Placing and producing brokers

The relationship between assured, placing broker and producing broker has yet to be fully explored by the English courts. In Dunlop Heywards (DHL) Ltd v Erinaceous Insurance Services Ltd [2008] EWHC 520 (Comm) cover obtained by the placing broker was arguably not what was requested, but the problems were not spotted by the producing broker. Mr Justice Field analysed the relationships between the placing and producing brokers, and between the placing broker and the assured, although the case involved only a striking out application so no final decision was required. There is also interesting discussion of the London Market method of making contracts, and in particular the effect of the assured accepting a quotation prior to the scratching of a slip.

Dunlop Haywards: the background contracts

The claimant, DHL, was a property consultant and a member of the Erinaceous Group. The dispute in this case arose out of the renewal of professional indemnity insurance for all companies in the Erinaceous Group. The broker instructed to place the renewal, HPC, was not a Lloyd’s broker, but had earlier entered into arrangements with a Lloyd’s broker, Forbes, to act as placing broker. By a letter agreement dated 26 February 2005, Forbes had been appointed by HPC to place risks for the Erinaceous Group. That agreement had been preceded by an oral presentation by Forbes to HPC in January 2005, and also by a ‘Professional Indemnity Fee Proposal’ sent by Forbes to HPC whereby Forbes promised to: assist with the completion of the proposal form; obtain and discuss terms; place cover; prepare cover notes; and prepare policy documents. The decision to appoint Forbes had been one taken by the finance director of the Erinaceous Group and the evidence was that it was known by all concerned that the decision as to the appointment of a placing broker rested with Erinaceous rather than Forbes.