LLR: Insurance & Reinsurance

Follow the settlements - Aviation war risks - London Market excess of loss spiral - Ambit of FS clause - Iraq’s invasion and occupation of Kuwait - Aircraft belonging to Kuwait Airways Corporation (KAC) flown out of Kuwait - Aircraft later destroyed - KAC insured under war risk policies - Total insurance value of aircraft about $700m - Maximum sum insured in respect of ground risk in relation to any one occurrence $300m - Kuwait Insurance Company, in collaboration with their reinsurers, paid to KAC $300m - KAC accepted payment, but without prejudice to their full claim, which was to be litigated - Whether Follow Settlements Clause required LMX reinsurer to follow settlement save in very exceptional circumstances - Whether reinsurer free to mount defences based on issues of law and/or fact notwithstanding settlements further down chain of reinsurers.

Arbitration - Arbitration clause - Construction - Motion to compel arbitration of product liability disputes denied.

Limitation - Time bar - Alleged deliberate concealment - Claims by Lloyd’s Names on Outhwaite syndicates against managing agents and members’ agents - Claims based on acts allegedly done or not done in or before 1982 - Writ not issued until April 1992 - Whether claims defeated by six-year limitation period in Limitation Act 1980 - Whether plaintiffs could show that running of limitation period had been postponed under section 32(1)(b) because of alleged acts and omissions said to constitute deliberate concealment.

Letter of credit - Duty on issuing bank - Confirmation - Letters requesting issuing bank to confirm that letter of credit amount was accurate and that credit was still in force - Second letter surrendering letter of credit to issuing bank and stating that “[a]ll of these letters of credit have been drawn in full by the beneficiary” - Whether letters were “document” within Uniform Customs article 7/UCC article 5 - Admission by issuing bank that it had knowledge of fact that there was outstanding balance on letter of credit which had not been drawn by beneficiary - Whether sufficient to establish contractual duty to beneficiary - Whether unjust enrichment actionable under Illinois law.

Arbitration - Award - Disclosure - Injunction against disclosure by reinsured of award against leading reinsurance underwriter on a particular risk - Scope of reinsured’s duty of confidence and exceptions to it.

Lloyd’s litigation - Loss review - Concurrence with litigation by Lloyd’s Names - Interviewee at loss review also defendant in litigation - Prejudice in continuing loss review - Whether decision by Lloyd’s Regulatory Board to continue loss review was unfair and could be impugned - Balance of prejudice against general public interest.

Letter of credit - Insolvency of issuing bank - Standby letter of credit securing reinsurance obligations - Whether FDIC responsible for issuing bank’s liability on letter of credit - Whether letter of credit was an insured deposit - Whether FDIC acted legally when it disaffirmed letter of credit.

Letter of credit - Injunction - Lloyd’s - Action by Lloyd’s Names in United States alleging violations of Ohio securities law - Whether Names entitled to preliminary injunction preventing defendants from presenting to any bank letters of credit which members had executed in support of their transactions.

Lloyd’s - Jurisdiction clause - Enforceability in United States - Action by Lloyd’s Names in United States alleging violations of Ohio securities law - Whether English forum selection clause in membership agreements was enforceable.

Arbitration - Agreement - Stay - Whether Bermuda court had jurisdiction to restrain foreign legal proceedings brought in breach of arbitration agreement - Whether retrocedants’ seat lay in Bermuda, place of its incorporation, registration and regulation - Whether Bermuda was identified by arbitration clause of proportional treaty as agreed place of that treaty arbitration - Whether reinsurers’ challenge to competence of Kuwaiti Courts under 1958 New York Convention was submission to jurisdiction of Kuwaiti Court.

Letter of credit - Lloyd’s - Membership - Letter of credit posted by Lloyd’s Name - Name filing lawsuit against Lloyd’s - Whether injunction should issue against drawdown.

Pool - Insolvency of retrocedant (Mission) - Action by liquidator against pool members - Whether liquidator or Mission had any contract with pool members - Whether liquidator could recover against pool members - Whether breach of contract by pool members would entitle liquidator only to damages for losses paid by Mission - Whether case reserves and IBNR recoverable as damages flowing from any breach of contract by pool members - Whether pool members entitled to repudiate retrocessions - Alleged illegal and unenforceable agreement - Alleged failure to disclose material facts.

