No missed opportunity: The Court of Appeal clarifies the principle of ‘loss of chance’ in Norman Hay Plc v Marsh Ltd (2025) EWCA Civ 58

The Court of Appeal in England & Wales has reaffirmed that the correct approach in cases of brokers’ negligence is to apply a loss of chance evaluation. In Norman Hay Plc, due to the insurance broker’s alleged negligence, the insured did not secure the necessary policy coverage and as a result, lost the opportunity to receive an insurance payout.

Background

Norman Hay Plc (the insured) brought a claim against Marsh Limited (the insurance broker) in negligence for alleged failure, in amongst other things, to recommend or arrange adequate insurance cover for Norman Hay’s subsidiaries. This related to non-owned vehicle cover in the USA. The issue arose following a road traffic accident in the USA involving an employee of a subsidiary of Norman Hay’s whilst driving a rental car, cover which was not provided under the company’s insurance policy.

Issues

The court focused on whether the insurance broker negligently failed to arrange insurance that would have indemnified the insured against liabilities from the accident, and whether the claimed losses were irrecoverable as reflective loss.

The broker argued they could not be liable as a holding company as there would be no valid claim against any insurer as it could not be legally liable to the third party. This argument was rejected by the court of first instance. Thus, the court had to consider on what basis a claim against the broker should be established.

The law

Whilst the court held the case was unsuitable for summary judgment due to unresolved factual issues, the court noted the claim against the broker should be evaluated based on the chance of recovery from a putative insurer.

The principle of loss of chance relates to the assessment of damages when a negligent omission by a professional has deprived a party of a real or substantial chance of a beneficial outcome even if the chance is less than 50%. The compensation amount awarded will reflect the probability of that positive outcome occurring.

Decision

The court reaffirmed the principles relied upon in its decision in Fraser v B.N. Furman (Productions) Ltd [1967] 1 WLR 898 and differentiated between cases against insurers and those against insurance brokers. To be successful in a claim against the former, the onus is on the insured to plead and prove the actual liability to the third party. Thus, where the question of whether a client would have been better off depends on what the client would have done based on appropriate advice, this must be proven on the balance of probabilities.

This differs to the latter, whereby proving loss in negligence for the failure to recommend or obtain appropriate insurance is determined by application of the principle of loss of chance as the outcome depends on what others would have done. An insured is not required to prove on the balance of probabilities that an insurer would have indemnified them, instead, the measure of loss will be the insured’s loss of chance to recover under the hypothetical policy. In these cases, the insured has lost the chance to recover money under a policy, even if as a matter of law, the insurer would not have needed to pay out. Applying the loss of chance principle, the court will assess the percentage chance of a beneficial outcome occurring, with any damages awarded adjusted to reflect that chance.

Practical implications

This case underscores the complexities involved in claims against insurance brokers for negligence and serves as a reminder of the importance of detailed factual analysis and the application of the loss of a chance principle in such disputes.

By clarifying the assessment is what a putative insurer would have done and not what they are strictly entitled to as a matter of law, it underscores the general principle of damages of placing the injured party, so far as is possible, in the position it would have been in but for the broker’s negligence.

If you would like any further information or advice, please contact Timothy Cockram, Rebecca Deans, or another member of the Professional Indemnity team.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice.