Brokers
Brokers' duty when placing Business Interruption
Insurance
The claimant alleged that its broker had been negligent when
placing business interruption ("BI") cover for it. The
claimant had reached a settlement with its insurers after they had
indicated that they might exercise their avoidance rights because
the claimant was under-insured. Although most of the case turns on
the facts of the case (and, in particular, the source of figures
supplied to the insurers), Blair J did set out some basic
principles of brokers' duties when placing BI cover:
- Two particular problems arise with the placement of BI cover:
the calculation of "gross profit", allowing for the fact
that the insured will not be incurring the costs of purchases or
variable costs in the event of a catastrophic event; and the period
of indemnity which will be required (the maximum indemnity period
can be 12 or 24 months and the insured event may take place near
the expiry of the policy).
