Category: Insurance case law · Reviewed by Taylor Watts, Broker · New Business · Last reviewed June 2026
The House of Lords decision confirming that a professional may owe concurrent duties in contract and tort, and that Lloyd’s managing agents owed Names a duty of care in tort independently of contract.
The case formed part of the multi-billion-pound litigation arising from the catastrophic losses suffered by Names at Lloyd’s of London during the late 1980s and early 1990s. The Names were the individuals who provided unlimited-liability capital to underwrite insurance and reinsurance risks at Lloyd’s through participation in syndicates. The structure of the market involved three principal levels: the Names themselves; members’ agents, who recruited Names and advised them which syndicates to join; and managing agents, who actually conducted the underwriting business of each syndicate.
In broad terms, a Name had a direct contract (the agency agreement) with their members’ agent. The members’ agent in turn entered into sub-agency agreements with the managing agents of the syndicates on which the Name participated. Many Names therefore had no direct contract with the managing agents who in fact underwrote risks on their behalf.
When huge losses (particularly arising from US asbestos, pollution and other long-tail liabilities, alongside catastrophe losses) crystallised at Lloyd’s, Names sought to recover from the various agents involved. Those Names who had only indirect (sub-agency) relationships with the managing agents argued that the managing agents owed them a duty of care in tort independently of any contract. The managing agents responded that the chain of contracts was a deliberate commercial structure and that the law of tort should not be used to circumvent it.
In addition to the indirect Names, direct Names (whose members’ agent also acted as their managing agent for some syndicates) argued that they were entitled to bring claims in tort as well as in contract — a question of concurrent liability — particularly because tortious limitation periods could be more favourable than contractual ones.
The case raised two principal issues of general importance. First, did managing agents at Lloyd’s owe a duty of care in the tort of negligence to Names with whom they had no direct contract (the indirect Names), arising out of the underwriting they conducted on the Names’ behalf? Second, where there was a direct contract between a professional and a client, could the client also sue in the tort of negligence in respect of the same conduct, or was the relationship governed exclusively by the contract?
These issues required the House of Lords to consider the proper relationship between the Hedley Byrne assumption of responsibility doctrine, the Caparo framework, and the law of contract — and in particular whether the existence of a contract precluded the recognition of concurrent tortious duties.
The House of Lords unanimously held that the managing agents owed the Names a duty of care in tort, and that this duty existed both as a concurrent duty alongside contract (for direct Names) and as a free-standing duty (for indirect Names whose contractual relationship was with the members’ agent only).
Lord Goff of Chieveley, giving the leading speech, anchored the analysis in the principle of assumption of responsibility derived from Hedley Byrne. The managing agents had held themselves out as possessing special expertise in underwriting and had agreed, expressly or by clear implication, to exercise that expertise for the benefit of Names whose capital they were deploying. The Names had necessarily relied on that expertise; the relationship was as close to a contractual one as could be imagined without actually being a contract. The chain of contractual intermediation did not negate the assumption of responsibility but reflected the realities of the market.
On concurrent liability, the House of Lords decisively rejected the view that the existence of a contract precluded a tortious duty in respect of the same subject matter. A claimant may, where the conditions of both contractual and tortious liability are independently satisfied, choose whichever remedy is more advantageous. Contract may, however, modify or exclude the tortious duty by clear words.
The decision had significant consequences for limitation, contribution and the choice of law in the Lloyd’s litigation, and for professional negligence claims generally.
Where a professional has assumed responsibility, within the meaning of Hedley Byrne, for the performance of services for another with whom there is no contract, a duty of care in tort is owed and the claimant may recover for foreseeable economic loss caused by negligent performance. Where there is a contract between the parties, the existence of the contract does not preclude a concurrent duty in tort in respect of the same conduct; the claimant may pursue whichever remedy is more favourable, subject to any contractual term that modifies or excludes the tortious duty.
Henderson v Merrett is centrally important for professional indemnity insurance for at least three reasons. First, it provides the doctrinal foundation for concurrent contract and tort claims, which means that PI policies written on a civil liability basis must respond regardless of the cause of action selected by the claimant — a critical drafting point. Second, the assumption-of-responsibility analysis is now the dominant route to recognising duty in PI cases not falling into a clear Caparo category, particularly where there is a chain of advice or services.
Third, the case has been formative in defining the architecture of Lloyd’s PI exposures and reflects on the duties owed by managing agents and members’ agents, which themselves required specific PI cover. The Lloyd’s catastrophe and subsequent reconstruction and renewal restructured the market, but Henderson remains an enduring authority on the duties owed by professionals operating through complex chains.
For practitioners, Henderson is also important on limitation. Tortious limitation in negligence runs from the date of damage rather than breach, and section 14A of the Limitation Act 1980 may extend the period to three years from the date of knowledge. Concurrent tortious claims may therefore survive when contractual ones are time-barred, with corresponding implications for run-off cover and notification.
Brokers placing PI for any profession operating through agency chains — investment management, fund administration, outsourced advisory, and similar — should understand Henderson as a reminder that contractual privity does not define the boundary of professional exposure.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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