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

9.83 Section 19 is based on two nineteenth century cases arising out of the
reinsurance of a steamship, the State of Florida. 47 In 1884, Blackburn Low & Co
insured the State of Florida, sailing from New York to Glasgow. The insurers
asked their Glasgow agents, Rose, Murison and Thomson, to place a
reinsurance contract. Rose, Murison and Thomson did this by contacting their
own London agents, who placed the insurance through a Lloyd’s broker. The
insurers then arranged a second reinsurance contract using other (different)
agents. After the ship was lost, it became known that before the first reinsurance
had been placed, Mr Murison, a partner in the Glasgow firm, had spoken to the
ship owners. During the conversation, the owner mentioned that there had been
reports that the State of Florida had been lost and that some of its crew had been
seen on another vessel. However, these rumours were not known to the insurer.
In Blackburn Low v Haslam, 48 the Court of Appeal found that the reinsurers could
avoid the first policy, placed by the Glasgow agents through the chain of
intermediaries. However, in Blackburn Low v Vigors, 49 the House of Lords found
that the second policy, placed through other agents, was unaffected. The
knowledge of the Glasgow agents could not be imputed to the insurers in these
circumstances.
9.84 The Blackburn Low litigation suggests that there is a distinction between an agent
who is part of a chain for placing insurance, and an agent who is not part of a
chain. Only the former is caught by section 19. If an agent is not involved in
placing the insurance, there may be some circumstances in which that agent’s
knowledge is imputed to the principal, so that the principal is deemed to know it.
Where this happens, the principal will be in breach of their own duty of disclosure
under section 18 by failing to disclose it to the insurer. However, Blackburn Low v
Vigors shows that knowledge may be imputed in this way only in limited
circumstances. 50
9.85 In 1995, the Court of Appeal re-examined the issue of who is an agent to insure,
in PCW Syndicates v PCW Reinsurers. 51 This time two of three Court of Appeal
judges took a narrower view of section 19, and held that only the final placing
broker fell within the section:
47
Blackburn Low & Co v Haslam (1888) LR 21 QBD 144 and Blackburn Low & Co v Vigors
(1887) LR 12 App Cas 531.
48
49
50
51
(1888) LR 21 QBD 144.
(1887) LR 12 App Cas 531.
In Simner v New India Assurance [1995] LRLR 240, it was suggested that the agent’s
knowledge would be imputed to the assured only where the assured relied on the agent for
information or where the agent was in a predominant position. See also ERC Frankona
Reinsurance v American National Insurance [2006] Lloyd’s Rep IR 157.
[1996] 1 WLR 1136. See the discussion in ERC Frankona Reinsurance v American
National Insurance Co [2006] Lloyd’s Rep IR 157.
236