The operation of binding authorities

Markel International Insurance Co v Surety Guarantee Consultants Ltd [2008] EWHC 1135 (Comm), a case coming before Mr Justice Teare, was, for the most part, a case that turned on its facts. An underwriting agency appointed by the claimant insurers wrote business for which it was not authorised. Claims were nevertheless paid, and the claimants sought to recover their losses from the agent and from the various individuals who controlled the agent or who worked for it. Teare J held that that the conduct of the agency had not been authorised and that the losses were recoverable.

Markel: the facts

Here, there were two separate actions, but because the issues were very similar and the defendants were the same, the two actions were tried together. The claimants were insurers Markel and QBE, and an underwriting agency Amalfi. The defendants were: an underwriting agent, SGC; two directors of SGC (H and W); an employee of SGC (F); a director of Templeton Insurance (B); and another insurance company, GCL. The basis of the claim was that the defendants were guilty of fraud in connection with the writing of surety bonds. Those bonds are designed to guarantee the performance of contractual obligations: in the simplest form, contracting party A obtains a bond from insurers (or banks) the sums under which are payable to contracting party B in the event that A defaults on his obligations under the contract. Party A pays a premium to the insurers for accepting the risk.