A consortium of London reinsurers are seeking a declaration from an English court regarding their duty to indemnify Philippine insurer Oriental Insurance Company for losses resulting from the sinking of a cargo passenger ship during Typhoon Frank in 2008. The sinking, which caused widespread outrage in the Philippines due to the vessel’s failure to heed storm warnings resulted in over 500 deaths and significant property loss. The reinsurance contract contained a “Typhoon Warranty,” which voided the policy if an otherwise covered vessel left port during a typhoon or storm warning. Oriental’s underlying policy with the ship owner contained a virtually identical clause. Oriental, facing massive claims and litigation in the Philippines, sought a stay of the proceedings initiated by the British reinsurers, arguing that their action was premature given the reinsurance contract’s “follow the fortunes” clause and significant unresolved claims pending in the Philippine courts. The lower court dismissed Oriental’s application for a stay, holding that such relief should only be granted in “rare and compelling circumstances,” which were not present. The appellate court dismissed the appeal with “little enthusiasm,” finding the lower court’s decision correct but noting its apparent “unfairness.” In particular, as one justice noted, the reinsurers’ action might force Oriental to assert in the London courts that the “Typhoon Warranty” did not apply, a position diametrically opposed to the one it would wish to take in defending ongoing and imminent coverage suits in the Philippines. Amlin Corp. Member Ltd. v. Oriental Assurance Corp., [2012] EWCA Civ. 1341 (Royal Courts of Justice, Queen Bench Division, Commercial Court Oct. 17, 2012).
This post written by Ben Seessel.
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