Broker negligence and loss of chance – Norman Hay PLC v Marsh Ltd

The Court of Appeal (CA) recently handed down its judgment in Norman Hay PLC v Marsh Ltd [2025] EWCA Civ 58 in which it dismissed the Defendant’s appeal concerning its application to strike out or summarily dismiss the Claimant’s claim, reaffirming that in cases of brokers’ negligence, the correct approach is to apply a loss of chance evaluation.

The facts and strike out / summary judgment application

Norman Hay Ltd (Norman Hay) is a holding company whose subsidiaries were world leaders in specialist chemicals, sealants and surface coatings. Norman Hay alleged that its insurance broker, Marsh Ltd (Marsh), failed to arrange suitable insurance cover for one of its subsidiaries, Internationale Metall IMPrägneier GmbH (IMP).

Specifically, Norman Hay alleged that Marsh was negligent by failing to arrange worldwide (including US) non-owned auto cover (insurance policies which covered driving hire cars) for its group companies and employees. As a result, Norman Hay says IMP had no insurance cover in place when one of its employees, Mr Kelsall, was involved in a road traffic accident in the US whilst driving a rented car on business in 2018. Ms Sage, the driver of the other vehicle involved, was seriously injured and brought a claim in Ohio against Norman Hay and IMP as being vicariously liable for Mr Kelsall’s negligence (alongside Mr Kelsall’s estate). Ms Sage settled her claim in 2021 for $5.5m, paid out of an amount held in escrow in connection with Norman Hay’s sale of its subsidiaries.

Norman Hay alleged that, but for Marsh’s negligence, IMP would have had adequate insurance which would have indemnified Norman Hay and/or IMP from the losses arising out of the accident and it would not have needed to pay Ms Sage under the settlement agreement. In the alternative, Norman Hay say that had Marsh not have been able to find suitable insurance cover, then it would have taken alternative steps, such as telling employees that they need to arrange their own insurance whilst in the US, or telling them to hire private drivers which in either scenario, insurance would have been in place.

Marsh applied to strike out Norman Hay’s claim primarily on the basis that Norman Hay had not pleaded that neither it nor IMP were actually liable to Ms Sage, notwithstanding the settlement reached. Marsh contended that this was an essential element of causation as a liability insurance policy (if it had been arranged) would only have responded if the insured was liable to the third party.

Marsh’s application was dismissed at the first instance. The court held that in a claim against an insurer under a conventional liability policy, the insured would need to prove it was liable to the third party. However, a case against an insurance broker is different. In such a case, had the broker not been negligent and insurance had been arranged, the court then must assess the chance that the insurer would have paid out in any event (including on a commercial basis), even if it was not strictly liable to do so. What the claimant has lost is the chance to have recovered money under a policy, even if as a matter of law, the insurer would not have needed to pay out. The court explained that this requires a trial to establish the factual inquiry. Marsh subsequently appealed the decision.

Court of Appeal decision

The CA rejected Marsh’s appeal. The CA agreed that cases against insurance brokers are different to claims against insurers and it referred to Fraser v B.N. Furman (Productions) Ltd [1967] 1 WLR 898 (Fraser).

In Fraser, an employee of the claimant had suffered an injury at work. The claimant then sued its insurance broker for failing to arrange suitable employer’s liability insurance. The court held that, if the putative insurer would have been liable in law, then damages would be recoverable from the broker. However, if the putative insurer would have been able to repudiate liability in law, then the court must then go on to consider whether, as a matter of business, it would have paid out in any event notwithstanding the position on liability. This was a question of fact, to be assessed on loss of chance principles; the court will assess the percentage chance of a beneficial outcome occurring, with any damages awarded adjusted to reflect that chance (for example, a 50% chance of a putative insurer paying regardless of liability could result in 50% of the damages being recoverable).

In the current case, the CA said that if there would have been a valid claim under the putative insurance policy then there would be no discount applied to recoverable damages. On the other hand, if it is clear that there would be no valid claim whatsoever, then it would not reach the requisite standard of a real and distinct, rather than merely negligible, prospect of success before an assessment of a loss of chance can be determined.

Therefore, the CA reasoned that Marsh’s argument that Norman Hay’s refusal to plead whether it or IMP was liable to Ms Sage was “not the knock-out blow” it believed it to be. If it could prove that Norman Hay and/or IMP was not liable to Ms Sage, then that would be just one factor in the hypothetical counterfactual matrix. The court would still then need to consider at trial the chances of whether the putative insurer would still have paid out in the circumstances.

Accordingly, Norman Hay’s claim against Marsh continues and will proceed to a full trial.

Comment

This decision reiterates the position laid out in Fraser that in cases of negligence involving brokers who have failed to arrange suitable insurance, the court will apply loss of chance principles as opposed to requiring claimants to prove on the balance of probabilities that it would have recovered under a putative policy. By clarifying the assessment is what a putative insurer would have done, and not what it is strictly entitled to as a matter of law, it underscores the general principle of damages of placing the injured party in the position it would have been in but for the broker’s negligence, at least as far as money can do so.

Further information 

If you have any questions or concerns about the topics raised in this blog, please contact Jemma Brimblecombe or  Filton Pavier. 

About the authors 

Jemma is widely recognised for her skills and experience in commercial litigation. She acts for both claimants and defendants in a wide range of sectors, including financial services, legal services, accountancy, and construction. 

Filton is an Associate in the Dispute Resolution team. His experience spans a range of complex matters, including civil fraud claims, contractual, company, boardroom and shareholder disputes, and professional negligence claims.