See this judgement:
London Trocadero v Picturehouse Cinemas has just become required reading for all commercial property insurers, landlords and tenants. A judgment in the case handed down last week (link attached) has blown open the extraordinary – yet widespread – practice of commercial landlords pocketing thousands of pounds from the insurance premiums paid by their tenants.
This is one of the practices that has been lying in plain sight for years (time to take note, FCA), but one which commercial tenants may be completely unaware of. It involves insurers hiking premiums charged on commercial properties which are passed on to tenants by landlords, who pocket the commission.
In the case of Trocadero and Picturehouse the commissions paid to the landlord were staggering, in one year amounting to £92,000 on gross premium of just £161,000.
As is often the case the landlord argued these commissions were justified, representing work it had done in placing the insurance. The judge disagreed, finding that they amounted to ‘unjust enrichment’ at the expense of Trocadero’s tenant, Picturehouse Cinemas.
This is a problem for Trocadero, which is going to have to pay these premiums back. However, it is a much bigger problem for the industry.
Insurance premiums on commercial property amount to around £12bn a year in the UK. If all landlords were taking 50% of those sums in commissions that would be £6bn a year in ‘unjust enrichment’. Of course the real figure will be much, much less than that. Not all landlords will be getting 50% and some won’t get anything at all (no surprise that these commissions do not appear in policies negotiated by owner-occupiers).
So total sums paid each year in landlord commissions will much lower than in the London Trocadero case. But whatever the sums, they will have been paid for longer than just one year. The practice has been going on for decades. The sums, plus interest, will be very large indeed.
Mactavish Claims Litigation Index
The Mactavish Claims Litigation Index aims at tracking insurance litigation and claims performance and getting the market to focus on what really matters, the product you buy with your premiums, not just the premium itself.
Get the latest claim dispute cases straight to your inbox
Receive our curated selection of claim litigation cases to keep abreast of the latest battles and legal practices and get insider insights on industry risks and claim rejections.
