Insurance Law Monthly

The simple question in Gammie v Abbey Legal Protection, Sheriff Court, Banff, 14 December 2011, was whether an underwriting agent (referred to in the policy as ‘coverholder’) faced personal liability under a Certificate of Insurance issued on behalf of insurers. Unsurprisingly, the court answered that question in the negative.

The coverage of employers’ liability policies as regards mesothelioma claims remains problematic on a number of levels. The latest clarification, the decision of Cooke J in International Energy Group Ltd v Zurich Insurance plc UK [2012] EWHC 69 (Comm) is not of direct relevance to English law, because the liability in question was governed by the law of Guernsey. However, there are important comments in the judgment as to how the matter would have been determined under English law.

The rules which govern the jurisdiction of the English courts where the defendant is domiciled in an EU country, as laid down in European Council Regulation (EC) No 44/2001, the Brussels Regulation, are modified in the case of matters relating to insurance. The broad effect of those rules is that the insurers are confined to suing the assured in the place of his domicile, whereas the assured can sue the insurers in either the place of his own domicile or that of the insurers. Any agreement to restrict those rights is void unless made after the dispute has arisen. In Sherdley and Anr v Nordea Life and Pension SA [2012] EWCA Civ 88 the Court of Appeal confirmed that an exclusive jurisdiction clause in the policy infringes the rights of the assured, although the outcome was unfortunate for the assured in that by the time the action had been brought the assured’s domcile had changed from Wales to Spain and it was no longer possible for the assured to rely upon English jurisdiction.

The Court of Appeal has, in a short judgment in Teal Assurance Co Ltd v W R Berkley Insurance (Europe) Ltd [2011] EWCA Civ 1570, upheld the first instance judgment of Andrew Smith J, [2011] EWHC 91 (Comm), discussed in the August 2011 issue of Insurance Law Monthly. The case turned on the construction of specific contract clauses, but nevertheless raises more general questions as to the allocation by the reinsured of its losses under direct policies to different reinsurance agreements. The question raised by Teal is whether a reinsured is entitled to allocate in a way which maximises reinsurance recoveries. The answer given by Andrew Smith J and the Court of Appeal is that for allocation purposes losses are to be treated in the order in which they occur and not in an order which is more beneficial to the reinsured. The case does not deal with the possibility of losses that cannot be properly sequenced or dated. That issue must await future determination.