In Eurokey Recycling Ltd v Giles Insurance Brokers Ltd [2014] EWHC 2989 (Comm), Mr Justice Blair held that Giles Insurance Brokers Ltd (Giles) was not liable in contract or negligence to a commercial client, Eurokey Recycling Ltd (Eurokey), after Eurokey was found to be severely underinsured following a fire at its premises.

The case concerned an insurance policy brokered by Giles to cover Eurokey for losses to stock and machinery and any business interruption costs.  Eurokey asserted that Giles had provided negligent advice and failed to arrange adequate levels of cover.  Giles denied all allegations of negligence, insisting that the policy had been arranged on the basis of specific instructions received from Eurokey.

Whilst the legal principles of the case were not in dispute, Blair J clarified the following points in relation to business interruption insurance:

  • A broker is not expected to calculate the business interruption sum insured or indemnity period.  He is, however, required to provide sufficient information on terminology and methodology to enable the client to do so on their own behalf.
  • A broker has a general duty to assess a client’s business interruption insurance needs.  The scope of this obligation is dictated by the client’s particular circumstances (e.g. sophistication, relationship with broker).  However, a broker is neither required nor expected to conduct a detailed investigation into a client’s business.  Should a client who appears to be well informed provide a broker with information, there is no expectation that a broker verify said information unless he believes it to be inaccurate.

Applying these facts to the evidence supplied, Blair J dismissed Eurokey’s claim, finding that there had been no negligence on the part of Giles.  He stated that he was satisfied that Giles had provided Eurokey with an adequate explanation of business interruption cover and that the sum insured reflected the figures that that had been provided by Eurokey to the broker.