25 April 2007

Arbory Group Limited v West Craven Insurance Services (A firm) (2007)

The recent case of Arbory Group Limited v West Craven Insurance Services represents the first time that a company under-insured for Business Interruption Insurance due to its broker 's negligent advice, has successfully argued that it should be entitled to damages for loss of profit flowing from the non-receipt of insurance monies.  This consequential loss claim was in addition to its claim for recovery in respect of the shortfall in insurance monies.

Further, the Judge held that the insured parent company claimant (that had not itself suffered any loss) could claim on behalf of the business as a whole for the loss suffered by its subsidiary, which was not actually named on the policy and which had since become insolvent.  

Although the judgment distinguishes Business Interruption cover from other forms of insurance, the decision is significant for insurance brokers generally as it potentially increases brokers' liability to businesses as a whole, and not necessarily just to the company insured. The decision also appears to conflict with the general principle that the insured should have no better claim against the broker than he would have had against the insurer.  

An Appeal has been lodged with the Court of Appeal, and it therefore remains to be seen whether this first instance decision will be upheld.