Sheriff Dismisses Partnership’s Damage Claim Over Insurance Renewal Misinformation

Scottish insurance broker spared liability in fire damage claim due to insufficient causation evidence

A partnership’s legal claim against their insurance broker has been dismissed by a sheriff at Airdrie Sheriff Court, highlighting the crucial importance of establishing clear causation in professional negligence cases. Angela Singh and Sunita Marwaha, trading as J&M Properties, sought damages from George Weightman & Company after a fire insurance claim was denied, but failed to adequately demonstrate how the broker’s actions directly caused their losses.

The case centered on events beginning in 2013-2014, when the partnership had an insurance policy for their commercial property in Larkhall Industrial Estate arranged through the defendant broker with insurer AIG. When the policy term ended, the broker informed J&M Properties that AIG would not renew coverage, stating in a January 16 letter that AIG was “no longer in the market for risks such as the pursuer’s.”

According to court documents, this explanation was false. AIG had actually declined to provide insurance because of outstanding repairs required at the property—repairs that J&M Properties had since completed. The partnership claimed they would have informed AIG of these completed repairs had they known the true reason for the denial, potentially securing renewal of their coverage.

Instead, relying on the broker’s explanation, the partnership engaged a different broker and obtained coverage from AVIVA. In their application, they declared—based on the information received from their previous broker—that AIG had withdrawn from offering insurance for their class of business. When a fire later caused extensive damage to the property, AVIVA declined the claim, citing a material misdeclaration in the proposal form.

The case hinged on whether the broker could reasonably foresee that their misinformation would lead to problems with future insurance coverage. J&M Properties argued that it was foreseeable that they would present the broker’s explanation to a new insurer, potentially leading to coverage issues.

Sheriff Anthony McGlennan, who presided over the case, identified significant gaps in the partnership’s legal argument. “The difficulty for the pursuer lies in what they offer to prove to establish that the defender’s wrongful act caused the loss,” he explained in his ruling. The sheriff noted that while the plaintiffs established the broker’s wrongful act, they failed to demonstrate that “but for the false information provided, AVIVA would nevertheless have provided an insurance policy for the property.”

The court also pointed out that if the partnership was claiming damages based on losing the opportunity to renew with AIG, they would need to prove “that AIG would have been satisfied by the repairs carried out and that they would have recanted from their previous refusal to insure the property.” No such evidence was presented.

Additionally, Sheriff McGlennan found issues with how the partnership specified their damages. The pleadings only mentioned the insured value of the property (£850,000) but did not establish the actual value at the time of loss or whether the policy was a valued policy with an agreed payout amount.

“The figure on its own tells the court nothing about the loss suffered. There were no pleadings as to the value of property at the date of the loss,” the sheriff stated in his decision.

This case underscores the complex nature of insurance litigation and the stringent requirements for proving causation in professional negligence claims. For businesses and individuals working with insurance brokers, it highlights the importance of understanding why coverage is being denied and ensuring accurate information is transmitted between parties.

The sheriff ultimately sustained the broker’s plea regarding insufficient specification, dismissed the action, and ordered the partnership to pay the defendant’s legal expenses.