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

It seems to me, both from a reading of the words used in Section 19,
and from an examination of the authorities upon which that Section
was based, that the "agent to insure" only encompasses those who
actually deal with the insurers concerned and make the contract in
question. 52
9.86 At first sight, this does not seem consistent with Haslam, where the information
was known only to the Glasgow agents, who asked other brokers to place the reinsurance.
Lord Justice Saville explained Haslam on the basis that placing
brokers are deemed to know every circumstance which in the ordinary course of
business ought to be communicated to them. Thus the Glasgow agents should
have passed the rumours about the ship “down the line to the brokers who
actually effected the cover”. The placing brokers were deemed to know what the
Glasgow agents knew.
9.87 From the current state of the authorities it appears that where there is a chain of
intermediaries, section 19 imposes a duty only on the final placing broker who
effects the cover. 53 However, placing brokers will be deemed to know everything
which ought to be communicated to them.
9.88 The problem with this approach is that the issue of what ought to be
communicated will depend on the arrangements between the different agents in
the chain. Even if there is an implied term that agents should communicate
between themselves, this must be subject to an express agreement to the
contrary (which will not be known to the insurer). This means that the insurer’s
rights against the placing broker will depend on other agreements within the
chain to which the insurer is not privy.
WHAT IS THE SCOPE OF THE DUTY UNDER SECTION 19?
9.89 The reference in section 19(a) to “every material circumstance” might suggest
that materiality is the only restriction on the duty of disclosure of an agent to
insure. An agent to insure would then be obliged to disclose material facts even if
knowledge of those facts was gained when not acting in that capacity. This was
the view taken by Hoffmann LJ (as he then was) in two cases, albeit that in each
his comments were obiter. The first was El Ajou v Dollar Land Holdings plc, a
company law case decided in 1993:
52 Above, at p 1149.
53
For criticisms of the position, see R Merkin, Colinvaux’s Law of Insurance (8th ed 2006), at
para 6-40.
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