A Justice of the Queen's Bench Division of the UK Commercial Court has interpreted a loss notification provision of a reinsurance agreement to permit the reinsured to recover under the agreement. The analysis used by the Court is similar in some respects to how courts in the United States interpret insurance policies. AIG Europe (Ireland) Limited v. Faraday Capital Limited, [2006] EWHC 2707 (Comm) (Oct. 31, 2006).
UK Court Opinions
UK Court denies claim over implementation of EEC Insurance Directive
The UK Commercial Court, Queen's Bench Division, has entered an extensive opinion (with an accompanying Appendix), denying claims asserted by various Names against Her Majesty's Treasury, which alleged that the Names had suffered losses at Lloyd's due to the government’s failure appropriately to implement an EEC Insurance Directive (Directive 73/239/EEC). The Names contended that as a result of the failures in the implementation process, the “true IBNR” for US asbestos-related risks were not disclosed, resulting in the Names participating in the reinsurance of such risks, when they would not have done so had they known the “true IBNR” for such risks. Poole v. Her Majesty’s Treasury, [2006] EWHC 2731 (Comm.) (Nov. 8, 2006). The Court denied the claims on two bases: (1) the Insurance Directive did not grant any relevant rights to the Names; and (2) the claims were time barred.
Modified follow the fortunes provision not apply to settlements by reinsured
A UK Court has held that a follow the fortunes provision in facultative reinsurance contracts did not apply to without prejudice settlements reached by a reinsured with its insureds, since the clause provided that the reinsurance would “follow in all respects the settlements or other payments of whatsoever nature excluding without prejudice and ex-gratia settlements.” The clear contractual exclusion of without prejudice settlements from the operation of the follow the fortunes clause meant that the reinsured had to prove that the claims payments were appropriate under the underlying insurance. Faraday Capital Ltd. v. Copenhagen Reinsurance Co., [2006] EWHC 1474, [2006] All ER D 74, 2006 WL 2667603 (Queen's Bench Comm. Ct. May 4, 2006).
UK Court permits substitution of party in arbitration and expanded damage request
The UK Commercial Court has approved an arbitrator's decision to permit the substitution of one Claimant for another to reflect what in effect was a corporate reorganization. It also permitted the Claimant to use a pending arbitration to seek an award of all balances that would come due under the treaty during the pendency of the arbitration, instead of requiring a filing of separate arbitrations for amounts that became due after the commencement of the pending arbitration. Harper Versicherungs AG v. Indemnity Marine Assurance Co., [2006] EWHC 1500 (QB) (June 23, 2006).
UK Court affirms avoidance of insurance based upon nondisclosure of fraud allegations
The UK Court of Appeal has upheld the avoidance of insurance on a vessel based upon the failure to disclose, during the placement of the insurance, that third parties had made allegations of fraudulent conduct by the prospective insured. North Star Shipping Ltd. v. Sphere Drake Insurance, [2006] EWCA Civ 378 (April 7, 2006). Even though the allegations turned out to be lacking in merit, the Court found that they would have been material to an underwriter considering the placement of the insurance.