Continuing liability for original error?

A policy of insurance is renewed from year to year. In the first year broker A negligently includes an inappropriate term, which significantly reduces the protection given to the insured. That term is reproduced in later years without any further thought being given to it, either by broker A or by his successor, broker B, who has replaced broker A by the time of the placing of the policy which is in force when the problem comes to light. Is broker A, the original source of the problem, liable for the loss? This was the main question which Christopher Clarke J had to answer in Beazley Underwriting Ltd and Ors v The Travelers Companies Inc [2011] EWHC 1520 (Comm). The case is discussed by Mark Cannon of 4 New Square.

Beazley: the facts

The context in which the point arose was the sale by Travelers of the Minet Group of insurance brokers to Aon on 16 May 1997. By that contract Travelers agreed to indemnify Aon against loss arising out of any event or matter relating to the business of any Minet Group company occurring before completion if provision had not been made for it in the Minet Group accounts. There was an express exclusion in relation to any obligations and liabilities of Aon arising out of its own negligent acts or omissions (‘the Aon exclusion’).