The Court of Appeal has upheld a High Court decision on an insurance broker's obligation to ensure the duty of disclosure is understood by his client.
After its insurer denied liability for a fire at the insured's premises for alleged material non-disclosure, the insured (Environcom) brought third party proceedings against its broker for breach of its duty to advise in relation to the duty of disclosure. The High Court agreed that the broker had breached its duty properly to advise its client, Environcom, on its disclosure obligations to its insurer, but Environcom failed to prove that the broker's breach had caused it to suffer any loss and therefore its claim failed. The High Court decision was previously blogged here.
On appeal, Environcom was refused permission to introduce a new argument on causation, which it had not pleaded at trial. Among its reasons for refusing, the Court of Appeal cited recent decisions stating that permission to amend pleadings at a late stage, which then raise a fundamentally new case, is unlikely to be granted, even in a trial court.
While the facts in this case prevented a finding that the breach had caused loss, it remains important for brokers to ensure full information is given to their clients on the nature and extent of the duty of disclosure.