United States - California - Coverage Construction of property, casualty and crime policy issued by London market insurers - Whether employment discrimination claims against employer covered by faithful performance clause - Whether clause contemplated indemnification of monetary or property loss caused by misconduct of employee - Whether discrimination complaints alleged discriminatory employment policies rather than employee misconduct.

Lloyd’s litigation - Gooda Walker claims - Limited E&O recoveries - Whether appropriate to assess damages - Whether liability to Lloyd’s a pre-condition of recovery - Whether Lloyd’s litigation special features justified deferral of assessment of damages in respect of anticipated claims.

Agency - Authority - London market reinsurance pool - Underwriting agent operating pool given written authority to underwrite “all types of insurance or reinsurance risks from wherever the offers may emanate” - Treaties negotiated and executed by agent in Boston, Massachusetts - Agreement between reinsurers and reinsured to arbitrate dispute arising out of treaties - Action by reinsurers to declare treaties invalid and void on grounds that agent acted beyond scope of authority in executing agreements - Whether agent’s authority to execute treaties was incidental to, and reasonably necessary to, accomplish grant of express authority - Whether fact that neither agent nor reinsurers were authorised to transact insurance business in Massachusetts affected plaintiffs’ obligations under agreements or limited scope of agency.

Arbitration - Reinsurance dispute - Estoppel - Motion by reinsurers for temporary restraining order and preliminary injunction to prevent arbitration proceedings from continuing - Whether reinsurers estopped from contesting validity of agreements by agreeing to arbitrate dispute over reinsurance contracts.

Practice and procedure - Security - New York - Action in New York against retrocessionaires by New York plaintiff - Action brought as successor of insurer and as assignee of retrocedants - Insurer and retrocedants not authorised to do business in New York - Motion by plaintiff to compel prefiling security by defendant retrocessionaires.

Lloyd’s - United States - Federal courts’ jurisdiction - “Complete diversity” - “Real parties in interest” - Whether, in US litigation involving Lloyd’s underwriters, only real parties-in-interest were active underwriters - Whether Names were merely “nominal or formal” parties in litigation - Whether “control” a dispositive issue in determining who, among parties, was real party-in-interest - Whether relationship between active and non-active underwriters was that of trustee and beneficiary.

Marine insurance - Ambiguity - Broker’s duty to insured - Whether coastal warranty in blue water extension was ambiguous - Whether insurer had waived right to cancel insurance by affirming insurance cover which had expired - Whether insured, through his broker, misrepresented or failed to disclose material circumstance - Whether broker’s failure to draw insured’s attention to fact that crew changes could result in cancellation or suspension of cover was negligent - Causation - Damages.

Arbitration - United States - Arbitration clause - Appointment of arbitrator - Whether Wisconsin circuit court had statutory authority to confirm appointment of arbitrator in accordance with terms of arbitration clause when parties had reached deadlock preventing successful arbitration of underlying dispute - Whether parties’ conduct indicated intent to waive strict performance of time condition - Whether circuit court’s finding that time was of essence of arbitration agreement was clearly erroneous - Whether US law firm had apparent authority to accept notice on behalf of Lloyd’s underwriters retrocessionaires.

Fire insurance - Indemnity - Material loss - Insured building partially damaged by fire - Building contracted for demolition before fire - Purpose of damage insurance - Whether compensation must relate to intrinsic value of property or to value of damaged property to insured.

Exclusion - Construction - Insurance brokers’ errors and omissions - New York insurance brokers’ failure to account to reinsured for recoverables - Liability of London market errors and omissions underwriters - Whether broker was found liable for failing to produce financial records or for failing to forward and remit premiums and reinsurance recoverables - Whether exclusion applicable.

Limitation - Time bar - Alleged deliberate concealment after cause of action arose - Claims by Lloyd’s Names on Outhwaite syndicates against managing agents and members’ agents - Claims based on acts allegedly done or not done in or before 1982 - Writ not issued until April 1992 - Whether claims defeated by six-year limitation period in Limitation Act 1980 - Whether plaintiffs could show that running of limitation period had been postponed under section 32(1)(b) because of alleged acts and omissions said to constitute deliberate concealment.

Practice and procedure - Costs - Security for costs - Whether application by defendant in existing proceedings to enforce plaintiff’s cross-undertaking in damages “an action or other legal proceeding” within section 726 or “an action or other proceeding in the High Court” within Order 23 rule 1(1) - Whether defendant who makes such an application substantially in position of plaintiff.

