Brokers - Entitlement to commission

(Harding Maugham Hambly Ltd v Compagnie Europeene de Courtage d’Assurances et de Reassurances SA, forthcoming in [2000] Lloyd’s Rep IR)

The law relating to the payment of commission is made to a broker is complex and not fully resolved. The courts appear to have reached the position that, although the broker is the agent of the assured and takes his commission from the premium paid by the assured, the amount of the commission is agreed with the insurers rather than the assured and accordingly payment is deemed to have been made by the insurers. Further, commission is deemed to have been fully earned by the broker by obtaining business for the insurers: the fact that the broker has post-contractual duties to fulfil for the assured, eg, assisting with claims, is irrelevant. The legal position is in many ways unsatisfactory, but for the time being must be accepted as it stands. In answering the question whether a broker is entitled to commission, the question in every case is whether the broker’s activities have brought about the contract of insurance. The important point to emerge from the decision of Mr Justice Rix in Harding Maugham Hambly Ltd v Compagnie Europeene de Courtage d’Assurances et de Reassurances SA, forthcoming in [2000] Lloyd’s Rep IR, is that there is no fixed standard for what a broker has to achieve, and that all depends upon his instructions from the insurers, moreover, responsibilities may vary as between placing and producing brokers.