UK Court Opinions

UK COURT OF APPEALS REVERSES DECISION ON TIMELINESS OF NOTIFICATION OF LOSS

December 11, 2007 by Carlton Fields

On December 6, 2006, we reported on the decision of a UK court, which interpreted a provision requiring notice to a reinsurer of a claim. The issue was whether the reinsured had knowledge of a loss when its stock price fell due to accounting restatements. While the Commercial Court decided that such activity did not amount to knowledge of a loss, the Court of Appeals disagreed. The UK Court of Appeal therefore reversed, finding that the notification of loss was late under the requirements of the reinsurance agreement. AIG Europe v. Faraday Capital Limited [2007] EWCA Civ 1208 (Nov. 22, 2007).

This post written by Rollie Goss.

UK COURT OF APPEAL REVERSES JUDGMENT ORDERING THE POSTING OF SECURITY IN ARBITRATION-RELATED ACTION

November 27, 2007 by Carlton Fields

The UK Court of Appeals has allowed an appeal and reversed an Order for security for costs in favor of a party seeking to set aside the enforcement of an arbitration award rendered at the International Commercial Arbitration Court in Moscow, Russia. The analysis may be of interest to those involved in international arbitrations involving the New York Convention. The lower court’s decision was reported on in this blog on June 14, 2007. Gater Assets Ltd. v. Nak Naftogaz Ukrainiy [2007] EWHC 725 (CA Oct. 17, 2007).

This post written by Rollie Goss.

UK COURT OF APPEALS AFFIRMS DECISION REGARDING NORTH KOREAN REINSURANCE CLAIMS

November 15, 2007 by Carlton Fields

In a September 6, 2007 post to this blog, we reported on the decision of the UK Commercial Court striking a defense of settlement to reinsurance claims arising out of claims by North Korean insurers. The UK Court of appeals has affirmed that ruling. Korea National Ins. Corp. v. Allianz Global Corporate & Specialty AG [2007] EWCA Civ. 1066 (Court of Appeals Oct. 30, 2007).

UK COURT GRANTS AVOIDANCE OF REINSURANCE AGREEMENTS DUE TO MISREPRESENTATIONS IN THE PLACEMENT PROCESS

October 31, 2007 by Carlton Fields

The UK Commercial Court, Queen’s Bench Division, has granted a request to avoid several reinsurance agreements based upon misrepresentations in the placement of the treaties. The treaties were first loss facultative reinsurance agreements, and the court found that there had been material misrepresentations of the cedent’s underwriting policies. Specifically, the court found that although the placement materials had represented that the cedent insured risks subject to deductibles of from £500,000 to 1 million, the reinsured risks in actuality had deductibles of from £100,000 – 200,000. The court found that the misrepresentations were of a present fact, rather than of future intention, and were highly material to the acceptance of the risk given the conditions of the particular market. The court found that if the actual underwriting practices of the cedent had been disclosed, the reinsurer would not have agreed to the reinsurance agreements. The fact that the reinsurance was a first loss cover made the amount of the deductibles particularly important. Limit No. 2 Limited v. Axa Versicherung AG [2007] EWHC 2321 (Comm. Queen’s Bench October 17, 2007).

ENGLISH COURT ALLOWS UNDERWRITER TO CONTINUE RUN-OFF BUSINESS

October 26, 2007 by Carlton Fields

In 2003, insurer Europ Assistance, and underwriter, Temple Legal Protection, entered into a binding authority agreement that authorized Temple to write ‘after the expenses’ coverage and handle claims on behalf of Europ. In exchange, Temple received 35% commission on the net premium. In 2005, Europ terminated the business with respect to new business, and in April 2007, Europ informed Temple that it planned to revoke all of Temple’s authority. Temple asserted that Europ repudiated the binding authority agreement.

While waiting for resolution of the underlying dispute, Europ sought an injunction barring Temple from continuing to carry on the run-off business, alleging that Temple was causing loss by unlawful means and was guilty of unlawful interference and breach of trust in failing to hand over premiums.

Balancing the interest of both parties, the English court refused to enjoin Temple from continuing with the run-off business. The court seemed influenced by the fact that Europ, a subsidiary of the well known and substantial Italian insurance company Assurazioni Generali SpA, had no continuing interest in the expenses business. In contrast, Temple, a small company, would be adversely affected if it were barred from running off the business. Europ Assistance Ins. Ltd. v. Temple Legal Protection Ltd., [2007] EWHC 1785 (Queen’s Bench July 25, 2007).