TEMPLE LEGAL PROTECTION LTD V QBE INSURANCE (EUROPE) LTD

[2009] EWCA Civ 453, Court of Appeal, Lord Justice Rix, Lord Justice Moore-Bick and Mr Justice Bennett, 6 April 2009

Insurance (ATE) – Binding authority – Underwriting agent authorised to write ATE insurance for insurers – Underwriting agent entering into coverholder agreements with solicitors empowering them to issue insurance to clients – Binder terminated for alleged breach – Whether underwriting agent authorised to carry on run-off business after termination

Temple entered into a binding authority with QBE under which Temple was given the power to write after the event insurance business on behalf of QBE. Temple in turn delegated the power to issue policies to various coverholders, mainly solicitors who took up claims the costs of which were insured by QBE. The binder provided that, upon its termination, “10.2.1 Temple shall immediately cease and shall have no further authority either to bind or offer to bind insurances or to renew any insurances but shall have authority to cancel, extend, amend or alter any insurances already bound. 10.2.2 unless otherwise agreed in writing by QBE, Temple shall remain liable to perform its obligations in accordance with the terms and conditions of this Agreement in respect of all insurances bound prior to Termination until every such insurance has expired or has otherwise been terminated”. QBE terminated the binding authority, alleging breach of contract by Temple following Temple entering into a binding authority with another insurer and thereby ceasing to write business for QBE. Temple asserted that it retained the right under the binder to handle present and future claims arising under policies issued prior to termination. The dispute went to arbitration, and the arbitrator found for QBE on the basis of common law principles of agency. Temple appealed against the award, and although Beatson J found that the arbitrator had erred in applying common law principles rather than construing the binder, Beatson J concluded that the arbitrator had reached the correct conclusion. Section 10.2.2 was concerned only with the situation in which, following expiry, Temple had refused to carry out its obligations: it said nothing about the authority of Temple after the binder had been terminated. Beatson J also held that QBE was a party to the various coverholder agreements entered into by Temple with the solicitors, and that if Temple was no longer authorised from conducting run-off business it would not be in breach of those coverholder agreements. The Court of Appeal upheld Beatson J’s conclusion, but for slightly different reasons. Moore-Bick LJ and Bennett J held that QBE was not a party to the coverholder agreements, but that those agreements were to be interpreted as meaning that Temple’s rights and obligations under them arose only while it was acting as agent for QBE. The effect of section 10.2.2 was to confer obligations on Temple, but not rights. Rix LJ held that section 10.2.2 did confer rights upon Temple, but that section 10.2.2 ceased to be applicable where there was a repudiatory breach of the binder by Temple. The Court of Appeal agreed with Beatson J that Temple did not have any interest, and had not incurred any obligations to third parties, which rendered the binder irrevocable.