Insurance brokers duty of care

Jones v Environcom Ltd and another MS plc (t/a Miles Smith Insurance Brokers), third party) [2010] EWHC 759 (Comm), [2010] All ER (D) 76 (Apr); NLJ 23 April p585

An insurance broker has to take reasonable steps to ensure that a proposed policy is suitable for the needs of the insured. To ensure that a policy is suitable, a broker has an obligation to advise the insured of the duty to disclose all material circumstances and the consequences of not doing so. A policy which was voidable for non-disclosure was clearly not suitable. The broker has to indicate the sort of matters which ought to be disclosed as being material and to take reasonable care to elicit matters which ought to be disclosed but which the insured might not think necessary to mention. In order to discharge the duty to disclose it is not sufficient to rely upon written standard form explanations and warnings annexed to proposals or policy documents. The broker has to satisfy himself that the position was in fact understood by the insured and that would usually require a specific oral or written exchange on the topic, both at the time of the original placement and at the renewal, particularly if a new person had become the client’s representative. Where an inappropriate and incomplete explanation was afforded to the insured by its broker as to its obligations, it followed that there was a higher standard of care on the part of the broker in eliciting possible material information for disclosure. In respect of a detailed process requiring technical expertise, a broker could not be expected to comprehend any more than a general knowledge of the process involved. Albeit the insured had to be properly advised, it remained the insured’s task to identify detailed processes.