Loss of Chance in broker’s negligence claim - Norman Hay PLC v Marsh Ltd – Part 2

Our previous article (here) considered the judgment in Norman Hay PLC v Marsh Ltd [2024] EWHC 1039 (Comm), the high court’s decision in an application by a broker to summarily dismiss the claim against it for allegedly failing to obtain cover which would respond to a claim. The Commercial Court did not agree with the broker that it would be appropriate to strike out the claimant’s claim, and the broker appealed this decision. The Court of Appeal ultimately agreed with the Commercial Court and the case will now proceed to a full trial. The Court of Appeal found that the Court’s assessment of causation and loss needs to involve consideration of the ‘loss of chance’ aspect including whether the putative insurer would have engaged in dealing with the underlying claim against the claimant and whether it would have provided an indemnity of some sort.

Background

The case is fact specific and the background facts are set out in our previous article (here). In summary, an employee of a subsidiary of Norman Hay was involved in a car accident in the USA, he sadly passed away and another person, Ms Sage, was injured. Ms Sage issued a claim against various parties including Norman Hay for her injuries. Norman Hay settled the claim, but their insurance did not cover the claim. As such and in response to this, Norman Hay issued a claim against their brokers, Marsh. They alleged that Marsh ought to have arranged worldwide (including US) non-owned auto cover under Norman Hay's group travel insurance policy. 

Commercial Court Decision

Marsh sought to strike out the claim but failed. A summary of the arguments put forward by Marsh and the Commercial Court’s decision can be found in our previous article (here). In short, the Commercial Court considered that, where a broker failed to arrange insurance, consideration should be given to the wider circumstances and what the outcome would have been if there had been no negligence by the broker. This would involve considering what the putative insurer would have done. This analysis is done using loss of chance principles. In this case, the Court needed to consider the counterfactual and ask itself whether, realistically, the putative insurer would have told Norman Hay to deal with Ms Sage's claim as a prudent uninsured or whether the putative insurer would have engaged with Norman Hay in dealing with the claim and provided an indemnity. On that basis, the Court found that a full trial was required to enable a proper inquiry and to consider the hypothetical counterfactual.

Court of Appeal

The most recent judgment in this matter, Norman Hay Plc (in Members' Voluntary Liquidation) v Marsh Ltd [2025] EWCA Civ 58, concerns Marsh’s appeal to the Court of Appeal. Before the Court of Appeal, Marsh asserted that the Commercial Court had adopted an incorrect approach, they argued that where it was alleged that a broker had failed to arrange the appropriate cover, the claimant must successfully prove that the supposed policy would cover the loss. Marsh asserted that the putative policy in this case would have been an indemnity policy and Norman Hay, therefore, needed to demonstrate on a balance of probabilities that they were liable to Ms Sage for the claim. However, Marsh argued that Norman Hay had failed to plead that it was liable to Ms Sage, meaning a putative indemnity insurance policy would not have responded.

The Court of Appeal dismissed the appeal and agreed with the Commercial Court. The Court of Appeal noted that Norman Hay’s pleading was defective but that there still needed to be consideration of the wider circumstances and what the outcome would have been if there had been no negligence by the broker. As such, the court needed to apply loss of chance principles, including consideration as to whether the notional insurer would have taken " the pragmatic view that as it was going to have to pay anyway” or a “commercial stance" in respect of the claim itself and how it was funded. On that basis, the Court found that Norman Hay’s failure to plead that it was actually liable to Ms Sage was “not the knock-out blow that [Marsh] maintains”.

Conclusion

As we comment in our previous article, the finding here is very fact specific. However, summary judgment and/or strike out applications should be very carefully considered. The main takeaway is that where there is no insurance policy in place that may have covered the insured’s loss (but for the broker’s negligence), then loss of chance principles are likely to apply. This is in contrast to the case of Dalamd Ltd v Butterworth Spengler Commercial Ltd [2018] EWHC 2558 (Comm) [judgment here] where it was found that, where there was an insurance policy that could have responded (but for the broker’s negligence), the claimant was required to prove this on a balance of probabilities. 

It may also be worth noting that the Court, in obiter, commented the position respect of addressing allegedly vague pleadings with numerous requests for further information. The Court provided a reminder that requests for further information should be carefully considered by all parties, in the queries they raise, and the responses provided. The overriding objective should always be kept in mind, throughout proceedings.