The Commercial Court recently delivered its latest judgement in litigation arising out of unpaid premium under marine facultative reinsurance placed in the London market by Heath for Venezuelan insurers, Banesco. The Court’s decision in Heath Lambert Ltd v Sociedad de Corretaje de Seguros and Another is a useful restatement of the legal position that a broker in the marine market who has paid premium on his client’s behalf, has a lien over claims recoveries and may offset the amount collected against the premium due from his client.
It was not disputed in the litigation that Heath had paid premiums to the facultative reinsurers and that neither Banesco nor the Venezuelan brokers had reimbursed Heath for the amounts paid. Unsurprisingly Heath asserted a lien over claims recoveries collected from the reinsurers in respect of the premium paid on Banesco’s behalf. Section 53(2) MIA provides:
Unless otherwise agreed, the broker has, as against the assured, a lien upon the policy for the amount of the premium and his charges in respect of effecting the policy.
In response Banesco argued that Heath were authorised to collect claims recoveries as Banesco’s agents and to account directly to Banesco rather than through the Venezuelan brokers. Heath could not therefore assert a lien over the loss recoveries for the premium due to them from the Venezuelan brokers and it followed that the parties had "otherwise agreed" that a lien would not attach.
The Court rejected Banesco’s argument and found that there was no evidence that Heath had "otherwise agreed" to forego its right to a lien. The judge restated the position that a marine broker has a lien for premium and commission and held that in the present case it made no difference whether Banesco was directly liable to reimburse Heath for the premiums paid. It is worth noting that the judge was clearly sympathetic to the brokers’ position and commented that it would be "obviously unfair" if the brokers were required to pay the claim proceeds to the reinsured without being able to off set the amount owed for premium.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 06/07/2006.
