Reinsurance: allocation of losses

The Court of Appeal in W R Berkley Insurance (Europe) Ltd and Another v Teal Assurance Co Ltd [2017] EWCA Civ 25 has dismissed an appeal against the first instance decision of Eder J [2016] Lloyd’s Rep IR 134 on the question of allocation of losses to a liability policy. The case turned on the construction of a settlement agreement.

The Court of Appeal applied the established rule that an insurer faces liability for claims in the order in which the assured’s losses are incurred, and in the case of a liability policy the loss occurs when the assured’s liability to third parties is established and quantified. The question was the point at which liability was established and quantified under the settlement agreement. The judgment of the Court of Appeal was given by Sir Stephen Tomlinson.