UK: Brokers' Duties and Liabilities

Last Updated: 20 April 2010
Article by Simon Cooper and John Whelan

In this article, we consider the development of brokers' duties and liabilities in light of a recent case before the court.

Since the FSA challenged the insurance industry in 2004 to achieve contract certainty, there have been huge advances in the documentation and recording of insurance placements.  Brokers have often been at the forefront of this process and have significantly improved their own systems. Nonetheless, difficulties still remain and disputes continue to arise where an insured finds that it does not have the cover that it sought to obtain. This can be a particular problem where a placement involves both a producing broker, who received instructions from the client, and a placing broker who negotiates the insurance with the underwriters.

The role and obligations of the parties in this situation were examined in detail by the Commercial Court in the recent case of Dunlop Heywoods v Barbon (2009).

Dunlop Heywoods v Barbon

The assured carried on business as a property consultant and had professional indemnity insurance for its professional activities for the year up to July 2005. The assured went through a merger and instructed the producing broker to place £10 million primary layer cover and £10 million excess layer cover on no worse terms than the current policy. The producing broker wrongly issued instructions to the placing broker that cover was required on the excess layer for "commercial property management" activities. A Limiting Clause was used to obtain cover on that basis. Subsequently, claims were made against the assured in relation to its valuation work. The excess layer insurers rejected the claims on account of the Limiting Clause.

The assured brought proceedings against the producing broker on the basis that the broker had been asked to obtain cover which protected the assured in respect of its valuation activities. The producing broker argued that, either as a matter of construction or by a process of rectification, the policy did in fact cover valuation activities. The excess insurers, who were joined to proceedings, disputed this. The judge ruled as follows:

  • The Limiting Clause was effective in restricting cover to commercial property management activities.
  • There was no basis for rectification.
  • The producing broker was in breach of duty by instructing the placing broker to limit cover. The producing broker was liable for its own default and also for the defaults of the placing broker.
  • The assured had not been contributorily negligent in failing to notice the draft Limiting Condition.
  • The placing broker was in breach of duty by failing to query any instructions which were adverse to the assured's interests. The claim by the producing broker against the placing broker succeeded, but damages were reduced by 80 per cent to reflect the producing broker's own contributory negligence.

Breach of Duty by the Producing Broker

Of particular interest is the judge's examination of the duties owed by the producing broker to the assured. The producing broker breached its duty to the assured to exercise reasonable skill and care in the following respects:

  • Failing to review the terms of the pre-placement documentation and the policy properly and carefully and in failing to identify the Limiting Condition;
  • In failing to draw the Limiting Condition to the attention of the assured and to advise them of the difference between the terms of the excess insurance actually obtained and the terms of the expiring excess insurance cover for 2004; and
  • In failing to exercise reasonable skill and care in obtaining excess insurance which provided cover for the assured's valuation work in an amount of £10 million excess £10 million, in accordance with the expiring 2004/2005 cover and as the assured had requested and required.

Was the Assured at Fault?

The producing broker alleged fault against the assured due to its failure to review the Renewal Review and Report (RRR). It is likely that, if the assured had reviewed the RRR, then the Limiting Condition would have been objected to. However, the producing broker was employed to obtain cover on the relevant terms and, in that context, to conduct the necessary reviews of the RRR to make sure that cover was being obtained on the relevant terms. Therefore, the assured had no reason to believe that the producing broker had obtained a quote for a fundamentally different and reduced cover and then had failed to identify that such was the case.  

In all the circumstances, the judge found that the assured's reliance on its professional broker to do its job properly was reasonable, and so the assured was not at 'fault'.  Furthermore, the judge found that even if there was fault on the part of the assured, the causative potency of that fault and, in particular, the degree of blameworthiness involved, paled into insignificance in comparison to the fault of the producing broker.

Duties Owed by the Placing Broker

With one qualification, the duties which apply to the client/broker relationship also arise in the producing broker/placing broker relationship. These common duties require the placing broker:

  • To exercise reasonable care and skill in the fulfilment of its instructions and the performance of its professional obligations.
  • To carefully review the terms of any quotations or indications received.
  • To explain the terms of the proposed insurance.
  • To use reasonable skill and care to draw up a policy, or to ensure that a policy was drawn up that accurately reflected the terms of the agreement with underwriters and which was clear and unambiguous so that the assured's rights under the policy were not open to doubt.

The qualification related to the duty "carefully to ascertain the client's insurance needs and to use reasonable skill and care to obtain insurance that met those needs". It is the function of the producing broker rather than the placing broker to ascertain the assured's insurance needs.

In order for the placing broker to perform its duties to obtain quotations and place insurance, it is necessary for the placing broker to take care to ensure that instructions are understood and to query instructions given. The judge found that the placing broker was negligent in failing to query the instruction to limit the surplus cover to commercial property management activities. The potential detriment and disadvantage to the assured arising from the instruction would have caused a reasonably competent broker, in the position of the placing broker, to query, clarify or confirm that instruction.

Important Risk-Management Lessons for Brokers

This case highlights important risk management issues for the producing broker and placing broker, including the need for the brokers to:

  • Understand the insured's business.
  • Confirm the insured's instructions and clarify any ambiguities.
  • Ensure that the correct breadth of cover is obtained.
  • Provide clear warnings in relation to any unusual restrictions in cover.
  • Ensure clear instructions from the producing broker to the placing broker which accurately reflect the insured's requirements.
  • Ensure clear communication from the placing broker to the producing broker of the underwriter's requirements, limitations on cover and any variations on terms sought.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.