Norman Hay Plc (in Member’s Voluntary Liquidation) v Marsh Ltd

In this case analysis, Nicholas Broomfield and Diarmuid Laffan discuss Norman Hay Plc v Marsh Ltd, examining its treatment of causation principles in brokers’ negligence claims and its clarification of the limited circumstances in which Dalamd Ltd v Butterworth Spengler Commercial Ltd [2018] EWHC 2558 (Comm) applies.

Introduction

1. Norman Hay Plc v Marsh Ltd is a professional liability claim brought by Norman Hay Plc against Marsh Ltd arising from Marsh’s alleged failure to obtain worldwide non-owner auto cover on behalf of Norman Hay and its subsidiaries for the policy year 2018/2019. As a result of the failure to obtain cover, Norman Hay claims that it suffered losses in excess of $5.5m when an employee was involved in a fatal car accident whilst driving in Ohio in November 2018. The case will be of interest to lawyers practicing in the fields of insurance and professional liability for its consideration of the principles of causation applicable to broker’s negligence claims and clarification of the limited circumstances in which Dalamd Ltd v Butterworth Spengler Commercial Ltd [2018] EWHC 2558 (Comm) applies.

2. Graham Chapman KC and Marie-Claire O’Kane of 4 New Square Chambers represented the successful Claimant before the Court of Appeal.

The Facts

3. Norman Hay was the holding company for subsidiaries specialised in chemicals, sealants and surface coatings (“the Group Companies”). The Group Companies were located in different jurisdictions throughout the world and their employees frequently travelled for business.
4. Marsh was the commercial insurance broker retained by Norman Hay to act for the Group Companies in placing cover: (a) on a country-by-country basis for the policy year 2017/2018; and (b) under a global liability programme for the policy years 2018/2019 and 2019/2020.
5. Mr Nigel Kelsall (“NK”) was an employee of a German Group Company known as Internationale Metall IMPragneier GmbH (“IMP”). In November 2018 he made a business trip to the United States and hired a car, but decided not to take out insurance. When driving to the airport for his return flight NK was involved in a road traffic accident and tragically died. Ms Heather Sage (“HS”) was driving the other vehicle involved in the accident and was seriously injured.
6. HS and her children intimated claims against NK’s estate, IMP and Norman Hay itself. In October 2019 Norman Hay decided to sell the Group Companies (including IMP) to a buyer known as Quaker Speciality Chemicals (UK) Ltd for £80m. Under the terms of the agreement Norman Hay was required to indemnify Quaker in respect of any liability to HS and the sum of $8m was deducted from the purchase price and paid into escrow for that specific purpose.
7. On 22 November 2020, HS and her children issued proceedings against various defendants including Norman Hay and IMP in a US District Court alleging that: (a) the accident was caused by the negligence of NK; (b) NK was driving the car in furtherance of IMP’s business and in the course of his employment; (c) both IMP and Norman Hay were vicariously, and jointly and severally, liable for NK’s negligence.
8. On 9 March 2021 Norman Hay settled HS’ claim and those of her children on the advice of specialist US personal injury counsel. HS was paid $5.5m from the escrow account, thus reducing the amount received by Norman Hay for the sale of the Group Companies.

Overview of the proceedings

9. Norman Hay’s principal allegation is that Marsh failed to identify the need for, and arrange, worldwide (including US) non-owned auto cover (i.e. motor liability insurance cover in the event of cars being hired) under Norman Hay’s group travel policy. It claims that if cover had been in place, it would not have had to fund the settlement of HS’ claim from the purchase monies held in escrow and the costs of dealing with the claim.
10. Norman Hay alleges in the alternative that: (1) if suitable cover was not available, it could have taken alternative steps to avoid liability to third parties (for example by directing employees to purchase suitable cover when abroad) and (2) IMP did have worldwide (including US) non-owned auto cover (with a limit of indemnity of €3m) which had been arranged by Marsh’s German subsidiary and which Marsh negligently advised Norman Hay to cancel when arranging the global liability programme.
11. Marsh denies liability on various grounds, including that it was not required to arrange, or advise about, worldwide non-owned auto cover because it is not typically provided in liability policies written in the UK. It further contends that Norman Hay’s case is defective because Norman Hay deliberately chose not to plead that either it or IMP was liable to HS, and that Norman Hay has suffered no recoverable loss.

The first instance decision: [2024] P.N.L.R. 25

12. Marsh applied to strike out Norman Hay’s claim pursuant to CPR r.3.4(2) and/or for summary judgment under r.24.3. Marsh’s principal submissions in support of the application can be shortly summarised as follows:

• Norman Hay’s claim was defective as a matter of law because it had not pleaded that it was liable to Ms Sage, and thus it could never establish that it would have been indemnified under the policy that should have been taken out but for the alleged negligence (“the Liability Issue”);
• Norman Hay is not entitled to claim damages on a basis that reflects the reduced sale value of its subsidiaries since nowhere has it been alleged in the Particulars of Claim that Marsh was under a duty to Norman Hay to protect the market value of its shareholding in its subsidiaries (“the Loss Issue”).