Asbestos - CGL policies - Insured covered by different insurers at different times - Periods when insured not covered - Whether insurers under duty to defend in claims alleging progressive disease (asbestosis) - Whether, if the insurers had duty to defend, duty could be prorated to correspond with periods during which insured had insurance - Whether “manifestation” theory should be adopted.

United States - Insolvency - New York - Trust fund - Action to determine rights in trust fund established by insolvent foreign insurer as prerequisite to writing insurance contracts in New York - Whether (1) bank which issued letter of credit to secure foreign insurer’s obligation under reinsurance agreement; (2) insurer’s attorneys alleging charging lien and (3) IOU holder with foreign judgment, entitled to recovery from trust fund.

Arbitration - Asbestos claims - Dispute on meaning of “occurrence” - Panel majority in consolidated arbitration awarding in favour of reinsured - Award confirmed in state court - Further arbitrations on similar treaties covering different periods - Whether action by reinsured in federal court should be stayed - Full Faith and Credit Act - Whether doctrine of collateral estoppel barred reinsurer from seeking further arbitration of liability issue between parties where central issue in pending disputes was meaning of “occurrence” - Whether merits of reinsured’s collateral estoppel defense should be determined by arbitrators and not by court.

Statute - Construction - Insurance Companies Act 1982 - Whether reinsurance business is “insurance business” within the Act - Whether long-term reinsurance business can be “long-term business” within that Act - Whether retrocession arrangements can equally be, in appropriate cases, not only “insurance business” but “long-term business” within the Act.

Agency - Pool - Underwriting agency agreement - Clause entitling pool participant to inspect documents and computer databases relating to transactions entered into by agents - Repudiation of agency contract - Agent’s refusal to permit inspection or copying of documents - Whether pool participant’s inherent right of inspection and copying survived termination of contract.

Insurance - Aviation insurance broker - Errors and omissions insurance - Notice of claim or suit - Whether claim arising out of helicopter casualty was “first made” against insured under claims-made errors and omissions insurance policy when plaintiffs amended their complaint, which had joined insured for discovery purposes only, to assert claim for monetary damages against insured, or earlier date when suit was first brought or when plaintiffs counsel notified insured of “potential” negligence claim against insured.

Conflict of laws - Tort - Double actionability - Exceptions to general rule - Alleged tort committed in foreign country - Insurer incorporated in Hong Kong with head office in Saudi Arabia - Insurer sued in Hong Kong by contractors seeking to recover in respect of building project in Saudi Arabia - Insurer seeking to counterclaim on basis of alleged tort actionable in Saudi Arabia but not actionable in Hong Kong - Counterclaim struck out by order of Hong Kong High Court - Order set aside by Court of Appeal of Hong Kong - Order of Court of Appeal that insurer could not counterclaim in negligence relying solely on law of Saudi Arabia as lex loci delicti - Whether appeal to Judicial Committee misconceived - Whether proposed amendment raised new claim which was time barred under Limitation Ordinance - Whether insurer could rely purely on Saudi Arabian law (lex loci delicti) to establish direct liability in tort when Hong Kong law (lex fori) did not recognise such liability - Whether rule 203(1)(b) and 203(2) stated in Dicey and Morris (12th edition) was correct statement of law.

Lloyd’s - Members’ agent - Duty of care to names - Members’ agent recommending name to allocate premium to high risk syndicates - Whether agent under duty to give proper advice in relation to such allocation - Extent of duty - Whether judge erred in concluding that had name been properly warned and advised, name would have allocated as much as 30 per cent of his premium income limit (p11) to high risk syndicates - Relevant figure - Whether, where it was most unlikely that any professional member of Lloyd’s foresaw magnitude of financial disasters that struck in 1980s, losses of type that occurred were foreseeable and, in fact, foreseen, even though their scale was not - Whether principle of indemnity disentitled name from recovering what he had lost in respect of each of his three causes of action - Whether judge rightly excluded from damages sum in respect of syndicate expenses on basis that if name had not been in high risk syndicates he would have allocated his pit to other syndicates and incurred similar expenses.

Insolvency - Scheme of arrangement - Jurisdiction of court - Reinsurance company in liquidation - Appeal by creditor out of time - Whether terms of scheme of arrangement were absolute and excluded jurisdiction of court to extend time for appeal by creditor.

Assignment - Mortgage - Mortgaged property - Fire insurance policy covering property taken out by mortgagor - Entitlement of second mortgagee to proceeds of policy - Whether valid notice of assignment given to insurer - Whether mortgagee still had interest by way of charge on proceeds.

