Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Arbitration / Court Decisions / UK Court Opinions

UK Court Opinions

BRITISH COURT APPROVES TRANSFER OF REINSURANCE FROM SOMPO JAPAN TO TRANSFERCOM LTD.

by

A justice of the UK Companies Court, Chancery Division, recently approved over the objections of policyholder Axa Corporate Solutions Assurance, a scheme under Part 7 of the UK Financial Services & Markets Act 2000 for the transfer of certain insurance business from Sompo Japan Insurance Inc. to Transfercom Ltd. The scheme involved a transfer of predominantly reinsurance contracts made between 1981 and 2003. The contracts suffered from exposure to the September 11, 2001 terrorist attacks and an airplane crash that occurred later that year, and were in run-off since 2003. In sanctioning the scheme, the justice relied heavily on an expert report and determined that the scheme would be fair to the companies’ respective shareholders and the various underlying policyholders. The justice considered, among other factors, the composition of the business to be transferred, the strength of Transfercom and its parent company, National Indemnity Company, the manner in which Transfercom would fund the run-off of the business, and the overall impact on the security of the underlying policyholders that would result from the transfer. In the Matter of Sompo Japan Insurance Inc., [2011] EWHC 260 (Cos. Ct. Feb. 16, 2011).

This post written by Michael Wolgin.

BRITISH COURT ANALYZES TRIGGER FOR EXCESS FACULTATIVE REINSURANCE COVER

by

A Justice of the UK Commercial Court (Queen’s Bench Division) has issued an opinion as a result of a trial of a “preliminary issue about the proper construction and the operation of an excess reinsurance policy of professional liability insurance, and more specifically about how it is determined whether the “excess point” that triggers the reinsurance cover has been reached.” Teal Assurance Company Limited alleged that its facultative reinsurance agreement with W.R. Berkeley Insurance (Europe) Limited and Aspen Insurance UK Limited covered certain claims arising from the operations of Teal’s insured, Black & Veatch Holding Company (Teal is a captive insurer subsidiary of Black & Veatch, a large international engineering firm), that were in excess of Black & Veatch’s primary layers of professional liability insurance. The primary insurance covered all of Black & Veatch’s claims, geographically, while the excess facultative reinsurance excluded from coverage all American liabilities. The Court held, contrary to Teal’s position, that the order in which claims should be aggregated for purposes of determining when the reinsurance was triggered (and thus, whether any non-American liabilities exceeded the primary layer), should be based on when those liabilities originated, not when they were paid to the policy limits by the primary insurer. Teal Assurance Co. Ltd. v. W.R. Berkeley Ins. (Europe) Ltd., [2011] EWHC 91 (Comm. Ct. Jan. 31, 2011).

This post written by John Pitblado.

ENGLISH COURT UPHOLDS ENGLISH JURISDICTION OVER EXCESS LOSS REINSURANCE DISPUTE

by

Glacier Re unsuccessfully appealed the decision of an English court allowing Gard Marine and Energy to bring proceedings under their participation in a contract of excess of loss reinsurance. Gard invoked English jurisdiction under the Lugano Convention, contending it brought claims against a London-domiciled participant and that the risk of irreconcilable judgments favored bringing all claims together at once. Glacier argued that its participation in the agreement was governed by Swiss law, so there was no risk of irreconcilable judgments. The appellate court determined that the parties to the excess loss reinsurance contract had chosen English law, and that the reinsurance arose out of Glacier’s participation in the London market. The underlying policy also was governed by English law. Further, the court determined that it did not make commercial sense for one portion of the contract to be considered under English law, and another under Swiss law. For these reasons, the appeal was dismissed. Gard Marine and Energy, Ltd. v. Tunnicliffe, Case No. A3/2009/2376; EWHC 2388 Comm (Ct. App. Q.B. June 10, 2010).

This post written by John Black.

U.K. HIGH COURT ENDORSES EXPOSURE TRIGGER FOR ASBESTOS-RELATED LIABILITIES

by

The U.K. Court of Appeals ruled on trigger of coverage issues in a consolidated appeal of cases involving underlying personal injury litigation arising from exposure to asbestos, in light of employers liability policies that generally cover liability for injury “sustained” during the policy year in question. The opinion discusses the unique long latency of mesothelioma, a cancer caused by exposure to asbestos, but which typically does not manifest into disease for as long as forty years or more. The court held generally that the insurer on the risk at the time of exposure — not the time of manifestation of the disease — is responsible for the liability. The ruling is grounded in industry custom, but addresses recent conflicting precedents, generally arising from differing policy wordings over time. The court distinguished a prior ruling, Wasa Int’l Ins. Co. Ltd. v. Lexington Ins. Co., [2009], which involved a conflict between the plain language of a reinsurance contract and a presumption arising from industry custom that insurance and reinsurance cover the same risks, and which ultimately applied the plain policy language as written, despite the presumption. Nevertheless, the court distinguished the Wasa case, noting the varying policy wordings in the employers liability policies at issue. It also recognized the consequences of its ruling on reinsurance liabilities and wordings as well, which it noted have likewise varied over time. Employers’ Liability Insurance “Trigger” Litigation, [2010] EWCA Civ. 1096 (U.K. Court App. Civ. Div. Oct. 8, 2010).

This post written by John Pitblado.

U.K. COURT CONFIRMS ARBITRATION AWARD AGAINST REINSURER AND IN FAVOR OF P&C INSURER THAT PAID SUMS UNDER SETTLEMENTS

by

A reinsurer challenged an arbitration award finding coverage in favor of a P&C insurer in six cases where the insurer had paid sums under compromise agreements. A U.K. court confirmed the award in favor of the P&C insurer, finding that the arbitrators’ reasoning was clear, and that their judgment was unchallengeable in law. The underlying claims by insureds involved silicon breast implant manufacturers’ liability, liability of makers of products derived from blood contaminated with HIV or AIDS, asbestos, and environmental pollution. In re Arbitration Between IRB Brasil Resseguros SA & CX Reinsurance Co., [2010] EWHC 974 (Q.B. 2010).

This post written by Ben Seessel.