Follow settlements clauses

In PT Buana Samudra Pratama v Maritime Mutual Insurance Association (NZ) Ltd (The ‘Buana Dua’) [2011] EWHC 2413 (Comm) the court had to consider whether it was open to a following market underwriter to advance defences alleging that the assured had been in breach of warranty or had used fraudulent devices after the claim had been settled by the lead underwriter. The decision is discussed by David Turner QC of 4 New Square.

The ‘Buana Dua’: the facts

In October 2005, the tug Buana Dua grounded off the coast of Tanjung Gede while en route to tow a damaged tanker from Pertamina Oil Terminal to Tanjung Priok. The tug was subsequently declared to be a constructive total loss. At the time of her grounding, the tug was insured under a policy of marine insurance led by Axa HK with a 40% line; the defendant wrote a 50% line and the balance of the risk was written by Aegis.