UK Court Opinions

UK COURT FINDS PARTIES NOT REQUIRED TO DISPENSE WITH LEAVE TO APPEAL ARBITRAL AWARD UNDER SECTION 69 OF ARBITRATION ACT OF 1996

July 31, 2008 by Carlton Fields

Royal and Sun Alliance (“R&S”) reinsured liabilities for certain BAE Companies. The parties entered into a Reinsurance agreement which contained a dispute resolution agreement (“DRA”). The DRA provided for English law to be the governing law and referred various disputes to arbitration incorporating the Rules of the London Court of International Arbitration (“LCIA Rules”). A dispute arose, and an arbitration panel made a partial award in favor of BAE. R&S sought to appeal the award to the English Courts on a point of law.

The question that arose was whether section 69 of the UK Arbitration Act of 1996 required an agreement of the parties permitting an appeal, or an agreement of the parties to dispense with the requirement to seek leave of the court. The Court resolved the issue in R&S’s favor as a pure question of construction, holding that Section 69 could not be held to require an agreement between the parties to dispense with the requirement to seek leave of the court. Royal & Sun Alliance Ins. v. BAE Systems, [2008] EWHC 743 (Comm. Apr. 15, 2008).

This post written by Lynn Hawkins.

UK COURT FINDS THAT REINSURED VIOLATES COOPERATION CLAUSE BY WAIVING POTENTIAL LIMITATION DEFENSE

July 30, 2008 by Carlton Fields

In a 40 page opinion, the UK Commercial Court considered a situation in which a Venezuelan insurer, Multinacional de Seguros, provided insurance for a producer of liquid aluminum, aluminum ingots and aluminum cylinders. Multinacional obtained reinsurance from three reinsurers. An adjuster was retained to assist in processing claims, and during negotiations with the insured the Venezuelan three year limitation period expired. The Venezuelan Superintendent of Insurance provided an opinion that the limitation period had not expired, but the reinsurers decided to commence a declaratory action in London seeking a declaration that they were not responsible for the losses, and instructed the insurer to take the same position with the insured. Multinacional sent the insured a letter, however, which the Court found waived any potential limitation defense. The Court found that this action breached the cooperation clause of the reinsurance agreements. Lexington Insurance Company v. Multinacional de Seguros, S.A. [2008] EWHC 1170 (Comm. May 23, 2008).

This post written by Rollie Goss.

ENGLISH COURT DENIES INSURANCE COMPANIES’ REQUEST TO STAY PENDING A PRIOR-FILED CASE IN US DISTRICT COURT

July 23, 2008 by Carlton Fields

Seaton Insurance Company and Stonewell Insurance Company are involved in litigation with Cavell USA, owned by British citizen Kenneth Randall, over Cavell’s handling of the run-off of their insurance obligations under an administration agreement. The parties entered into a written settlement of their disputes, and the settlement agreement contained a provision that the settlement “shall be governed by and construed in accordance with English law and the parties submit to the exclusive jurisdiction of the English courts.”

After entering into the settlement with Cavell, Seaton and Stonewell initiated arbitration with their reinsurers in the US, National Indemnity Company, and served subpoenas on Cavell. Seaton and Stonewell also sued Cavell in the US, alleging that Cavell fraudulently concealed its intention to delegate claims handling to the reinsurer. Allegations of such wrongdoing had been dismissed from the US arbitration. Cavell filed a motion to dismiss, and contended that any suit should be brought in the UK under the terms of the settlement.

Cavell then separately sued Seaton and Stonewell in the UK, seeking a declaration that all of their disputes had been compromised, and seeking damages resulting from Seaton and Stonewell involving it in the US arbitration and the US lawsuit. Seaton and Stonewell gave notice that they would challenge the jurisdiction of the UK court, and sought a stay of the UK lawsuit pending a decision on the motion to dismiss the US lawsuit they had filed.

The Queen’s Bench Division of the Commercial Court refused the insurance companies’ application for a stay for proceedings, finding that the resolution of the motion to dismiss in the US court would not assist it in resolving the jurisdictional challenge in the UK lawsuit. The court also stated that “it is difficult to see how the defendants can challenge the jurisdiction of this court at that stage.” This case is an interesting example of the interplay between proceedings in different countries. Cavell USA Inc. v. Seaton Ins. Co. [2008] EWHC 876 (April 11, 2008).

This post written by Rollie Goss (with thanks to Jason Morris).

UK COURT OF APPEALS AFFIRMS INJUNCTION AGAINST ACTION IN US COURTS

June 24, 2008 by Carlton Fields

In an August 28, 2007 post, we reported on the decision of the UK Commercial Court granting a permanent injunction against an insurer seeking to challenge a UK arbitration award, which was governed by New York law, in US courts. The UK Court of Appeals has denied an appeal, affirming that decision, in a situation in which: (1) the contract was a Bermuda insurance form; (2) the contract provided that it was governed by New York substantive law; and (3) the contract provided that any arbitration would occur in London, subject to UK arbitration law. The decision turned on the interpretation of the insurance contract, with the Court of Appeals agreeing with the analysis and conclusion of the Commercial Court judge. The Court of Appeal found that disputes as to the confirmation or vacation of an award had to be brought in the UK courts, and that a permanent injunction barring the insurer from challenging the award in US courts was appropriate. C and D [2007] EWCA Civ. 1282 (Dec. 5, 2007).

This post written by Rollie Goss.

UK COURT DETERMINES THAT UNDERWRITING AGENCY DOES NOT HAVE AN ENTITLEMENT TO CONDUCT RUN-OFF

June 5, 2008 by Carlton Fields

Following the termination of an underwriting agency agreement, Temple Legal Protection sought to continue managing the run-off of the business originated under the agreement. The other party to the agreement contested the right of Temple to manage the run-off. An arbitrator found that Temple was not entitled to manage the run-off. On appeal, the Commercial Court found that the agreement did not provide a clear answer to the issue, but considering the agreement, custom and practice and other factors, the court concluded that while the arbitrator's analysis was faulty, the correct result had been reached. Temple Legal Protection Limited v. QBE Insurance (Europe) Limited [2008] EWHC 843 (Comm. Apr. 23, 2008).

This post written by Rollie Goss.