Funding and expert determination

Hamishmar Insurance Agency Ltd v FirstCity Partnership Ltd [2009] EWHC 256 (Comm) is a decision on the scope of the authority of an expert appointed to determine an accounting dispute between the parties, a coverholder under a binding authority and brokers acting as intermediaries between the coverholder and the underwriters. The only real point to arise from the case is confirmation that a contract is not to be construed by reference to the negotiations leading up to it, although there is a good description of the role played by brokers in the funding of premiums and claims.

Hamishmar: the facts

Hamishmar was an insurance agent, a wholly owned subsidiary of an Israeli insurance company, Harel. In the 1990s Harel became the coverholder under a number of binding authorities issues by Lloyd’s and other underwriters. FCP was the broker employed by Harel. FCP’s role was to forward premiums to the underwriters and to collect from them sums payable for claims. FCP did this by paying over 60% of the premium and retaining 40% as a float to fund claims. Accounting was on a quarterly basis, so that at the end of every three months FCP paid 60% of the net premium for the forthcoming quarter and 40% of the net premium for the past quarter. Hamishmar produced quarterly bordereau breaking down the various payments, and on receipt of a bordereau FCP would make adjusted payments to Hamishmar.