13. Marsh’s submissions on the Liability Issue stood on two main foundations. The first was the well-established proposition that where the insured under a liability policy has settled the claim of a third party, to claim under the policy the insured must demonstrate that it was or would have been liable to the third party and cannot simply rely on the settlement agreement as evidence of that liability (Enterprise Oil Ltd v Strand Insurance Co Ltd [2006] 1 Lloyd’s Rep. 500, per Aikens J (as he then was) at [27]).
14. The second foundation was the judgment of Mr Justice Butcher in Dalamd Ltd v Butterworth Spengler Commercial Ltd [2018] EWHC 2558 (Comm). The claimant in that case issued proceedings under an assignment against a broker alleging, so far as relevant, that as a result of the broker’s negligence the insureds’ property damage and plant & machinery insurers had reasonable grounds for denying coverage following an industrial fire. The claimant issued against the broker without first bringing proceedings against or settling with the insurers. Butcher J held that where an insurance broker is sued for failing to obtain effective cover, the insured has to prove on the balance of probabilities that cover was not available under the policy put in place by the broker on account of the broker’s negligence. It is not enough to show (as had been submitted by the claimant in that case) that the insurer has a reasonably arguable defence, with all questions as to what it and other third parties would have done determined on a loss of chance basis with reference to the principles in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 W.L.R. 1602. Butcher J further held that where a broker argues in defending a claim that the insured’s policy would not have responded for reasons unrelated to the alleged negligence (such as breaches by the insured of policy conditions) such arguments must also be determined on the balance of probabilities.
15. On these grounds Marsh submitted that when addressing causation in the context of a professional negligence claim against a broker where the claimant is alleging a failure to obtain insurance, the claimant must plead and prove that the counter-factual insurance would have provided cover. It is this which, on Marsh’s account, rendered Norman Hay’s failure to plead that it was liable to HS fatal because it put Norman Hay in a position where it could not prove that but for Marsh’s negligence it would have been indemnified.
16. Picken J accepted the distinction suggested on behalf of Normal Hay between the positions respectively of an insured claiming against a liability policy and the claimant in a broker’s negligence claim (at [64]):

“…I agree with Mr Chapman KC when he submitted that, whilst it is quite clear that an insured must prove, as a matter of contract, that it is entitled to be indemnified under the policy according to its terms, the position is not the same where the claim is against an insurance broker in negligence. In the latter context, there is scope for a broader inquiry as to what, had the broker not been negligent, would have happened in the event that the claimant (here Norman Hay) had presented a claim to its putative insurer. That necessarily requires there to be an assessment of the chance that the claim under the putative policy would have been met. That will include the Court asking itself whether, realistically, the putative insurer would in the present case have told Norman Hay that it should, in effect, act as a prudent uninsured in dealing with Ms Sage’s claim or whether, as Mr Chapman KC would suggest, the more likely position would be that the putative insurer would have engaged with Norman Hay in dealing with the claim and provided an indemnity of some sort.”

17. He went on to distinguish Dalamd as follows (at [83]):

“I do not read what Butcher J was saying in Dalamd as precluding the case which Norman Hay wishes to advance… this is not a case (unlike Dalamd) where the claimant (here Norman Hay) has chosen not to pursue its insurer and instead only to bring a claim against its broker. This is for a straightforward reason: Norman Hay does not have an insurance policy under which it could bring a claim – precisely because, so Norman Hay alleges, of negligence on Marsh’s part; there is, as Mr Chapman KC put it, no insurer “on the scene”.”

18. On the Loss Issue, Picken J accepted Norman Hay’s explanation that it was not seeking to claim a loss based upon the reduction in the value of any subsidiary and thus concluded that the Second Loss Issue had ceased to be a freestanding objection and stood or fell with the Liability Issue (at [53] – [55]).

