High Court ruling influences insurance duties

On 13 June 2025, the High Court of Justice delivered a key ruling in the matter of AmTrust Europe Limited v MD Insurance Services Limited & Anor. This case focuses on the obligations of insurance entities and explores the ramifications of underwriting practices, especially highlighting AmTrust's allegations against MDIS regarding inadequacies in claims handling and underwriting processes. The proceedings bring to light the crucial role of duty of care in insurance operations and the processing of property insurance policies.

In the background of this case, AmTrust appointed MDIS as a coverholder responsible for managing underwriting processes and claims handling for a variety of latent defect insurance policies, such as the Premier Guarantee and LABC Warranty schemes. These policies are critical as they enable developers to sell newly constructed properties with assurances against defects that may emerge soon after the completion of construction.

The dispute arose from AmTrust’s dissatisfaction with MDIS's performance in adhering to a Binding Authority Agreement that specifically outlined MDIS’s obligations, such as how it should conduct underwriting and handle claims. The core question was whether MDIS had exercised adequate due diligence in overseeing the insurance policies, notably in ensuring that properties covered were assessed as ‘standard risk’ and adequately inspected before issuing coverage.

Throughout the proceedings, various legal applications were presented. AmTrust aimed to amend its Particulars of Claim to introduce additional defendants and claims, while MDIS requested a summary judgement to dismiss AmTrust's allegations. Central to the litigation was the examination of whether MDIS owed a duty of care to AmTrust, alongside establishing if negligence could be substantiated within the existing contractual framework.

The court meticulously explored legal principles related to the duty of care, referencing established precedents delineating how such a duty might emerge, particularly when one party relies on another's expertise. The judgement demonstrated the court's in-depth evaluation of the relationship dynamics between both parties, including how prior rulings highlighted the expectation of reasonable skill and care in insurance matters.

In the ruling’s conclusion, the court dismissed MDIS’s motion for summary judgement, determining that AmTrust's allegations merited legal examination at trial due to the intricacies surrounding the duty of care. The court identified crucial factors that influenced its decision, including the interconnectedness of the insurer-coverholder relationship, which reinforced MDIS's obligation to act in AmTrust’s best interests, and recognised evidence suggesting that MDIS's conduct may have resulted in negligence, allowing AmTrust's claims to progress.

This case further underscores the complexities inherent in insurance claims, particularly those linked to property transactions. It emphasises the vital need for clear documentation and strict adherence to established processes for risk assessment and management.

Ultimately, the court's directive to advance with the case indicates that the subtleties of the relationship and associated obligations require further exploration through a full trial. This ruling carries significant implications for the insurance industry, particularly regarding how coverholders manage their responsibilities and the care owed to their insurer counterparts. It highlights the necessity for meticulous adherence to underwriting practices amid the challenges ultimately faced by insurers when evaluating their appointed representatives' performance in a competitive market.

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