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XIIIth AIDA WORLD CONGRESS PARIS 2010 Reinsurance Working Party “Conflicts of interest faced by reinsurance brokers: the modern role of the broker and his duties.”. Dr Kyriaki NOUSSIA LL.M, Ph.D. 1. Introduction. Insurance, Reinsurance law Broker - agent of assured or reinsured

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XIIIth AIDA WORLD CONGRESS PARIS 2010Reinsurance Working Party “Conflicts of interest faced by reinsurance brokers: the modern role of the broker and his duties.”

Dr Kyriaki NOUSSIA

LL.M, Ph.D


1. Introduction

Insurance, Reinsurance law

Broker - agent of assured or reinsured

- owes insured/reinsured

fiduciary and contractual duties.


1. Introduction (cont.)

HIH Casualty & Gen. Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493

  • brokers who had expressly undertaken

  • to forward to their reinsured management reports of a third party

  • also owed a duty to alert and advise the reinsured

  • of any breaches of warranty by the assured.


1. Introduction (Ctd.)

HIH Casualty & Gen. Ins. Ltd v JLT Risk Solutions Ltd

[2006]Lloyd’s Rep. I.R. 493

sparked concerns across insurance & reinsurance world

encompassed presumption

post-placement duty to alert insured/reinsured

as to any coverage concerns

applies not only in unusualcircumstances.


1. Introduction (Ctd.)

HIH Casualty & Gen. Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493

Back-to-back context,

Brokers - should discuss with insured

before sending information to

reinsured,

- be alive to potential for conflict

- seek advice if concerned.


1. Introduction (Ctd.)

Similarly

Broker = not only agent of insured

also agent of insurer for certain

duties.

Thus

> agency relationship of double character

(broker - performs functions also for

insurer)


2. Ongoing Information Duty of the Broker

  • Rule

    - responsibility to advise on operation of policy

    Sarginson v Moulton (1942)73 Ll.L.R. 104;

    Strong & Pearl v Allison & Co (1926) 25 Ll.L.R.

    504;

    King v Chambers & Newman [1963]2 Lloyd’s Rep.

    130;

    Victor Melik & Co Ltd v Norw. Un. Fire Ins. Soc.

    [1980] 1 Lloyd’s Rep.523


2. Ongoing Information Duty of the Broker (Ctd).

  • Rule (cont.)

    - no general duty to monitor activities or insurance needs of assured while policy subsists

    BUT

    - duty of care may be owed

    HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493


3. HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd.

  • Held

    First instance

    Breach of continuing post-placement duty

    Continuing post-placement duty

    > to alert HIH to any potential issues of coverage

    Not enough > for JLT to ONLY to pass on risk

    management reports


3. HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd (Ctd).

Court of Appeal

  • upheld the Commercial Court judgment in all respects

  • whether broker owed duty of care to insured post-placement, & scope of duty, had to depend on the circumstances of the case


3. HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd (Ctd.)

  • Commentary (Ctd).

    Arguable:

    - post-placement duty

    to alert insured re coverage issues

    applies

    not only in unusual circumstances,

    BUT

    across the board


4. Obligations of Broker to the Insurer

Agency duty

  • owed by broker to insurer

  • entailedin functions brokers perform

  • unquestionable

  • if broker does not bring conflict of interest

  • if assured has given full informed consent

    to broker acting in such function

    Excess Life Ass. Co Ltd v Fireman’s Fund Ins. Co of Newark NJ [1982] 2 Lloyd’s Rep. 599s

    Pryke v. Gibbs Hartley Cooper[1991]1 Lloyd’s Rep. 602.


4. Obligations of Broker to the Insurer

Where insurance broker:

  • duty to report facts to underwriter

  • failure to report = detrimental


4. Obligations of Broker to the Insurer

Practical operation of London Ins. Market

Brokers > carry out functions for both

parties of ins. transaction

[The Zephyr] [1984]1 Lloyd’s Rep. 58


5. Other Jurisdictions

Continental jurisdictions (Greece, Germany)

Post-contractual information duties

> regulated in complex of insurance contract law.

Germany - s.6 § 1.1. Regulation on Duties of Information

Relating to Insurance Contracts

Greece- 1997 Insurance Law, Civ. Code, art. 224 et seq.


5. Other Jurisdictions (Ctd).

German Law - broker has information duty

pre-contractually

- bears post-placement information

duty

- bears all duties that any representative would

have under general contract law

(§ 181 BGB, §19 VVG).

Also – duty to inform the insurer of any alteration in risk’s

nature

- obligation to collect the premium and payments on

behalf of the insured.


5. Other Jurisdictions (Ctd).

  • Greek Law

    Insurer- broker relations:regulated mainly by:

  • Law 1569/1985

  • Minister’s Decision (Min. for Commerce)K3/1377/18-2-1994

  • Presidential Decree 190/2006.


5. Other Jurisdictions (Ctd).

Most usual obligation

  • de lege: payment of commission to broker by insurer for conclusion of

    task of effecting insurance contract

    Also usual:

  • by special separate contractual agreement,

    other obligations are being agreed

    (e.g. collection of premium by broker on behalf of insurer,

    exact insurance risks undertaken by him & resulting duty of care owed to insurer way and amount of damages (may be) owed for breach of duty the way agreed for broker to give account for actions)


6. Conclusions.

  • Arguable

    if post-placement duty to alert insured

    (coverage issues)

    applies always in all circumstances


6. Conclusions (Ctd).

Re back-to-back insurance:

  • brokers to discuss matter with insured

    before sending information to reinsured


6. Conclusions (Ctd).

Traditional broker’s role - agent of assured

Exception - brokers have also obligations

vis-à-vis the insurer


XIIIth AIDA WORLD CONGRESS PARIS 2010Reinsurance Working Party “Conflicts of interest faced by reinsurance brokers: the modern role of the broker and his duties.”

Thank you for your attention !


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