Misrepresentation, Non-Disclosure and Breach ... - Law Commission

Dual Agencies
9.20 Intermediaries may on occasion act for both the insurer and the applicant for
insurance ― sometimes in the course of the same transaction. In our Scoping
Paper we gave the example of an independent intermediary who acts as the
agent of the applicant in identifying a suitable motor insurer, then switches to
being the agent of the insurer to issue a cover note. 8 Outside the consumer
context, it is common for an intermediary to give independent advice to a
proposer and then use a binding authority to accept the risk on behalf of the
underwriters. In the reinsurance market, brokers owe duties up and down the
reinsurance chain, and the courts have faced difficulties in determining who the
primary principal is in any one situation. 9
9.21 The primary concern with dual agency arrangements is the potential for conflicts
of interest. 10 In this paper we are not addressing all the issues concerned with
agency in insurance, and conflicts of interest is a subject to which we may need
to return. For the moment, we simply note that “dual agency” may make it that
much more difficult for an applicant to understand the agency position.
The status of an intermediary: whose agent?
9.22 The issue of whether an intermediary is acting for an insurer or insured is
complex. Under the general law of agency, the court would normally start by
looking at any express agreement between the insurer and the intermediary: in
particular, did the insurer give the intermediary actual authority to act as their
agent for the purposes of receiving information or explaining the questions
asked? In the absence of any express authority, the court may look for implied
authority, by asking what was normal in that particular market. Finally, even if an
agent was acting outside the terms of their actual authority, the insurer may still
be held liable for their actions if the insurer held them out as having apparent
authority to do what they did. These general principles have been interpreted and
applied to different sorts of insurance intermediaries.
8 See the arrangements discussed in Drake Insurance v Provident Insurance [2004] Lloyd’s
Rep IR 277, where the Court of Appeal almost summarily held that the broker was acting
for insurers when issuing the cover.
9
See HIH Casualty and General Insurance v JLT Risk Solutions Ltd [2006] Lloyd’s Rep IR
493, [2006] EWHC 485 (Comm).
10 Under general agency law one would expect an intermediary to seek the consent of its
principal before it acted for the third party. However, in the example we give of motor
insurance, we are told that the intermediary will not typically seek explicit consent from the
applicant before acting for the insurer.
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