Markel loses £16 million surveyor negligence dispute. Published June 2020

June 15, 2020 11:42 am Published by

UK Acorn Finance (UKAF) has won a £16 million negligence claim against professional indemnity insurer (PII), Markel, which had tried to avoid paying out on a surveyor’s PII policy.

UKAF is an agricultural bridging finance provider.  It appointed Colin Lilley Surveying (CLS) from 2010 to 2012 to value agricultural properties before making loans. In 2016 to 2017 UKAF claimed that CLS had negligently overvalued 11 properties and obtained judgements against the firm.

UKAF had brought its claims against the surveyor, but as CLS was insolvent, it now sought recovery of its losses directly from Markel, CLS’s PII insurer.  Markel refused to pay the claims on the grounds that CLS had made fraudulent misrepresentations in its insurance applications.  Markel alleged that CLS had failed to disclose that it was working for a sub-prime lender.

Under the terms of the policy there was an Innocent Non-Disclosure (IND) clause.  This meant that Markel should pay out under the policies if any non-disclosure was innocent and was not an attempt to defraud the insurer.

Markel defended its decision to avoid the policies in court, arguing that its decision making process was reasonable.  However the court found that Markel’s approach to assessing the alleged fraudulent misrepresentation had significant failings.  It cited the rarely-used ‘Braganza Test’ to conclude that Markel did not have the right to avoid paying under the policies.  Markel was ordered to pay £16m in damages.

The Braganza test is named after the case of Braganza v BP Shipping Limited [2015].  This prevents a decision-maker from making decisions which are ‘arbitrary, capricious or irrational’.

James Burgoyne of Brunel Professions explains that the Braganza Test is intended to prevent one party to a contract, who has the right to make a decision which may be to the detriment of the other, from abusing their power.  “In this case it meant that the underwriter needed to take more account of all the facts and material points before avoiding the policy for non-disclosure,” he said.

Reports about the case have been published by Beale & Co and 3 Verulam Buildings. is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK.  Click here to get a quote or call 0345 450 1074 to speak to a broker.

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This post was written by James Burgoyne

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