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

The broker as agent for the insured
9.23 It is long-established that brokers, including Lloyd’s brokers, normally act as
agents for the insured, even if they carry out specific functions for the insurer
(such as arranging re-insurance or appointing loss adjusters). 11 The fact that the
broker acts for the insurer for some limited purposes does not undermine the
general proposition that for other purposes (such as receiving pre-contract
information) they act as agents for the insured.
9.24 The case law applying to Lloyd’s brokers has been applied more generally within
the commercial sector. In Arif v Excess Insurance Group, 12 a hotel owner bought
insurance through his bank to cover a hotel owned by a partnership he was
involved with. When the insurers sought to avoid the policy on the grounds of lack
of insurable interest, the policyholder argued that the bank knew he was buying
insurance on behalf of the partnership. The Court of Session, however, found that
the bank had acted as his agent rather than the insurer’s agent, and so this
knowledge could not be imputed to the insurer. They dismissed the pursuer’s
arguments that the bank should be considered the insurer’s agent because it had
advised him to insure through the insurer, submitted the form and been paid a
commission:
I am quite unable to hold that there is anything in these averments
which takes the case out of the ordinary position in which insurance
brokers or agents act for the insured. The fact that the bank already
acted for the pursuer in banking matters merely confirms the view that
the bank's insurance services department acted for the pursuer in
arranging the insurance. 13
9.25 In Winter v Irish Life Assurance plc, 14 the same principle was applied to a
consumer policy. The policyholders bought life insurance through a large firm of
brokers. The brokers knew that both policyholders suffered from cystic fibrosis,
but this information was not disclosed to the insurer. The court held that the
brokers acted for the policyholders, not the insurers. It was not sufficient that the
insurers paid the brokers commission, or gave them publicity material overprinted
with the brokers’ name, or provided guidance and training about how the
forms should be filled in. The judge stressed that the policyholders approached
the brokers to find them insurance. He said that the position might have been
different if the insurer had provided the broker with the names of various leads
and asked them to approach clients to sell the insurer’s products.
11 See, for example, Rozanes v Bowen (1928) 32 Lloyd’s Law Reports 98; Anglo-African
Merchants v Bayley [1970] 1 QB 311 and Roberts v Plaisted [1989] 2 Lloyd's Rep 341.
12 1986 SC 317.
13 Above at p 319 by Lord Sutherland.
14 [1995] 2 Lloyd’s Rep 274. See also Hazel (t/a KGM motor policies at Lloyds) v Whitlam [2005]
Lloyd’s Rep IR 168, [2004] EWCA Civ 1600, where the broker failed to pass on the fact that
the policyholder was training as a golf professional.
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