Duties owed to third parties

In Crowson v HSBC Insurance Brokers, 26 January 2010 (Ch D) the question for Chancery Master Bragge was whether there was an arguable case that insurance brokers owed a duty of care to a third party who was to be either a co-assured under, or at least a beneficiary of, an insurance policy which the brokers had been instructed to procure by the primary assured. The court thought that the claim should not be struck out.

Crowson: the facts

The claimant was the managing director of Hughes Brickwork Ltd. HSBC became the company’s bankers, and as a result the company was introduced to the defendant insurance brokers. The defendants agreed to put into effect insurance policies to cover risks under earlier policies placed by different brokers. The required cover included a directors’ and officers’ liability policy. The defendants failed to put such cover into place. The claimant, who as a director had thus been left without the protection provided by such a policy, argued that the defendants owed him a duty of care to follow the instructions given by the company. The defendants’ response was that their contract was with the company and not the claimant, and that any duties owed by them were confined to the company. It is important to comment that under a typical D&O policy the named assured is the company, and directors may be identified as co-assured or as third party beneficiaries with rights under the policy. The issue in Crowson was whether the action should be struck out.