Civil procedure – Joinder – Property consultants instructing defendant to renew professional indemnity insurance – Defendant engaging sub-broker to obtain excess insurance cover – Excess insurer relying upon limiting condition to deny liability – Claimants suing defendant for negligence in obtaining limited cover – Whether excess insurer being joined – Whether sub-broker entitled to summary judgment – Applications dismissed
The first claimant carried on business as a property consultant, which included commercial property management, surveying and valuations. The second claimant acquired the first claimant’s business in 2005, both companies being subsidiaries of a group. The defendant was an insurance broker.
In December 2004, the claimants instructed the defendant to consolidate and renew the professional indemnity insurance for the group and to procure primary cover of £10m on an each-and-every-claim basis, together with excess cover for the first claimant of a further £10m. The defendant engaged a sub-broker, which placed an excess layer of cover limited to liability arising from the insured’s commercial property management activities.
The claimants were involved in disputes arising out of allegedly negligent and/or fraudulent valuations. Since it was possible that some of those claims could affect the excess cover, the claimants notified the excess insurer. However, the insurer denied liability on the ground that the claims arose out of valuations rather than commercial property management activities. The claimants sued the defendant for failing to fulfil their instructions by limiting liability under the excess cover policy. The defendant sought an indemnity or contribution from the sub-broker in Part 20 proceedings, alleging that any liability to the claimants arose out of breaches of contract by and/or the negligence of the sub-broker.
The defendant applied to the court, under CPR 19.2(2), to have the excess insurer joined as a defendant so that it would be bound by any decision regarding the true construction of the excess policy and whether that policy should be rectified. The sub-broker applied for summary judgment in its favour on the Part 20 claim or, alternatively, to have the claim struck out.
Held: The applications were dismissed.
(1) The court had jurisdiction to make the order sought by the defendant under CPR 19.2(2), notwithstanding that neither the defendant nor any other party to the proceedings was in a position to assert a claim against the excess insurer. Were it a requirement that an existing party should be able to bring a claim against the party sought to be joined, CPR 19.2(2) would be obsolete, since the party seeking joinder could always issue a Part 20 claim.
However, in the instant case, it was not appropriate for the court to exercise its discretion under CPR 19.2(2). On the evidence, the defendant’s rectification contentions were so weak that the excess insurer should not be put to the expense and inconvenience of having to participate in that part of the case. Further, even assuming that the claims on construction had a real prospect of success, it was neither desirable nor appropriate that the excess insurer should be made a party in respect of the claims when it was uncertain that the holder of the right to make those claims would do so. Moreover, any such claims could be tried speedily and relatively cheaply in separate proceedings.
(2) The defendant had a real prospect of success in establishing that the sub-broker had acted in breach of the defendant’s instructions and that that breach, together with its arguably culpable failure to alert the defendant to the discord between the defendant’s instructions and the limiting condition, was the primary cause of the defendant’s breaches of its policing obligations.
Furthermore, the defendant had a realistic prospect of establishing that the claimants had reasonably relied upon a representation made to them by the sub-broker that it had assumed the responsibility for exercising reasonable care in placing the excess cover for the defendant: Henderson v Merrett Syndicates Ltd (No 1) [1995] 2 AC 145 and Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 considered.
Adam Fenton QC and Julia Dias (instructed by Cayton & Co) appeared for the defendant/Part 20 claimant; Nicholas Craig (instructed by Simmons & Simmons) appeared for the Part 20 defendant; Sioban Healy (instructed by Kennedys) appeared for the excess insurers.
Eileen O’Grady, barrister
