Loss of Chance in Claims Against Insurance Brokers

Professional negligence claims arise when a professional’s substandard service causes financial or personal loss to a client. A key concept in such claims, particularly when dealing with insurance brokers, is “loss of chance.” We explore this complex area of law and examine how the recent case of Norman Hay PLC v Marsh Ltd [2025] EWCA Civ 58 clarifies the legal principles surrounding it, offering crucial insights for those pursuing professional negligence claims.

Understanding Professional Negligence

Professionals, be they solicitors, barristers, financial advisors, surveyors, or insurance brokers, owe a duty of care to their clients. This means they must perform their services to the standard expected of a reasonably competent professional in their field. If a professional breaches this duty, and this breach directly causes a loss to the client, a professional negligence claim may arise.

What is “Loss of Chance”?

In many negligence cases, it’s straightforward to demonstrate that the professional’s actions directly led to a clear financial loss. However, in cases involving insurance brokers, the loss may not be so direct. For example, if a broker fails to arrange proper insurance, the client’s loss isn’t the cost of the premium. Instead, the loss is the “chance” to have been insured against a specific event.

The legal concept of “loss of chance” acknowledges that a claimant can suffer a loss when a professional’s negligence deprives them of the opportunity to obtain a benefit or avoid a detriment. Rather than proving on the balance of probabilities that they would have been indemnified, the court will evaluate the likelihood that a third party such as an insurer would have taken a particular course of action, taking into account a range of factors including what they would have done as a matter of business, rather than just a strict legal entitlement.

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Key Takeaways from Norman Hay PLC v Marsh Ltd

The Norman Hay v Marsh case serves as an important illustration of the application of loss of chance principles in the context of professional negligence, specifically against insurance brokers.

• The Claim: Norman Hay, a holding company, sued its insurance broker, Marsh, for failing to arrange adequate non-owned auto insurance for its subsidiaries. An employee of one of its subsidiaries (IMP) was killed in a car accident in the USA while driving a hire car, in which the driver of the other vehicle (Ms Sage) was seriously injured. Ms Sage sought to bring a claim against the employee’s estate, as well as against Norman Hay and IMP, alleging vicarious liability for his negligence. The company was subsequently sued and incurred significant costs. Norman Hay claimed that Marsh’s negligence left them uninsured, arguing that Marsh failed to identify the need for adequate non-owned auto cover and did not consider an existing policy that could have provided indemnity. As a result, Norman Hay lost the opportunity to be covered.

• Marsh’s Defense and the Court’s Analysis: Marsh argued that Norman Hay had not shown that they were liable to the injured party and so an insurance company would not have paid out. However, the court found that in a claim against a broker, it is not necessary to demonstrate that a claimant would have been indemnified under a policy. Instead, a court should consider what a hypothetical (or putative) insurer would have done. The court emphasised that the assessment should be based on a real and distinct prospect of success, not just a negligible one. This involved considering whether the insurer would have taken a pragmatic approach and provided an indemnity, or whether it would have relied on its strict legal rights to avoid payment.

• Loss of Chance: The Court of Appeal referenced several pivotal cases including Fraser v B.N. Furman (Productions) Ltd [1967] 1 WLR 898 and Perry v Raleys Solicitors [2019] UKSC 5. These cases established the principle that when an insurance broker fails to arrange a policy, the insured is entitled to be placed in the position they would have been had the broker fulfilled their contractual duties. The court clarified that when assessing damages, one must consider whether, as a matter of business, an insurer would have been likely to pay out.

• Key Principle: In cases against brokers, the court’s focus is on the availability of insurance coverage rather than on establishing a direct liability to a third party. The court must consider a counterfactual scenario: what would have happened had the broker not been negligent.

• Outcome: The Court of Appeal dismissed Marsh’s attempt to obtain summary judgment and ruled that the case should go to a full trial. The Court found that a full factual inquiry was necessary to assess what insurance coverage would have been arranged, its effectiveness and to apply loss of chance principles.

Download the Judgment Here

Implications for Professional Negligence Claims

The Norman Hay v Marsh case highlights several important points:

• Broader Inquiry: Claims against brokers allow for a broader inquiry into what would have happened had the broker not been negligent, compared to a claim against an insurer.
• Focus on “Chance”: Claimants do not need to prove they would have definitely been indemnified but that the opportunity to be indemnified was lost due to the broker’s negligence.
• No Summary Judgment: Courts are less likely to grant summary judgment and dismiss a claim where there is a complex factual inquiry relating to the loss of chance.
• Duty of Care: Insurance brokers have a duty of care to arrange suitable insurance cover and protect the interests of their clients.
• Loss of Chance Application: Courts will consider the likelihood of a putative insurer honouring a claim when assessing losses, applying the principles of “loss of chance“.

How Can We Help?

If you believe you have a professional negligence claim, it is crucial to seek expert legal advice promptly. Our team of specialist negligence lawyers, including both solicitors and barristers, has extensive experience in handling complex claims against various professionals. We can assess the merits of your case, advise you on the best course of action, and help you obtain optimal compensation for your losses, often on a no win no fee basis.

We are experts in settling high-value contentious professional negligence disputes, including claims against solicitors, barristers, conveyancers, accountants, surveyors, financial advisers, and insurance brokers.

The Norman Hay v Marsh case is a significant development in professional negligence law, particularly for claims against insurance brokers. It reinforces the application of “loss of chance” principles, ensuring that professionals are held accountable for their negligent actions, even where the loss is not directly quantifiable. Understanding these concepts is crucial for those seeking to recover losses due to professional negligence.

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