UK: Insurance And Reinsurance Weekly Update - 11 February 2014

Last Updated: 10 March 2014
Article by Nigel Brook

Welcome to the fifth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2014.

A summary of recent developments in insurance, reinsurance and litigation law.

This week's caselaw

  • San Evans Maritime v Aigaion
    A case on follow the lead clauses and whether a following underwriter is bound by a settlement which is expressed not to be binding on him.
  • Deutsche Bank AG v Sebastian Holding
    A decision on whether the court should allow service out of the jurisdiction by an alternative method.
  • Murrills v Berlanda & Anor
    A case on service of a claim form and whether an individual is being sued in the name of a business.
  • Dass v Beggs & Anor
    An application for a security for costs order and whether a claimant had taken steps in relation to his assets to make it difficult to enforce against him.

San Evans Maritime v Aigaion

Follow the lead clauses and whether a following underwriter is bound by a settlement which is expressed not to be binding on him

The insured's vessel was covered by two insurance policies: (1) a policy issued by three Lloyd's syndicates covering 50% of the interest in the vessel; and (2) a policy issued by the defendant covering 30% of the interest in the vessel (the remaining 20% interest was uninsured). The policy issued by the defendant contained a Follow Clause which read as follows: "Agreed to follow [two of the Lloyd's syndicates] in claims excluding ex gratia payments" (thus, although the syndicates were not expressly referred to as lead underwriters, this was in effect a follow the lead underwriter clause).

Following damage to the vessel and a claim under both policies, a settlement agreement was entered into between the three syndicates and the insured. The loss was agreed by those parties to be USD 1.5 million and the syndicates agreed to pay their respective shares of an aggregate sum of USD 779,500 (ie just over 50% of the loss). The insured argued that the defendant was bound by this settlement to pay 30% of the agreed loss (i.e. USD 450,000). However, the defendant argued that it was not obliged to follow this settlement for the following reasons:

  1. The Follow Clause only authorised the Lloyd's syndicates to act on the defendant's behalf to settle claims and did not bind it to the follow any settlement. That argument was rejected by Teare J. The insured's interpretation of the clause was said to "ignore, and add to, the simple words of the Follow Clause". Nor was there any need to introduce a concept of agency into the clause. Although there is uncertainty as to the basis on which a follow clause operates, the issue of what duty the Lloyd's syndicates owed to the defendant did not fall to be decided in this case.
  2. The settlement agreement contained the following clause (Clause 7): ""The settlement and release pursuant to the terms of this Agreement is made by each Underwriter for their respective participations in the Policy only and 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 ... cover in respect of [the vessel]."

    Teare J accepted that the insured had, by virtue of Clause 7, agreed that the settlement agreement would not be binding on the defendant (and this conclusion was unaffected by the absence of a reference to the Follow Clause in Clause 7). However, the defendant had not been a party to the settlement agreement. The judge went on to find that it was unable to rely on the Contracts (Rights of Third Parties) Act 1999 because Clause 7 did not purport to confer a benefit on it. It has been previously held that a contract does not confer a benefit on a third party just because the third party's position is incidentally improved by the contract – instead, it must be shown that one of the purposes of the contract was to confer that benefit (see Dolphin Maritime v Sveriges [2009]).

    Tear J held that the purpose behind Clause 7 was the protection of the syndicates from any possible liability to the defendant (in light of the current uncertainty as to what duty a lead owes to a following underwriter when entering into a settlement with the insured). The judge said that even if he was wrong in that conclusion, although the syndicates had acknowledged, by the inclusion of Clause 7, that the settlement was not binding on the defendant, that did not prevent the insured from relying on the Follow Clause against the defendant (which was contained in the policy entered into between the insured and the defendant). Clear words would be needed to show that the insured was giving up the benefit of the Follow Clause
  3. The Follow Clause was not triggered by the settlement agreement. The judge rejected an argument that it was an implied term of the Follow Clause that it would not apply to settlements which have been expressly agreed not to be binding on the defendant: "The lead underwriter is, in my judgment, unable to countermand the effect of the Follow Clause if, as I have held, the effect of such clause is to oblige the following underwriter to follow any settlement made by the lead underwriter, whether or not the lead underwriter purported to act as agent from the following underwriter".

COMMENT: This case confirms that, once a Follow the Lead clause has been included in a policy, nothing in a later settlement agreement will prevent a following underwriter being bound by that settlement, even if the lead purports to agree that the following underwriter would not be bound. The following underwriter might attempt to circumvent this position by asking to be joined to the agreement, but it would be arguable that there has been no consideration provided from the following underwriter in return for an agreement that the settlement will not bind him (especially where, as here, the leads were settling only their share of the loss).

