An important legal judgment for insurance brokers - Norman Hay PLC (in members’ voluntary liquidation) v Marsh Ltd (CA) [Jan 2025]

In a significant development for the insurance and legal sectors, the Court of Appeal has delivered its judgment in the case of Norman Hay Plc (in Members’ Voluntary Liquidation) v Marsh Ltd [January 2025]. This ruling provides crucial insights into the application of “loss of chance” principles in professional negligence claims against insurance brokers[1].

Background

Norman Hay Plc, a holding company specialising in specialist chemicals, sealants, and surface coatings, engaged Marsh Ltd as its insurance broker to arrange a global liability insurance program. In November 2018, an employee of a Norman Hay subsidiary was involved in a fatal road traffic accident in Ohio, USA, while driving an uninsured rental car. The accident resulted in serious injuries to another driver, Ms. Sage, who subsequently filed a lawsuit against Norman Hay, alleging that the employee was acting within the scope of his employment during the incident. The lawsuit was settled for $5.5 million.

Norman Hay claimed that Marsh had been negligent by failing to secure appropriate insurance coverage that would have indemnified the company against such liabilities. Marsh sought to have the claim struck out or dismissed via summary judgment, arguing that Norman Hay could not prove that it would have been indemnified under a hypothetical insurance policy.

Court of Appeal’s Findings

The Court of Appeal upheld the earlier decision, emphasising that in professional negligence claims against insurance brokers, the claimant is not required to prove on the balance of probabilities that a hypothetical insurer would have provided indemnity. Instead, the court should assess the claimant’s loss based on the “loss of a chance” doctrine. This approach involves evaluating the likelihood that the claimant would have obtained an indemnity under the hypothetical policy, considering factors such as the potential insurer’s stance and the merits of the underlying claim.

The court distinguished this case from the precedent set in Dalamd Ltd v Butterworth Spengler Commercial Ltd [2018] EWHC 2558 (Comm), noting that Dalamd pertained to situations where a claimant had an existing policy and chose not to pursue a claim against the insurer. In contrast, the Norman Hay case involved a scenario where, due to the broker’s alleged negligence, no relevant insurance policy was in place, necessitating an assessment of the lost opportunity to claim under such a policy.

Conclusion

The Court of Appeal’s decision in Norman Hay Plc v Marsh Ltd underscores the nuanced application of the “loss of chance” doctrine in professional negligence claims against insurance brokers. This ruling highlights the importance for brokers to diligently secure appropriate coverage, as failure to do so can result in liability for the lost opportunity of indemnity, even if it’s uncertain that an insurer would have provided coverage. For claimants, the judgment clarifies that in cases where no policy exists due to alleged broker negligence, the focus should be on demonstrating the lost opportunity to obtain indemnity, rather than proving that indemnity would have been provided on the balance of probabilities. This case serves as a critical reminder of the responsibilities of insurance brokers and the legal strategies available to claimants in professional negligence disputes.