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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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Dr Kyriaki NOUSSIA LL.M, Ph.D

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Dr kyriaki noussia ll m ph d

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

1. Introduction

Insurance, Reinsurance law

Broker - agent of assured or reinsured

- owes insured/reinsured

fiduciary and contractual duties.


1 introduction cont

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

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 ctd1

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 ctd2

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

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

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

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

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 ctd1

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

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 insurer1

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 insurer2

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

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

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 ctd1

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 ctd2

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

6. Conclusions.

  • Arguable

    if post-placement duty to alert insured

    (coverage issues)

    applies always in all circumstances


6 conclusions ctd

6. Conclusions (Ctd).

Re back-to-back insurance:

  • brokers to discuss matter with insured

    before sending information to reinsured


6 conclusions ctd1

6. Conclusions (Ctd).

Traditional broker’s role - agent of assured

Exception - brokers have also obligations

vis-à-vis the insurer


Dr kyriaki noussia ll m ph d

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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