A separate problem is that a lead underwriter might potentially leave himself exposed to a claim by the following underwriter for a breach of the duty of care which might be owed by the lead to him when reaching the settlement (although it is unclear at present whether leads do indeed owe such a duty to the following market). Accordingly, the lead might, in such a situation, seek to agree directly with the following underwriter that no breach will occur if the settlement with the insured is concluded.

Deutsche Bank AG v Sebastian Holding

Whether court should allow service out of the jurisdiction by an alternative method

CPR r6.15(1) provides that, where there is "good reason", the court can order service by an alternative method.

Weekly Update 24/13 reported the Supreme Court decision in Abela & Ors v Baadarani, in which permission was given to serve out by an alternative method was given. There, Lord Sumption said it was "no longer a realistic view of the situation" to describe service out of the jurisdiction as an "exorbitant" jurisdiction and "it should no longer be necessary to resort to the kind of muscular presumptions against service out which are implicit in adjectives like "exorbitant". Furthermore, although the fact that the claim form has been brought to the attention of the defendant cannot constitute a good reason in itself, it will be a "critical factor".

In this case, the claimant obtained an order for service out by an alternative method from the court, and the defendant argued that permission should not have been given. Cooke J held that, although notice is a "prime purpose" of service, "there is more to it than that". After reviewing the decision in Abela, he concluded that there had been no good reason to make the order in this case. Questions of convenience and possible speed were not sufficient in themselves to justify service by alternative means: "Whilst I am conscious of accusations of "uncommerciality" or "technicality" in this approach, in my judgment service not only requires more than the giving of notice but is also not to be seen as not just a matter of speed and convenience, particularly where the court's powers to permit service out of the jurisdiction are invoked. There must be some good reason beyond speed and convenience..." What was required instead was something like evidence that the defendant was seeking to evade service or that it was proving difficult to serve by conventional means.

Murrills v Berlanda & Anor

Service of claim form and whether individual being sued in the name of a business

The defendant is an Italian cosmetic surgeon who has lived at an address in Trento, Italy, for some 30 years. He worked for the second defendant at its clinic in London for 3 or 4 days every 15 days (staying in a hotel when he did so). The claimant was operated on by the defendant at the second defendant's clinic. She subsequently issued a claim form against the defendant and sought to serve him within the jurisdiction by posting the claim form to the defendant at an address in England where he had worked after leaving the second defendant's employment. In so doing, the claimant argued that it could rely on CPR r6.9 which provides that "an individual being sued in the name of a business" may be served at the "usual or last known residence of the individual; or principal or last known place of business".

The Court of Appeal upheld the decision at first instance that the defendant had not been validly served. The defendant was being sued as in individual in his personal name. Although a person practising medicine may be carrying on a business, within the meaning of CPR r6.9, that will not be the case if he is an employee working in someone else's business: "whether the [defendant] worked as an employee or was self-employed, he was not sued in the name of a business. An individual is sued in the name of a business when he is sued in the name of a business which is not his personal name".

Accordingly, the defendant ought to have been served out of the jurisdiction, in Italy.

Dass v Beggs & Anor

Security for costs order and whether claimant had taken steps in relation to his assets to make it difficult to enforce against him

The defendant obtained an order for security for costs against the claimant for GBP 5,000 on the ground set out in CPR r25.13(2)(a) (on the basis that the claimant is resident in the USA). However, the amount recoverable under this ground has been limited by caselaw (broadly, to the extra cost of enforcing in the other jurisdiction). Therefore, the defendant applied under CPR r25.13(2)(g) which provides that an order can be made if "the claimant has taken steps in relation to his assets that would make it difficult to enforce an order for costs against him".

The judge, Donaldson QC, referred to prior caselaw which has confirmed that it is the step which is relevant, rather than the claimant's motivation (although the claimant's motives may be relevant to the issue of whether it is just to make the order). Nor does evidence of dishonesty suffice if that dishonesty does not relate to the step taken in relation to the asset. There is also no requirement that the step must be taken at a time when the proceedings are in contemplation.

However, the judge added that there must be a nexus between the step and the difficulty in enforcement of a later costs order against the claimant, and "that lapse of time may lead to the causal effect being spent".

The step in question in this case was a payment of just under GBP 200,000 made by the claimant to his son. In the circumstances of this case, that payment did not make it difficult to enforce the order – in fact, if the claimant had had the money in his account instead, it would have subsequently passed to his trustee-in-bankruptcy. Accordingly, it was held that there was no basis for making the further security for costs order.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nigel Brook
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.