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In a
claim for recovery of premium by a marine reinsurance broker, the Court
of Appeal reiterated that the broker's cause of action for payment of
the premium is not for an indemnity in respect of the premium actually
paid, but for an indemnity in respect of premium deemed to have been
paid.
Heath Lambert
placed reinsurance with various Lloyd's syndicates on behalf of a Venezuelan
insurer in 1996. The cover was "Marine Facultative Reinsurance".
They paid the premium to the reinsurers, were not reimbursed and so
issued proceedings to recover the sums due.
All the
parties accepted that Section 53(1) of the Marine Insurance Act 1906
applied. That section provides that "…where a marine policy
is effected on behalf of the assured by a broker, the broker is directly
responsible to the insurer for the premium…". Heath Lambert
was in principle liable to the reinsurers, therefore, and the reinsured
was in turn, liable to Heath Lambert for the premium.
The Court
analysed the cases underlying s.53(1) of the 1906 Act. The Act recognised
that it was an established practice in marine insurance that the broker
treated himself as responsible to the underwriter for the premiums.
A fiction is therefore created by which he is deemed to have paid the
underwriter (even if he has not) and can at once recover the amount
from the assured.
This means
that a broker's cause of action for payment is not for an indemnity
in respect of premium actually paid (in which case the cause of action
would accrue on payment) but for an indemnity in respect of premium
deemed to have been paid.
This was
a vital point. The reinsured raised a time bar issue. The reinsurance
provided that "warranted premium payable on cash basis to London
underwriters within 90 days of attachment". Following the reasoning
through, the Court decided that this meant that the obligation to pay
the premium was only to pay before the expiry of 90 days from attachment,
at which point, the broker was deemed to have paid and his cause of
action arose. This lengthened the limitation period sufficiently to
ensure that the claim was not time-barred.
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