This was an action against a freight forwarder and insurance broker for breach of contract and negligence arising out of damage to a cargo of chocolate bars shipped to Trinidad. The cargo was insured subject to the Institute Frozen Food Clauses which only provided coverage in the event of mechanical breakdown of the reefer units for a period longer than 24 hours and such coverage ceased 5 days after discharge from the ship. The Plaintiff was unable to meet these conditions and, hence, there was no insurance coverage. The claim against the freight forwarder and insurance broker for breach of contract was based on an alleged contractual agreement that the Defendants were to procure "all risks, warehouse to warehouse" insurance coverage for the shipment. The Court found, however, that although the Plaintiff had initially requested "all risks, warehouse to warehouse" coverage it later instructed the freight forwarder to procure coverage subject to the Institute Frozen Food Clauses. Accordingly, the Court found that there was no breach of contract.
The Court next considered the question of negligence. The Court reviewed the authorities on the duties owed by insurance agents and brokers to their customers. These authorities established that the duty included: to review the needs of the customer; to provide information about available coverage and advice about which forms of coverage are appropriate; to exercise reasonable skill and care to obtain policies in the terms bargained for and to service those policies as required; to advise the customer if they are unable to obtain the policies bargained for; and to point out gaps in the coverage and advise the customer how to protect against those gaps. The Court held that although the Plaintiff had been advised of the limiting conditions of the Institute Frozen Food Clauses, the Defendants had a duty to do more. Specifically, the Court found that extended coverage was available and that the Defendants should have advised the Plaintiff of this coverage. The Court rejected the Defendants’ argument that the Plaintiff had not proven that it would have been granted the extended coverage if it had so requested. The Court held that there was no onus on the Plaintiff to prove this.
An additional argument advanced by the Defendants was that there had been material non-disclosure on the part of the Plaintiff. The Court rejected this argument saying that even if there had been material non-disclosure the effect would be to make the contract of insurance voidable and not void ab initio. As the underwriter never exercised the right to void the policy the Defendants could not rely upon the voidability of the policy as proof that the Plaintiff suffered no loss. Further, the Court held that there was insufficient evidence that the facts not disclosed were material. The Court noted that the onus was on the Defendants to lead evidence from the underwriter that it, in fact, regarded the non-disclosure as material and also to lead expert evidence of an independent underwriter that a prudent underwriter would be of the same view. In the result, the Defendants were liable for failing to obtain the proper insurance coverage.