San Evans Maritime Inc & Ors v Aigaion Insurance Co SA1

The Court held that the defendant following underwriter was required to follow a settlement reached by lead underwriters under a Follow Clause, despite the following underwriter being excluded from the settlement agreement between the lead underwriters and assureds.

Background

The three preliminary issues tried in this case arise out of a hull and machinery policy covering the vessel St. Efrem. On 27 July 2010, the vessel grounded at Paranagua, Brazil and suffered a generator breakdown. It was then towed to Abidjan, Ivory Coast.

The claim was bought by three claimants. The first claimant was the vessel owner, the second claimant was the vessel manager and the third claimant was a mortgagee of the vessel. The first and second claimants were Liberian companies which had been dissolved. Their claims were stayed on 20 December 2013 as they failed to provide security for costs. The third claimant's (Mrs Chariklia Livanou's) claim proceeded and the court's determination was binding upon all the claimants.

50% of the interest in the vessel was insured under a policy written on 16 and 17 March 2010 by three Lloyd's syndicates; Catlin, Ark and Brit (the "Lloyd's Policy"). Catlin was the slip leader. 30% of the interest in the vessel was insured by the defendant, Aigaion Insurance Co SA ("Aigaion") under a policy issued on 24 March 2010 (the "Aigaion Policy"). The remaining 20% interest was uninsured. A claim was made under both policies. The Aigaion Policy contained the Follow Clause below:

"Agreed to follow London's Catlin and Brit Syndicate in claims excluding ex-gratia payments"

On 6 April 2011, Aigaion complied with a request to send a copy of the Aigaion Policy to the Lloyd's syndicates. On 24 April 2012, the Lloyd's syndicates settled the claim brought against them. Clause 7 of the settlement agreement included the following wording:

"...none of the Underwriters that are party to this Agreement participate in the capacity of a Leading Underwriter under the Policy and do not bind any other insurer providing hull and machinery cover in respect of the St. Efrem."

The claimants argued that Aigaion is obliged to follow the settlement in respect of its cover for 30% of the interest in the vessel. Aigaion denied that it was required to do so.

The preliminary issues

The three preliminary issues arising are summarised as follows:

  1. Did the Follow Clause require Aigaion to follow any settlement by the Lloyd's syndicates or did it merely authorise the Lloyd's syndicates to act on Aigaion's behalf in negotiating or agreeing the settlement?
  2. If the Follow Clause required Aigaion to follow the settlement, was the Follow Clause triggered by the settlement agreement?
  3. Did the claimants agree by clause 7 of the settlement agreement that Aigaion would not be bound by the settlement and, if so, can Aigaion rely on the Contract (Rights of Third Parties) Act 1999 (the "Act") to enforce clause 7?

> Teare J. considered the third issue before the second issue, and we summarise the Court's ruling in the same order here.

Footnote

1) [2014] EWHC 163 (Comm)

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