UK Court Opinions

UK COURT PERMITS EXPERT TO TESTIFY IN REINSURANCE MATTER AGAINST LLOYD’S SYNDICATE THAT PREVIOUSLY RETAINED HIM ON SIMILAR ISSUE

January 5, 2012 by Carlton Fields

An English court recently refused to enjoin an expert witness from giving testimony against a Lloyd’s syndicate, despite that expert’s previous employment by the syndicate in an arbitration over similar issues with a different party. The subject of the expert’s testimony in this case related to the extent of coverage for losses arising from the 9/11 terrorist attacks under a reinsurance “Interlocking Clause” provision. Although the expert’s previous testimony on behalf of the syndicate did not involve the Interlocking Clause, the interpretation of that clause did arise in private meetings wherein the expert expressed disagreement with the syndicate’s interpretation. Subsequently, the syndicate’s opponent in the instant case employed the expert to give testimony on the Interlocking Clause. After the arbitration tribunal denied the syndicate’s request to exclude the expert, the syndicate sought injunctive relief from the court. The court rejected the syndicate’s argument that the expert unfairly possessed confidential information, including the syndicate’s potential cross-examination strategy. The court explained that there was no evidence that the expert had misused confidential information thus far, and that the expert’s alleged inability to recall details of the syndicate’s meetings rendered it unlikely that the expert would do so in the future. To the extent the syndicate lost the element of surprise with respect to its cross-examination strategy, the court was “not persuaded that the loss of such a forensic advantage amounts to damage which justifies the grant of an injunction which would interfere with the tribunal’s management of the arbitration.” A Lloyd’s Syndicate v. X, [2011] EWHC 2487 (Q.B. Comm. Ct. Oct. 3, 2011).

This post written by Michael Wolgin.

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ENGLISH COURT ORDERS SERVICE OF PROCESS AGAINST OUT-OF-JURISDICTION DEFENDANT IN INSURANCE DISPUTE

December 12, 2011 by Carlton Fields

The Queen’s Bench Division of the Commercial Court affirmed an order permitting Faraday Reinsurance Co. to serve process out of the jurisdiction against defendant Howden North America. Howden had argued that service should not be permitted and that the parties’ quarrel should be resolved in litigation pending in Pennsylvania federal court. The underlying dispute relates to coverage for asbestos liabilities under three excess layer policies. The case implicates potential differences between English and American law on loss triggers, i.e., whether exposure to a hazardous substance itself constitutes a loss, or whether loss occurs at the time of manifestation or at some other incremental stage between exposure and manifestation. This determination can be dispositive in cases involving asbestos coverage because mesothelioma, which is caused by asbestos exposure, typically does not manifest for decades. Earlier this year, we reported on a decision by the U.K. Court of Appeals holding that the insurer on the risk at the time of exposure, not manifestation, is responsible for the liability. Faraday Reinsurance Co. v. Howden North America, Inc. [2011] EWHC 2837 (Q.B. Comm. Ct. Nov. 1, 2011).

This post written by Ben Seessel.

ENGLISH COURT UPHOLDS ENFORCEMENT OF AUSTRALIAN JUDGMENT AGAINST INSOLVENT REINSURER

December 8, 2011 by Carlton Fields

An English appellate court permitted an Australian reinsurer in liquidation to enforce a judgment entered in Australian insolvency proceedings against a Lloyd’s syndicate, which had elected not to participate in the foreign proceedings. On appeal, the syndicate argued that England’s reciprocity act did not apply to foreign judgments made in insolvency proceedings, and that England’s insolvency act, which recognizes Australian courts, should be interpreted as strictly permitting only Australian choice of law, rather than the enforcement of Australian judgments. The court disagreed on both issues, relying on another English appellate decision (currently on appeal before the Supreme Court of the United Kingdom) that held that England would enforce a foreign insolvency judgment under the reciprocity act, and rejecting the syndicate’s narrow interpretation of the insolvency act. The court considered the respective laws’ legislative history, as well as the interplay between English common law, the reciprocity act, and the insolvent act’s jurisdictional provisions. In re New Cap Reinsurance Corp. Ltd. (In Liquidation), 2011 EWCA Civ 971 (Eng. Ct. App. August 9, 2011).

This post written by Michael Wolgin.

U.K. COURT AFFIRMS 21-MONTH SENTENCE FOR REINSURANCE BROKER CONVICTED OF GOVERNMENT CORRUPTION

August 16, 2011 by Carlton Fields

Julian Jeffrey Messent, a reinsurance broker who was head of the Property Division (Americas) of PWS International Limited, a London-based reinsurance broker, was convicted in London in late 2010 of corruption offenses, stemming from his supervision of payments made to various Costa Rican governmental officials. The payments were found to be bribes meant to steer reinsurance placement for Costa Rican government-owned utility organizations to PWS. For his placement of the contracts, Messent received large incentive bonuses between 1999 and 2002 from PWS. After a new President of Costa Rica was elected in 2002, newly appointed Costa Rican officials discovered the improper payments, and both the Costa Rican and U.K. governments undertook criminal investigations which led to Messent’s arrest in 2007. Messent appealed his sentencing of 21 months each on two counts of corruption (to run concurrently), as well as a fine of £100,000. The convictions were affirmed on appeal, the court noting “there can be no doubt that corruption of foreign government officials . . . is at the top end of serious corporate offending both in terms of culpability and harm.” Regina v. Messent, [2011] EWCA Crim 644 (Eng. Ct. App.).

This post written by John Pitblado.

CLAIMANT IN UK COURT ENTITLED TO ENGINEERING REPORTS OF DAMAGED HIGHWAY COVERED UNDER REINSURANCE AGREEMENT

April 18, 2011 by Carlton Fields

The UK Commercial Court, Queens Bench Division, recently decided a discovery matter in a reinsurance dispute. The litigation arose out of a dispute under a facultative reinsurance contract, which reinsured claimant Axa Seguros’ participation in an insurance policy covering risks of physical damage to a “Toll Road Network concession” in Mexico. After a hurricane caused damage to a highway, Axa Seguros initiated arbitration and subsequently filed suit against Allianz, seeking indemnity for sums said to be due under the reinsurance contract. Axa sought all reports and associated documents produced by Halcrow, an engineering company hired to inspect the damaged highway. Allianz, for its part, claimed a litigation privilege on the basis that it was obtained and prepared for the purpose of obtaining legal advice in connection with expected litigation. The presiding justice concluded that, although litigation was reasonably expected at the time the reports were made, the reports were not generated for the predominant purpose of anticipated litigation. Rather, they were generated to assess whether the highway had been constructed up to international standards, and to determine what damage had been caused by the hurricane. Accordingly, Axa was entitled to the materials sought. Axa Seguros, S.A. DE C.V. v. Allianz Ins. PLC, 2011 EWHC 268, Case No. 2007 Folio 1396 (Comm. Ct. Q.B. Feb. 3, 2011).

This post written by John Black.