RALPH ERNEST WYNNIATT-HUSSEY (AND THE OTHER NAMES LISTED IN THE 1ST SCHEDULE TO THE WRIT OF SUMMONS) v (1) R J BROMLEY (UNDERWRITING AGENCIES) PLC (IN LIQUIDATION) (2) H G CHESTER & CO LTD (IN LIQUIDATION) (AND THE MEMBERS' AGENTS LISTED IN THE 1ST SCHEDULE TO THE WRIT OF SUMMONS) (3) RUTH BARBARA BROMLEY (THE EXECUTRIX OF THE ESTATE OF ROY JOHN BROMLEY DECEASED) (1996)

QBD (Langley J) 16/4/96

INSURANCE

LLOYD'S NAMES LITIGATION : UNDERWRITING CLAIMS

Preliminary rulings on certain issues in claims by Lloyd's Names against managing agents and members agents in negligence.

Claims for negligent underwriting of London Market Excess of Loss (LMX) reinsurances substantially in the underwriting years 1989 and 1990 by plaintiff Names or underwriting members of Marine Syndicate 475 at Lloyds for one or more of the underwriting years 1987 to 1991.

HELD: The conclusions to be drawn from the evidence were that the proper maximum level of unprotected exposure was that 50% of stamp capacity and that figure should never have been exceeded. The minimum required of the late Mr Bromley acting as a prudent underwriter would have been: (1) to assess the PML of the Syndicate at any date which may be material and (2) to have ensured that either the business was not written or reinsurance protection was acquired to the extent necessary to ensure that at any material time the syndicate was not exposed to an unprotected risk on that PML greater than 50% of stamp capacity; and (3) to have done so by ensuring that the risk of such exposure (the 50%) arose only at the top of and not at some intermediate stage in the protection programme which should have been acquired to achieve that outcome. To the extent that Mr Bromley did not achieve that outcome he fell below the standard of care to be expected of a prudent underwriter and was in breach of the duty which he owed to the plaintiff Names and the Bromley Agency as managing agents would also be liable to the Names accordingly as would the members' agents for the 1989 year, save only to the extent to which a limitation defence is available to the defendants. The question whether or not the plaintiffs' claims were statute barred arose only in respect of the claims for the 1989 year. The real cause of the loss, is the inadequate level of cover at the time the relevant catastrophes which caused such losses, occurred. This conclusion results in the only claims which might yet give rise to limitation defence to the members'agents were those on the 6th writ. Whether they do so or not must await a further hearing so that should the Exxon Valdez disaster, which occurred on 24/3/89, give rise to losses for which the plaintiffs in the 6th writ would otherwise be entitled to claim the members' agents' limitation defence may well be effective. As to the separate claim against the Chester Agency this must fail as the plaintiffs failed to establish the duty of care on which they relied. There was no evidence that the Names or their agents were at any time aware of or in any way relied upon the terms of the undertaking given to Lloyd's by the Chester Agency. In the event of the members' agents being found liable to the plaintiffs they seek an indemnity of 100% to that liability including their costs, from the Bromley Agency as managing agents of the Syndicate and from the estate of Mr Bromley. Whilst it will require a further trial to determine whether the consequences of this judgment is that the members' agents and the Bromley Agency are liable to the plaintiffs and if so in what sums the liability of the members' agents will arise from the breach by the Bromley Agency of their duty to control and manage the underwriting of the Syndicate. That duty was also owed to the members' agents under the terms of the sub-agency between them and the Bromley Agency. In those circumstances Mr Bromley and the Bromley Agency were responsible to the members' agents for the proper conduct of the Syndicate's underwriting and it follows that the member's agents are entitled to the indemnity they claim. Judgment accordingly.

Mr Rokison QC for the Names. Mr Flaux QC for the Bromley Agency and Mrs Bromley in her capacity as executrix. Mr Bryan for certain of the Members Agents. The Chester Agency were not represented.

LTL 18/4/96 (Unreported elsewhere)

Judgment Approved

Document No. AC0004077