Background
MW Eat, which operated ten London restaurants, sued its insurance broker, James Hallam, alleging professional negligence, breach of duty and breach of contract in connection with its September 2019 insurance renewal. It alleged that the broker should have advised it to obtain a different product with more suitable disease and non-damage denial-of-access cover. MW Eat said its actual policy did not, beyond a £50,000 limit, cover losses arising from the COVID-19 lockdown.
The claimants sought damages of up to £8 million for lost profits said to have resulted from the March 2020 lockdown and subsequent financial years. Their pleaded counterfactual was a “Correct Alternative Product” that would have provided adequate protection for disease and denial-of-access losses, including diseases such as SARS, with limits reflecting turnover and, where necessary, per-restaurant limits. James Hallam applied to strike out the claim or obtain summary judgment, arguing that the hypothetical policy, causation and loss were insufficiently pleaded.
The Court’s Holding
Deputy Master Valentine held that the Particulars of Claim did not define the alleged alternative insurance sufficiently precisely. They failed to state the material indemnity limits, indemnity periods, acceptable premium, whether other important policy features would match the actual policy, and what amount of the claimed lockdown losses would have been recoverable. That left the broker unable to know the positive counterfactual it had to meet, assess the value of the claim, or prepare responsive evidence.
However, the court declined to strike out the claim or grant summary judgment. The absence of a named insurer or complete alternative policy wording was not itself fatal at the pleading stage. The claimants could, in principle, plead either a direct claim for losses that an adequately specified alternative policy would have covered, a loss-of-a-chance claim, or both. The court ordered the claimants to serve amended Particulars of Claim curing the identified defects within 28 days.
Key Takeaways
- An insurance-broker negligence claim must plead the positive counterfactual with enough detail for the broker to understand and answer it.
- “Adequate” cover is insufficient without pleaded limits, indemnity periods, premium parameters and the loss said to be recoverable.
- A claimant need not necessarily identify a particular insurer or provide complete policy wording at the pleading stage.
Why It Matters
The decision distinguishes between a deficiently pleaded counterfactual and an inherently unviable COVID-19 business-interruption claim. It confirms that uncertainty about the precise policy that might have been obtained does not automatically confine a claimant to loss-of-a-chance damages or require dismissal at an interlocutory stage.
For brokers and insureds, the case underscores that claims based on allegedly inadequate renewal advice need a concrete alternative insurance case: the pleaded policy features must be sufficiently defined to show how the asserted loss would have been avoided.