Crawford Adjusters v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17 (13 June 2013)

An insurance adjuster, appointed by one insurer to assess a claim for a consortium of co-insurers, was sued for negligence by another insurer in the group. The Privy Council held that the adjuster could owe a duty of care to the other co-insurers.

Facts

Following damage caused by Hurricane Ivan in 2004 to a condominium complex in the Cayman Islands, a claim was made under a property insurance policy. The policy was underwritten by a consortium of insurers, including Sagicor General Insurance (Cayman) Ltd (‘Sagicor’) and Cayman First Insurance Company Ltd (‘Cayman First’). Cayman First, acting as the lead insurer, appointed Crawford Adjusters (‘Crawford’) to adjust the entire loss for the benefit of all the co-insurers. Crawford produced a series of reports upon which the insurers, including Sagicor, relied to make payments on the claim. Sagicor subsequently alleged that Crawford had negligently over-valued the loss in its reports, causing Sagicor to overpay its share of the claim by over US$2.5 million. Sagicor brought a claim in tort against Crawford for negligence, as there was no direct contractual relationship between them.

Issues

The central legal issue was whether Crawford, having been retained only by Cayman First, owed a duty of care in tort to the other co-insurers, specifically Sagicor, to act with reasonable care and skill in the adjustment of the insurance claim. The core of this question rested on whether there was an ‘assumption of responsibility’ by Crawford towards Sagicor, sufficient to establish the necessary proximity for a duty of care to arise in a case of pure economic loss.

Judgment

The Privy Council, in a judgment delivered by Lord Wilson, affirmed the decision of the Cayman Islands Court of Appeal and held that Crawford did owe a duty of care to Sagicor. The Board conducted a detailed analysis of the principles governing the duty of care for pure economic loss, focusing on the ‘assumption of responsibility’ test derived from Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.

The Assumption of Responsibility Principle

The Board determined that the relationship between Crawford and Sagicor satisfied the requirements for an assumption of responsibility. Crawford had agreed with Cayman First to adjust the loss for the benefit of all co-insurers and knew that all of them, including Sagicor, would rely on its professional advice in its reports to guide their payments. This knowledge and the purpose for which the reports were created were crucial.

Lord Wilson critically analysed the arguments, stating:

In the Board’s view therefore, the answer to the assumed responsibility question in the present case is that, by their agreement with Cayman First to adjust the whole of the complex’s loss for the benefit of all the co-insurers including Sagicor, Crawford did assume a responsibility to Sagicor for the careful performance of their tasks as adjusters. For the purpose of the adjustment was to quantify the loss on behalf of all the co-insurers in order that they should all pay their proper shares of it to the complex.

Reasoning of the Court

The court reasoned that this was not a novel situation extending the law but rather an application of established principles. Crawford knew the identity of the co-insurers and the explicit purpose of its reports. The reports were not for general circulation but were directed at a specific, limited class of persons (the co-insurers) for a specific purpose (payment of the claim). In these circumstances, it would be fair, just, and reasonable to impose a duty of care. The court rejected Crawford’s argument that imposing such a duty would create indeterminate liability. The liability was determinate as it was confined to the known co-insurers for a specific transaction. The court also noted that the contractual arrangements pointed towards, rather than against, the existence of a tortious duty of care.

Implications

The decision provides significant clarification on the scope of a professional’s duty of care to third parties, particularly within the insurance industry. It confirms that an insurance adjuster, or any professional retained by one party, can owe a duty of care to other known parties who will foreseeably and reasonably rely on their work for a specific purpose. This reinforces the principle that the absence of a direct contract does not preclude a finding of a duty of care where there has been an assumption of responsibility. The case serves as an important precedent for claims involving professional negligence against valuers, surveyors, and adjusters in multi-party commercial arrangements.

Verdict: The appeal was dismissed. The appellants (Crawford) were ordered to pay the respondents’ (Sagicor’s) costs of the appeal.

Source: Crawford Adjusters v Sagicor General Insurance (Cayman) Ltd) [2013] UKPC 17 (13 June 2013)