Loss of chance – a new dawn in broker’s claims

The Court of Appeal’s recent decision in Norman Hay Plc v. Marsh Ltd [2025] [1] provides important clarification on the application of loss of chance principles in professional negligence claims against insurance brokers. It represents a significant authority in the approach to causation and quantum where a broker’s alleged negligence results in the complete absence of insurance cover.

Background

Norman Hay instructed its broker to arrange a global insurance programme that included non-owned auto cover for its German subsidiary. Unfortunately, no such cover was placed. In 2018, an employee of that subsidiary was involved in a fatal road traffic accident in Ohio while driving a hire car. The claim brought by the deceased’s family was eventually settled for over US$5.5 million. Norman Hay, having no applicable cover in place, funded the settlement directly and brought proceedings against the broker for failing to secure the relevant insurance.

The broker applied for strike out or summary judgment on the basis that Norman Hay had failed to plead or prove that it was legally liable to the claimant in the US proceedings and that in the absence of such proof, it could not establish causation. The broker relied heavily on the High Court’s decision in Dalamd v Butterworth Spengler [2], where a broker was found not liable because the claimant had failed to prove that the existing policy would have responded to the loss.

The courts' approach to loss of chance

At first instance, Picken J rejected the broker’s application. He held that Dalamd was distinguishable. In this case, there was no policy in place at all, whereas Dalamd involved a policy whose scope of cover was in dispute. Where a broker’s alleged breach of duty results in the total absence of cover, the court held that causation could be established using loss of chance principles. The key question becomes whether there was a real and substantial chance that the insurer would have provided an indemnity had the policy been in place.

The Court of Appeal upheld that approach. Males LJ, giving the leading judgment, reaffirmed the distinction between two types of claim:

• where a policy exists and the claim is against an insurer, the claimant must establish that the insurer would have been legally liable to indemnify the loss on the balance of probabilities;
• where the claim is against a broker, and no policy was ever placed due to negligence, the court may assess whether the chance of obtaining indemnity was sufficiently real and substantial to support a claim for damages.

The Court confirmed that the Fraser v BN Furman [3] line of authority remains good law in this context. Insurers may make commercial decisions to settle claims even where strict legal liability is uncertain. A claimant in a broker negligence case is not required to show that a hypothetical insurer would definitely have responded. Instead, the court may evaluate the likelihood that cover would have been available and that the insurer would have paid, and awarded, damages proportionate to that chance.

This is consistent with broader case law on loss of chance, including the Supreme Court’s guidance in Perry v Raleys Solicitors[4]. The insured’s own hypothetical actions (e.g. whether they would have made a claim) must be proved on the balance of probabilities. But the hypothetical actions of third parties (such as insurers) may be evaluated on a loss of chance basis.

Practical implications for PI Insurers

This decision offers a restatement of the principle for professional indemnity insurers handling broker negligence claims. It confirms that where a broker’s breach results in no policy at all, the hurdle for proving causation is lower than in cases where the issue is the interpretation or enforcement of an existing policy.

However, it also serves as a reminder that such cases may proceed even in the face of uncertainty about whether an indemnity would have been granted. Provided there is evidence of a realistic chance that the claim might have been met, the broker may be exposed to liability—albeit reduced to reflect the assessed likelihood.

  [2025] EWCA Civ 58
  [2018] EWHC 2558 (Comm)
  [1967] 3 All ER 57
  [2019] UKSC 5