SIR DAVID BERRIMAN & ORS v ROSE THOMSON YOUNG (UNDERWRITING) LTD (AND THE OTHER AGENCIES LISTED IN THE SCHEDULES TO THE WRITS OF SUMMONS) (1996)
QBD (Morison J) 21/3/96
NEGLIGENCE - INSURANCE
LLOYD'S NAMES LITIGATION : NEGLIGENCE
Claims by Lloyd's Names against their Managing Agents and Members' Agents
Action in negligence by Lloyd's Names to recover damages from their Managing Agents and Members' Agents for substantial losses which they have incurred as underwriting members of Lloyd's in the 1988 and 1989 years of account. To be admitted to membership of Lloyd's at the relevant time a person was required to demonstrate a minimum amount of wealth. The amount of premium income which a Name was permitted to write in any year was calculated by multiplying his proven wealth by 2.5. A Name could only become a member of a syndicate through the agency of a Members' agent or a Combined Agent. In consultation with and unusually upon the advice of such agent, a Name's permitted premium income would be allocated between a number of syndicates ('a portfolio'). At the relevant time the 1st defendants ("RTY") were the Managing Agents of marine syndicate 255/258 ("the syndicate") and employed Mr Bullen as the Syndicate's active underwriter and Mr Green as his deputy. RTY were also a Members' Agency. There are 1,092 plaintiffs. Each of them is a Name or the personal representative of an Name who either participated in the Syndicate directly through RTY or, indirectly, through a Member's Agency other than RTY which, in turn appointed RTY as its sub-agent. There are 42 such Member's Agencies which have been joined by indirect Names. The plaintiffs claim that RTY failed to act with reasonable care and skill in the conduct and management of the underwriting for the two relevant years of account and are liable for the resulting losses.
HELD in a 179 page judgment: The duties owed to direct and indirect Names by a Combined Agency such as RTY and by a Members' Agency, in relation to the manner in which a syndicate's underwriting is carried out and managed have been fully analysed by the House of Lords in Henderson v Merrett (1995) 2 AC 145. It is common ground that, if the plaintiffs have made good their contentions, RTY are liable in both contract and tort to the direct Names; and the Members' Agents named as defendants are liable in contract to the indirect Names, to whom RTY are also liable in tort. In fact Names may legitimately ask themselves whether the Managing Agents did anything to justify their percentage. Mr Bullen's failures have been put under a microscope in these proceedings. If he had been more responsibly managed, the court had little doubt that he would have been acted more competently. The court's criticism of him as an underwriter should not be isolated from the fact that he was as incompetent as he was allowed to be by RTY. RTY were not only liable vicariously, for the acts and defaults of Mr Bullen but they were also in breach of duty as Managing Agents in the respects set out in para.37 of the Amended Points of Claim (p.79 of the judgment). With regard to specific defences which were raised, the fact that certain Names specifically requested (unprompted by their members' agent) to be placed on high risk syndicate 255 did not estop them from claiming in the action. No limitation defence was available in relation to the amendments to the points of claim. In regard to quantum]: (1) whether the plaintiffs had to give credit for the benefit of any profits in previous years would not be decided as the defendants wished to reserve it for a higher court although his lordship considered that there was no merit in the point; (2) the plaintiffs do have to give credit for the cost of any additional insurance which Mr Bullen should have purchased; (3) the plaintiffs do not have to give credit for the benefit of any reinsurance which ought not to have been written in favour of other syndicates on which any of the plaintiffs participated for the years of account; (4) the plaintiffs do not have to give credit for the benefit of any tax refunds or allowances in respect of losses suffered by individual Names as a result of their participation in Syndicate 255 during the relevant years; (5) the plaintiffs do not have to give credit for the benefits of any stop loss policy insurance they may have received in the relevant years of account; (6) the additional cost of reinsurance should fill the existing cover from the bottom upwards.
Judgment for the plaintiffs.
LTL 23/3/96 : (1996) CLC 1283
Document No. AC0003948