In Mr Peter Crowson v HSBC Insurance Brokers Ltd (unreported), the Judge, in considering an application to strike out the claimant's claim, held that an individual who is not in a contractual relationship with an insurance broker may have rights of action in tort and/or contract where the insurance to be arranged is also for his benefit.
The claimant was the managing director of a company which had contracted with an insurance broker to effect inter alia a directors and officers policy, the contract thereby conferring a benefit on the claimant himself. The claimant gave the instructions to the broker on behalf of himself and the company and when the broker failed to effect the policy, the claimant brought a claim against it in both tort and contract under section 1(1)(b) of the Contracts (Rights of Third Parties) Act 1999. The defendant broker sought to strike out the claim, arguing that the contract was between the company and the broker and that the broker did not owe the claimant a duty of care at common law.
The Judge rejected the application on three grounds. Firstly, he held that it was at least arguable that a broker could be liable in tort to a person other than the person who appointed him as broker in two situations – when the broker is instructed to arrange insurance for both that person and others, and where the policy is intended to benefit a third party.
Secondly, the Judge held that where a person instructs a broker to effect insurance for his own benefit, and the benefit of others, there is a valid argument that he is acting as an agent of the others. There will therefore be a contract between the broker and those others for whose benefit the policy is effected.
Thirdly, even if this could not be successfully argued, the Judge held that in the present situation, the Act applied so as to give the claimant the right to enforce the contract. It was arguable that although the claimant was not a party to the contract between the broker and the company, he could enforce a term of that contract because he was a third party to it and it conferred a benefit on him.