Intermediaries

Assumption of responsibility

The law has accepted, since the eighteenth century, that the broker is the agent of the assured and that duties are owed to the assured rather than to insurers. That principle has in recent years begun to break down in the light of the realities of insurance and reinsurance markets. Brokers will often find themselves representing different parties up and down a reinsurance chain, and it has been accepted in the last year or so that: (a) a broker owes a duty of utmost good faith to insurers when placing a risk; (b) a broker can be liable to insurers for losses incurred on their policies where the insurers were induced to enter into those policies by promises of reinsurance cover; and (c) a broker can face liability for assisting another person (eg an underwring agent) to break its fiduciary duties to insurers. The modern test of liability is whether the broker has assumed responsibility, a point illustrated by the decision of the Court of Appeal in European International Reinsurance Co Ltd v Curzon Insurance Ltd [2003] EWCA Civ 1074, [2003] Lloyd’s Rep IR 805 . The live issue in Curzon was whether claims against brokers could be struck out as disclosing no cause of action, and the case proceeded on assumed facts. The summary given below is based on the assertions of the parties rather than on established facts.