Premium paid to an insolvent broker

The key question is whose agent Calder was for receipt of the premium. A broker is usually the insured's agent when placing the risk, but the agency can differ for premium. Here Insurer Z gave Calder delegated authority to receive premiums and issue cover notes. That is actual authority, and it is usually treated as authority to receive premium on Z's behalf. Payment to Calder on 5 February therefore discharges Ridgeway's premium obligation. Z's remedy for non-receipt is against Calder and its administrators, not against Ridgeway. Z cannot cancel the policy for non-payment as if Ridgeway had failed to pay. The FCA client money rules (CASS 5) reinforce the expectation that premiums are held in a segregated client account, but a breach of those rules does not by itself revive the insured's debt. The policy should be treated as in force, subject to its terms.

Calder's oral statement that retroactive cover was unlimited is a misrepresentation, but the question is whether it binds Insurer Z. A broker is not automatically the insurer's agent for every statement. Calder was Ridgeway's agent for placing the insurance; its authority to issue cover notes does not necessarily extend to varying the policy limit orally. If the statement was outside Calder's actual or apparent authority, Z is not bound and can rely on the £1m aggregate limit. Ridgeway's remedy is then against Calder for breach of duty, but Calder is in administration, so recovery may be limited. Ridgeway should check whether Calder's professional indemnity policy responds and whether any compensation scheme applies. If Calder made the statement in a cover note issued under delegated authority, or if Z held Calder out as having authority to describe the cover, Z may be bound. On these facts, the policy wording is likely to prevail.

Ridgeway can complain to FOS about both Calder and Z if each is an FCA-regulated firm and Ridgeway is an eligible complainant. An LLP may qualify as a micro-enterprise if it meets the employee and turnover tests; that needs checking. FOS can consider the sales advice, the alleged misrepresentation and the decline. However, the claim is £1.4m, far above the FOS award limit, so FOS could not award the full amount. It can still make a recommendation or an award up to the limit, and its decision may influence settlement. Calder's administration may affect practical recovery and FOS may stay or discontinue the complaint, but it does not automatically remove jurisdiction. For a claim of this size, court proceedings or negotiation with Z and Calder's administrators are likely to be more appropriate. FOS is not a substitute for litigation where the sums are large.