Brokers

Payment of brokerage

In Insurance Law Monthly (Volume 16: December (pp1–4)) there was detailed discussion of the decision of HHJ Havelock-Allan QC in Carvill America Inc v Camperdown UK Ltd [2005] Lloyd's Rep IR 55.The Court of Appeal has now upheld the first instance decision ([2005] EWCA Civ 645 (forthcoming in Lloyd's Rep IR)).This case raises fundamental issues concerning the payment of brokerage and how such brokerage is earned.There is a view, dating back to at least the 19th century, that although the broker is the agent of the assured for virtually all purposes, the broker fully earns his commission by placing the business, and payment is made by the underwriters. It has been argued that the notion that the agent of the assured is paid by the underwriters is at least anomalous and possibly a serious conflict of interest. Further, it is difficult to reconcile the principle that a broker owes continuing duties to the assured with the suggested principle that commission is fully earned on placement. HHJ Havelock-Allan QC expressed strong views on these matters, although the Court of Appeal was able to uphold the appeal without expressing any view on their merits.