Liability for failing to insure

Phillips & Co v Whatley (Gilbraltar) [2007] UKPC 28, an appeal to the Privy Council from Gibraltar, is on its face nothing to do with intermediaries. It is a case in which an employee injured at work lost a claim against his insurers by reason of the negligence of his legal advisers, leaving him time-barred. This was a fallback action against the lawyers, in which the court assessed the measure of damages, and that turned on the prospect that the employers’ liability insurers would have taken a separate defence against them in relation to a failure by them to notify a claim at the appropriate time. This is the same question which has arisen in a series of cases against brokers who have failed to procure valid insurance and who have raised as a defence an entirely separate ground on which the insurers could have denied liability. The additional twist in Phillips was that there was an additional issue as to whether the insurers would have responded differently to a claim by the victim under the third-party rights legislation.