HILL AND OTHERS V MERCANTILE AND GENERAL REINSURANCE COMPANY PLC BERRY AND OTHERS V SAME

(1996) 5 Re LR 461

House of Lords

Before Lord Mackay of Clashfern LC, Lord Goff of Chieveley, Lord Mustill, Lord Slynn of Hadley and Lord Hoffmann

Follow the settlements - Aviation war risks - London Market Excess of Loss spiral - Follow the settlements - Iraqs invasion and occupation of Kuwait - Aircraft belonging to Kuwait Airways Corporation (KAC) flown out of Kuwait and 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.