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Broker negligent for yacht valuation error

25 August 2015

The claimant had taken out insurance for a yacht valued at £13 million which was renewed annually. Four years later the broker instructed a sub-broker and £13M was submitted on the proposal form without consulting with the claimant. When the yacht was damaged, the insurer declined to pay £13M as there was evidence to show that the claimant believed that it may be worth £7M to £8M.

Leggett J found that had the insurers been aware of the true information they would have never insured the yacht for £13M. The representation was untrue but had not induced the insurer to enter into the contract. The broker was negligent in not checking with the claimant what the value of the yacht was at the time the sub-broker was asked to place the insurance. Judgment was awarded to the claimant for £2M for the increase in value cover which it would have received had the insurer not avoided the policy.

Brokers should be wary of changes in valuations and it is imperative that material information is checked with policyholders before submitting to insurers. Status quo should not always be assumed and particularly with the new obligations in place under the Insurance Act.

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