Reinsurance

Follow the settlements

The Court of Appeal in Assicurazioni Generali SpA v CGU International Insurance plc [2004] EWCA Civ 429, forthcoming in [2004] Lloyd’s Rep IR, has affirmed the lengthy judgment of Deputy High Court Judge Gavin Kealey QC discussed in the October 2003 issue of Insurance Law Monthly and reported at [2003] Lloyd’s Rep IR 737 . The case considers the relationship between the twin principles applicable to a follow the settlements clause, that: (a) the reinsured must settle in a bona fide and businesslike fashion and thus can recover even though liability is disputed, and; (b) the reinsurers are nevertheless able to rely upon the terms of the reinsurance policy. The only reasoned judgment in the Court of Appeal was given by Tuckey LJ. It is to be emphasised that the courts in this case were required only to give preliminary rulings on issues of law, so that the facts were assumed.