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Home/Law/GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years’ account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company’s failure to ensure that Finley had the required level of experience.

GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years’ account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company’s failure to ensure that Finley had the required level of experience.

Legal Issues Raised by the Payment of Double Commissions

Conflict of Interest

The double payment of commissions by GT Limited and Finley to the same recruitment firm could potentially be problematic for the implementation of the agency relationship among the three parties. This is because of the potential for conflicts of interest to emerge due to the interrelated structure of their relationship. The Chartered Insurance Institute says that conflicts of interest in the insurance business often arise due to the uneven pegging of insurance premiums for different transactions. The case involving North and South Trust Co. v. Berkeley exemplifies such conflicts of interest because it involved an insurance broker working on behalf of a claimant but with prior links to the insurance company. It was decided, in an appellate court, that the broker could not represent the claimant effectively after it was proven that he worked on behalf of the insurer.

Indemnity

Indemnity is also another legal issue that emerges from the aforementioned case study. It refers to the act of compensating a company for the loss it accrues. Given that indemnity policies are only supposed to compensate a party to the extent of the value of the insured property before the accident, the double payment of commissions makes it difficult to apply this principle effectively. In other words, its design is skewed towards benefitting the insurer as it receives double commission payments, which is against the principle of indemnity in insurance. Therefore, given the circumstances of the case, indemnity is one of the legal issues that emerge from the assessment.

Legal Effects of the Lack of Experience of the Recruited Party

The failure of the recruitment company to ensure that Finley had the requisite experience needed to perform his duties bears significant legal implications on the law of agency which governs the relationship between GB Limited and the recruitment company. Under the principal-agent relationship, the Chartered Insurance Institute states that an agent has a duty of care to:

  • Abide by their client’s instructions
  • Exercise proper care and skill in undertaking their duties
  • To perform duties personally
  • Act in good faith towards the client
  • Sufficiently account for all financial resources of the principal

Subject to the above provisions of law that the agency was supposed to comply with, the failure to make sure that Finley had the requisite skills means that the recruiter failed to abide by the first rule of their duty of care, which is to abide by their client’s instructions. This duty of care is closely associated with the need for obedience in principal agency relationships because it is the foundation for implementing the client’s wishes. The only exception to this principle is when the client engages in illegal activities, which is not the case here. Therefore, the legal effect of failing to recruit a party that has the requisite skills needed to undertake the accounting work could lead to the avoidance of the contract.

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Academic.Tips. (2022) 'GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years' account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company's failure to ensure that Finley had the required level of experience'. 9 October.

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Academic.Tips. (2022, October 9). GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years' account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company's failure to ensure that Finley had the required level of experience. https://academic.tips/question/gb-ltd-is-an-insurance-broker-they-engaged-a-specialist-recruitment-company-to-find-an-account-manager-which-led-to-the-employment-of-finley-by-gb-ltd-gb-ltd-recently-discovered-that-both-gb-ltd-an/

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Academic.Tips. 2022. "GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years' account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company's failure to ensure that Finley had the required level of experience." October 9, 2022. https://academic.tips/question/gb-ltd-is-an-insurance-broker-they-engaged-a-specialist-recruitment-company-to-find-an-account-manager-which-led-to-the-employment-of-finley-by-gb-ltd-gb-ltd-recently-discovered-that-both-gb-ltd-an/.

1. Academic.Tips. "GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years' account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company's failure to ensure that Finley had the required level of experience." October 9, 2022. https://academic.tips/question/gb-ltd-is-an-insurance-broker-they-engaged-a-specialist-recruitment-company-to-find-an-account-manager-which-led-to-the-employment-of-finley-by-gb-ltd-gb-ltd-recently-discovered-that-both-gb-ltd-an/.


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Academic.Tips. "GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years' account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company's failure to ensure that Finley had the required level of experience." October 9, 2022. https://academic.tips/question/gb-ltd-is-an-insurance-broker-they-engaged-a-specialist-recruitment-company-to-find-an-account-manager-which-led-to-the-employment-of-finley-by-gb-ltd-gb-ltd-recently-discovered-that-both-gb-ltd-an/.

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"GB Ltd is an insurance broker. They engaged a specialist recruitment company to find an account manager, which led to the employment of Finley by GB Ltd. GB Ltd recently discovered that both GB Ltd and Finley are paying recruitment commission to the recruitment company, of which neither were aware. GB Ltd had specified to the recruitment company that all potential candidates must have at least two years' account management experience. However, GB Ltd has since discovered, after employing Finley, that he does not have the required level of experience. Explain, with justification, two legal issues raised by commission payments being made by both GB Ltd and Finley. Explain, with justification, the legal effect of the recruitment company's failure to ensure that Finley had the required level of experience." Academic.Tips, 9 Oct. 2022, academic.tips/question/gb-ltd-is-an-insurance-broker-they-engaged-a-specialist-recruitment-company-to-find-an-account-manager-which-led-to-the-employment-of-finley-by-gb-ltd-gb-ltd-recently-discovered-that-both-gb-ltd-an/.

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Define the Veto Power term.
Bella is currently employed by KL Ltd, an insurance broker. KL Ltd operates a single office in New Town. Bella has a contract of employment with KL Ltd, which states that 'On leaving the firm, employees are not permitted to work at any insurance broker within 25 miles of KL Ltd for a period of five years.' Bella intends to resign from KL Ltd and establish her own insurance brokerage in New Town. Joe, a competitor to KL Ltd, is to buy the insurance broking business from KL Ltd. Explain, with justification, whether Bella is entitled to establish her own brokerage in New Town. Refer to one relevant case in support of your explanation. Explain, with justification, how Joe could prevent the directors of KL Ltd from establishing another insurance broking business in New Town.
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