The Court of Appeal’s judgment: [2025] EWCA Civ 58

19. Marsh appealed on both issues. Before addressing the grounds of appeal, Lord Justice Males (giving judgment for the court and with whom Lord Justice Birss and Sir Geoffrey Vos MR agreed) held that it would be premature to strike out Norman Hay’s claim by reference to arguments about causation and loss in circumstances where Norman Hay was yet to identify the type of insurance which on its case it would have secured via reasonable advice from Marsh, and where various disputed issues were yet to be determined including as to the scope of Marsh’s instructions and hence its obligations to Norman Hay and as to the advice Marsh should have given Norman Hay acting as a reasonable insurance broker ([22]-[26]).
20. Males LJ went on to agree with Picken J in holding that, while a conventional liability policy would only respond if the insured was liable to a third-party, a professional negligence claim against a broker for failing to arrange a policy of insurance is entirely different for the reasons identified by the Court of Appeal in both Fraser v B.N. Furman (Productions) Ltd [1967] 1 WLR 898 and Dunbar v A&B Painters Ltd [1986] 2 Lloyd’s Rep 38. At [31], Males LJ approved the following dicta of Diplock LJ in Fraser:

“What damage they have suffered does not depend upon whether Eagle Star would have been entitled as a matter of law to repudiate liability under their standard policy, but whether as a matter of business they would have been likely to do so. What the employers have lost is the chance of recovering indemnity from the insurers. If Eagle Star would not have been entitled to repudiate liability in law, cadit quaestio; the damages recoverable would amount to a full indemnity. Even if they would have been entitled in law, however, to repudiate liability, it does not in my view follow that the employers are entitled to no damages. The court must next consider in that event, what were the chances that an insurance company of the highest standing and reputation, such as Eagle Star, notwithstanding their strict legal rights, would, as a matter of business, have paid up under the policy.”

21. Males LJ held that the Court of Appeal’s approach in Fraser was consistent with the Supreme Court’s assessment in Perry v Raley Solicitors [2020] AC 352 of when the loss of a chance principles are to be applied. Adopting the “clear and common-sense” dividing line approved in Perry at [20], the assessment of what a putative insurer would, or would not, have done if faced with a claim is clearly falls to be determined upon a loss of a chance evaluation.
22. The Court of Appeal therefore concluded that the putative insurer’s liability was not determinative but a single factor amongst many that the trial judge would have to consider when assessing the Norman Hay’s lost chance. Although the assessment of the counterfactual claim against the insurer was left for the trial judge, Males LJ observed (at [36]) that other factors the trial judge may consider would include whether an insurer would have taken “the somewhat academic point that the only valid claimant was IMP and not Norman Hay, or would it have taken the pragmatic view that as it was going to have to pay anyway, it might as well take over the defence of the claim by [HS]?”.
23. The Court of Appeal shortly dismissed the Loss Issue, upholding Picken J’s conclusion that it did not require separate consideration on the grounds (at [38]-[39]) that: (a) the Settlement was entered into by all of the defendants in the group; (b) if the putative insurer had taken over the defence of the claim then it is likely that it would have funded the settlement without distinguishing between the positions of the various Group Companies; (c) if necessary Norman Hay could have taken an assignment of IMP’s claim against the putative insurer; and (d) in circumstances where Marsh had been retained to arrange cover on behalf of the Group Companies the Court of Appeal was not prepared to accept on a summary judgment application that Norman Hay did not suffer loss if one of the Group Companies was left uninsured.

Commentary

24. Norman Hay is consistent with the way in which loss of a chance principles have been applied to claims against other professionals where the Court has been tasked with determining what would have happened if the negligent professional had acted with reasonable care and skill. The Court of Appeal followed Fraser, which it held to be consistent with the general loss of a chance principles laid down by the Supreme Court in Perrys v Raleys Solicitors [2020] AC 352.
25. For instance, in a claim arising from the lost opportunity to pursue litigation, a solicitor is unlikely to be able to defend the claim on the basis that on the balance of probabilities its former client would have provoked no settlement offers and would have failed at trial in any event. In these circumstances the Court does not apply a “balance of probabilities” test and will (if asked to do so) consider both the lost opportunity to successfully pursue the claim to trial or to settle the claim on the best available terms.
26. Following the Court of Appeal’s judgment in Norman Hay, the status of Dalamd is uncertain. Males LJ stated pointedly (at [28]) that while Picken J had considered Dalamd in detail, it was sufficient for him to refer to the leading authority “of this court” in Fraser v B.N. Furman (Productions) Ltd.
27. In coming to his decision in Dalamd Butcher J noted that where an insured seeks to establish a contested right indemnity under an existing policy, it will often sue the insurer and broker in the same action, and he regarded it as anomalous that an insured could side-step its obligation to prove its right to indemnification on the balance of probabilities by deciding not to join the insurer to the proceedings and to claim solely against the broker on loss of chance principles (at [125]-[135]).
28. It appears that following Norman Hay the approach advocated in Dalamd is restricted to the specific scenario of that case (i.e. where the claimant has sued the broker without suing or settling with the insurer in relation to an extant policy) and does not apply in cases where as a result of the broker’s negligence the insured has been left without any insurance against which it might claim.

The full judgment is available here.

©  Nicholas Broomfield and Diarmuid Laffan of 4 New Square Chambers