Insurance Law Monthly

In Masefield AG v Amlin Corporate Member Ltd [2011] EWCA Civ 24, the Court of Appeal was asked to overturn David Steel J’s conclusion that the detention of goods by pirates had not amounted to an actual total loss. The decision is discussed by David Turner QC of 4 New Square.

In Greene Wood McLean LLP v Templeton Insurance Ltd (No 2) [2010] EWHC 2679 (Comm) Cooke J explored the relationship between after the event insurers and the solicitors appointed by the assured to bring the claim which is funded by the insurers. In outline, Cooke J held that: (a) ATE insurers are required to indemnify the solicitors if they are obliged to pay the assured’s costs when the ATE insurers have wrongfully refused to do so; and (b) the solicitors do not owe any duty of care to the insurers.

The compulsory motor insurance regime within the European Union ensures that the victim of a road traffic accident anywhere in the EU can bring a claim against the negligent driver’s motor insurers in the courts of the member state in which the victim is domiciled. As an alternative, the victim is entitled under EU rules to bring an action against the Motor Insurers’ Bureau established in the member state of the victim’s domicile. That right is extended to the situation in which the driver is uninsured or unidentified. The question in Jacobs v Motor Insurers’ Bureau [2010] EWCA Civ 1208 was whether the damages awardable to the victim by the MIB in a case involving an uninsured driver were to be assessed by the law of the country of his domicile or by the law of the country in which the accident occurred.

Where the parties have agreed to subject their contract to English law, and an issue as to whether the English courts should assert jurisdiction over any dispute arises, the fact that English law is the applicable law will generally make it appropriate for the English courts to hear the action. However, that is not an absolute rule, and there may be cases in which the dispute is factual and the relevant evidence is outside England. In such a situation, as long as the English court is satisfied that English law will be applied by the foreign court seised of the action, there is no particular basis for an assertion of jurisdiction by the English court. Such a case was Mujur Bakat Sdn Bhd and Anr v Uni Asia General Insurance Berhad and Ors [2011] EWHC 643 (Comm).

In Masefield AG v Amlin Corporate Member Ltd [2011] EWCA Civ 24, the Court of Appeal was asked to overturn David Steel J’s conclusion that the detention of goods by pirates had not amounted to actual total loss. The decision is discussed by David Turner QC of 4 New Square.

There is no modern authority on the effect of an external event, such as war, on a contract of insurance made between an English insurer and a policyholder who has subsequently become an enemy alien, although there is a body of early marine authority relating to various events such as the Napoleonic wars. It is likely that such a contract is rendered illegal and that no future performance is possible. In Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association (Bermuda) Ltd [2010] EWHC 2661 (Comm) the question was rather a narrower one, of whether Government regulations restricting dealing with particular bodies other than for limited purposes operated to render illegal, or to frustrate, a P&I Club insurance. The outcome turned on the proper construction of the regulations.

The sanctions imposed upon Iran by reason of the refusal of that country to comply with international requirements on its use of nuclear materials have now led to two cases in which insurers have sought to cancel cover for fear of infringing the sanctions. The issue in Arash Shipping Enterprises Co Ltd v Groupama Transport [2011] EWCA Civ 620 was the effect of the sanctions on a self-renewing policy.

English insolvency law does not permit the parties to contract out of the basic rule that a debtor’s unsecured creditors are to be treated equally on the insolvency of the debtor. It is for that reason that a cut-through clause in a reinsurance agreement, whereby in the event of the reinsured’s insolvency the sums payable by the reinsurers are to go directly to the reinsured’s policyholders, is almost certainly void. The point has arisen in a rather different insurance context, in Folgate London Market Ltd v Chaucer Insurance plc [2011] EWCA Civ 328, where the scope of the principle was confirmed.

The decision of the Scottish Court of Session in Quantum Claims Compensation Specialists Ltd v Wren Insurance Services [2011] ScotCS CSOH_61 is of interest as it is one of very few reported decisions on the terms of cover obtained by organisations which fund litigation. The case shows that if the insurers are not kept informed of significant developments in the litigation, including the addition of new defendants facing entirely different claims, there may be no cover under the policy.

The ambit of the post-contractual duty of utmost good faith is uncertain in its scope but, at least as far as the assured is concerned, establishing breach by the insurers is likely to be of little value after a loss has occurred because the only remedy is avoidance ab initio. In Stansfield Group Pte Ltd v Consumers’ Association of Singapore [2011] SGHC 122 various ingenious attempts to find an alternative basis for a duty whose breach would give rise to damages were waved away by Judith Prakash J.

The EU’s five Motor Insurance Directives, now codified in European Parliament and Council Directive 2009/103/EC, demand that the users of motor vehicles insure against liability for death, personal injury and property damage. The purpose of the Directives is the furtherance of a single market whereby persons can travel freely, so that a victim is to be protected irrespective of the EU member state in which injuries have been inflicted, and to that end a policy must cover civil law liabilities in every EU member state. However, the various countries comprising the EU all have their own tort liability regimes, and the Directives have never sought to harmonise those regimes: they merely say that if there is liability, insurance must cover it. The relationship between tort liability and insurance coverage has nevertheless been examined in two recent cases referred to the European Court of Justice by the Portuguese courts, Santos v Companhia Europeia de Seguros SA Case C-484/09 and Lavrador v Companhia de Seguros Fidelidade-Mundial SA Case C-409/09.