In Pakeezah Meat Supplies Ltd v Total Insurance Solutions Ltd (2018) the court was required to assess damages in an insurance claim by considering what the claimant would have recovered from the insurer if the insurance broker had provided the correct information to the insurer and proper advice to the claimant insured.
Following a fire at its premises, a supermarket, the claimant made a claim under its insurance which was purchased through the defendant broker. The policy covered material damage and 12 months of business interruption. The insurer argued that the claimant had misrepresented certain information, in particular, the number of fryers at the premises. The insurer also argued that the claimant failed to disclose previous financial difficulties of its directors. The claimant asserted that the broker was responsible for the misrepresentation and failure to disclose. The claimant also considered that the broker had failed to identify that the amount of cover should have been higher and had not provided proper advice in relation to this.
The court held that the broker was liable to pay damages in the amount which the claimant would have recovered under the ‘correct’ insurance policy had it obtained the correct level of cover initially. In particular, the court held that the two individuals controlling the claimant had very little experience in insurance matters before and were not aware of the disclosure obligations or the matters relevant to the level of cover required. Further, the court held that if the broker had asked the correct questions, the claimant would have provided the insurer with the correct information and the appropriate level of cover would have been obtained.
In the assessment of damages the court had to consider (i) whether the claimant’s directors ought to have known about its disclosure obligations, (ii) whether the claimant would have disclosed such matters if the broker had properly advised the claimant and (iii) whether this would have affected the available indemnity following the fire. In assessing damages, Butcher J considered the following: i) the claimant’s knowledge of disclosure obligations; ii) the effect of the broker’s advice; iii) the policy that would have been obtained had the claimant been properly advised and accurate disclosure been provided; iv) indemnity for contents; v) indemnity for business interruption; vi) additional premium that the insurer would have charged for additional levels of cover sought; and vii) the possibility that the insurer may not have insured the claimant if it had disclosed the information regarding the number of fryers and financial difficulties of the directors.