London market placements - Leading underwriter clauses

(Unum Life Insurance Co of America v Israel Phoenix Assurance Co Ltd 2001, unreported)

Where insurance is placed by slip in the Lloyd’s and London markets, the established principle that the assured has a number of separate and independent contracts with the subscribing underwriters, and that the consent of each subscribing underwriter has to be obtained when terms are agreed or variations are required, has led to the use of ‘leading underwriter’ clauses. The general effect of such a clause in the slip is to require each subscribing underwriter to delegate decision making to the leading underwriter in respect of the matters falling within the scope of the clause. London Market Principles 2001 (LMP) contain important provisions relating to the use of leading underwriter clauses, and these contemplate an increased role for the leading underwriter so as to allow more efficient placement and other negotiation with the market as a whole. However, there remains no standard wording, so that the scope of each clause has to be considered separately, and it is also the case that there is little agreement on the legal effects of a clause. Some of the issues were considered by Andrew Smith J in Unum Life Insurance Co of America v Israel Phoenix Assurance Co Ltd 2001, unreported. The Court of Appeal refused permission to appeal in this case, but the short judgment of Mance LJ on the application (July 2001) itself contains valuable comments on the use of leading underwriter clauses. Both judgments will be reported in [2002] Lloyd’s Rep IR.