The UK High Court decision on 8 February 2013 in AIOI Nissay
Dowa Insurance Company Limited v Heraldglen Limited and Advent
Capital (No 3) Ltd  EWHC 154 removed any uncertainty in
the reinsurance market by upholding an arbitration tribunal's
decision that the terrorist attacks of 11 September 2001 on the
Twin Towers of the World Trade Center (WTC) amounted to two
"events" for the purposes of aggregation under a whole
account catastrophe XL reinsurance wording.
The underlying losses principally arose from settlements for
property damage/personal injuries claims made by the liability
insurers of American Airlines (for flight AA11, which crashed into
the North Tower), United (for flight UA175, which crashed into the
South Tower) and the two security companies responsible for
screening passengers on each flight. The issue was whether the
losses arising from each act of hijack of the aircraft were one or
two events under the reinsured's outwards XL reinsurances.
The case was reinsurer AIOI's appeal from an arbitration
award dated 26 January 2012 made by a tribunal consisting of Ian
Hunter QC, David Peachey and Richard Outhwaite. AIOI contended that
its liability under the outward XL reinsurances was on a one-event
basis, whereas Heraldglen had presented its claims to AIOI as two
separate occurrences arising out of two separate events. The
outward XL reinsurance contracts were subject to London Standard
Wording 351, which provided that "each and every loss" is
"each and every loss or accident or occurrence or series
thereof arising from one event".
The tribunal had decided that the losses arising were caused by
two separate occurrences arising out of separate events. The High
Court upheld this finding on the basis that the tribunal had (i)
correctly applied the law; (ii) had regard to all materially
relevant matters; and (iii) did not take into account impermissible
In reaching this conclusion, the tribunal had evaluated the
"four unities" test set out in the Dawson's Field
arbitration and adopted by Rix J in Kuwait Airways Corporation
v Kuwait Insurance Co:
The circumstances and purposes of the persons responsible
In relation to each of these:
The tribunal acknowledged that the hijackings were the result
of a coordinated plot paid for by Al Qaeda, but observed that it
was clear from the authorities that a conspiracy or plan cannot of
itself constitute an occurrence or an event for the purposes of
clauses in reinsurance contracts that refer to each and every loss,
occurrence or event.
The tribunal was not satisfied that there was any basis, at
least in the context of analysing unity of cause, for concluding
that there was any factor amounting to an event of sufficient
causative relevance to override the conclusion that two separate
hijackings caused separate loss and damage. There were two separate
causes because there were two successful hijackings of two separate
The tribunal considered that there were clearly similarities in
the timing of the events from the commencement of the flights to
contact with the North and South Towers, but these were not such as
to lead to the conclusion that there was either one occurrence or
two occurrences arising out of one event. So far as timings were
concerned, there were two occurrences and two events: infliction of
personal injury and death started in the case of each aircraft
shortly after they were hijacked and continued until at least the
collapse of each of the North and South Towers, a period of 134
minutes in the case of Flight 11, and 72 to 76 minutes in the case
of Flight 175.
The tribunal held that each tower was a separate building,
albeit connected by a single mall. They did not stand or fall
together. If only one of the hijackings had succeeded, only one
tower would have been destroyed. The fact that both towers were
destroyed was attributable to the fact that there were two
successful hijackings directed at separate buildings forming part
of the WTC.
The decision will be welcomed as it confirms the view taken by
the majority of the market and removes any uncertainty as to the
number of events.
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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