Insolvency - Liquidator - Arbitration - United States federal and state statutes - Whether anti-arbitration provision in Kentucky (State) Insurers Rehabilitation and Liquidation Law was enacted “for purpose of regulating business of insurance” - Whether state law preserved by McCarran-Ferguson Act from pre-emption by US Federal Arbitration Act.

United States - Illinois - Environmental impairment liability - Action by insured for breach of contract and declaration of insurance coverage - Dismissal for failure to join other insurers as necessary parties - Motion for reconsideration - Whether insurer’s excess clause made insurer excess insurer if comprehensive general liability (CGL) policies covered same environmental liability - Whether insured could sue insurer if insurer’s liability was contingent upon construction of another insurer’s policies - Whether insurer’s liability was contingent on liability of other insurers which could not be joined.

Non-disclosure - Misrepresentation - Materiality - Contractors All Risks - Design and construction project - Proposal stating that construction involved piled foundations - Failure to disclose earlier reports - Construction proceeding on shallow footings - Subsidence damage caused to buildings - Whether insurer’s right of avoidance arose only when misrepresentation or non-disclosure was “material” and when actual insurer was induced thereby to enter into contract - Test of materiality - Whether limited to factors seen as increasing risk - Whether inducement could be inferred where actual insurer did not give evidence.

Non-disclosure - Right to avoid - Waiver - Imputed knowledge - Failure to disclose medical conditions on restatement of lapsed policy - Medical conditions disclosed on medical report in respect of later application for insurance - Later application declined but premiums accepted in respect of earlier policy - Imputed knowledge - Whether knowledge sufficient to found waiver by election.

Non-disclosure - Misrepresentation - Exclusion clause - Reinsurance to close agreement providing that contract neither cancellable nor voidable by either party - Summary judgment proceedings against reinsurer - Non-disclosure and misrepresentation alleged by reinsurer - Whether reinsurer had raised triable issues.

Marine insurance - California - Misrepresentation and non-disclosure - Whether underwriters had constructive knowledge of prior loss record - Whether inserting “present market value” of vessel, rather than actual purchase price, was acceptable industry practice in applying for marine insurance - Whether age of vessel misrepresented - Whether cruising warranty violated.

Insurance - Agricultural policy - Exclusion - “Deterioration” - Damage to irrigation pipes caused by copper-based pesticides - Whether damage fell within policy exclusion for “deterioration” - Whether insured’s claim barred by insurance policy’s time limitation - Whether “proximate efficient” cause of damage was fungicide manufacturer’s failure to provide warning.

Professional indemnity (solicitors) - Claims-made policy - Notice of claim - Insured to give to insurer “immediate notice in writing of any circumstance... likely to give rise to claim” - Policy expiring at 4 pm on March 31, 1986 - On April 23, 1986, insurer advised of possible claim - Meaning of “immediate notice” - Possible effect of section 9 of (New Zealand) Insurance Law Reform Act 1977.

Follow the fortunes - Asbestos-related claims - “Occurrence” - Reinsured’s decision to pay insurance proceeds to insured for asbestos claims on single occurrence basis, rather than contest coverage based upon argument that each claim was separate occurrence subject to $1 million deductible - Whether decision was reasonable and binding on reinsurers Whether reinsured entitled to summary judgment.

Taxation - Lloyd’s names - Underwriting business - Whether damages awarded to names against their members’ agents in respect of negligent underwriting arose from “a member’s underwriting business” and subject to tax in their hands.

Non-disclosure - Agency - Fraud - Whether managing agent of reinsured was bound to disclose to reinsurer that he had been defrauding his principal - Assumption of existence of fraud and that it was circumstance material to be disclosed to reinsurers - Whether Marine Insurance Act 1906 section 19 required disclosure, notwithstanding further assumption that majority of reinsured syndicates did not know of fraud at material time.

Reinsurance - Follow the settlements - Construction of clauses - Whether liability of reinsurers had been conclusively determined - True meaning of follow settlements clause, and definition of “each and every loss” - Whether reinsurers bound by decision as to number of claims.

Reinsurance - Treaty - Construction - Losses discovered or claims made clause - Extension of protection clause - Professional liability risks arising out of Outhwaite litigation - Whether e&o losses incurred by original insureds under total of 32 contracts could be aggregated under treaty definition of “each and every loss” - Whether reinsurers who were on risk under reinsurances only for calendar year 1985 were liable for claims first notified by members’ agents in 1987 under express clauses in 1985 contracts.