Insurance agreements should be evidenced in writing

Insurance and Reinsurance, Legal — By on April 10, 2012 at 5:51 PM

Paul Wordley, Partner, Hollman Fenwick Willan

In Stephen Allen v (1) Michael Seaman and (2) MS PLC Trading as Miles Smith Insurance Brokers [2011] EWHC 3526 (Ch), an account of commission claim, the Claimant alleged that he and the First Defendant (as agent for the Second Defendant) reached an oral agreement in a bar in the City to warehouse certain professional indemnity insurance business in consideration for the Claimant receiving a percentage of the brokerage earned.

The issues concerned whether:

  1. The Claimant owned the insurance business in the first place?
  2. An oral warehousing agreement was concluded?
  3. The First Defendant had actual or ostensible authority to bind the Second Defendant to such an oral warehousing agreement?

Graham Denny, Associate, Holman Fenwick Willan

The judge was satisfied that the Claimant had ‘no or no significant personal contact with approximately 165 (or 60%) of these assureds’ and that no oral warehousing agreement was concluded. The judge also held that the First Defendant, as a divisional director, did not have the authority, ostensible or express, to bind the Second Defendant to the alleged warehousing agreement. The Claimant did not pursue the ostensible authority argument at trial as he would have had to rely upon the Second Defendant holding the First Defendant out as having such authority but the Claimant accepted in cross examination that he did not do so. Instead the Claimant relied upon the First Defendant’s job title (a divisional director) to argue that the First Defendant had the actual authority to enter into a commission sharing agreement on behalf of the Second Defendant. The judge accepted the Defendants’ expert and witness evidence that a divisional director would not have such authority and this would be known in the insurance market.

The judge heavily criticised the Claimant for forging or causing documents to be forged and colluding with others to produce untrue evidence to support his case and following the judgment, the court ordered that the Claimant pay the Defendants’ costs on an indemnity basis, with an order for a substantial payment on account.

The case is a reminder to the insurance industry that agreements should be evidenced in writing and FSA requirements adhered to in respect of introducer agreements where relevant. Furthermore, parties should always ensure that the parties with whom they are concluding agreements have the actual authority to conclude them. Where necessary, this should include checking with the employers and requesting confirmation in writing.

HFW successfully defended both the First and Second Defendants.

 

 

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