UK: (Re)insurance Weekly Update 14- 2016

Last Updated: 26 April 2016
Article by Nigel Brook

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

This week's caselaw:

Mitsui Sumitomo v Mayor's Office for Policing and Crime: Supreme Court unanimously rules that consequential loss is not covered under the Riot (Damages) Act 1886

http://www.bailii.org/uk/cases/UKSC/2016/18.html

The previous decisions in this case were reported in Weekly Updates 32/13 and 19/14. During the widespread UK riots in 2011, a gang of youths broke into the Sony distribution warehouse in Enfield and stole goods and threw petrol bombs, which destroyed the warehouse. At both first instance and on appeal, it was found that this incident was a "riot" and so fell within the scope of the Riot (Damages) Act 1886. This Act provides that: "Where a ... building in [a police area] has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as hereinafter mentioned shall be paid out of [the police fund] of [the area] to any person who has sustained loss by such injury, stealing, or destruction the responsible statutory body". Of issue in this appeal to the Supreme Court was whether the claimants (here, the insurers of warehouse and stock) were entitled to recover consequential losses. The Court of Appeal held that they were so entitled (as there was nothing in the wording of the Act to exclude such losses), but the Supreme Court has now unanimously reversed that decision.

Lord Hodge, delivering the leading judgment, held that "this is a case in which history rather than legal theory casts light, revealing the correct answer". Linguistic analysis of the Act did not itself provide a clear-cut answer. However, it was noted that the Act provides only partial compensation for damage caused by rioters: for example, the Act does not expressly provide compensation for either personal injury caused by rioters or damage to property in the streets (even where such losses resulted from damage to, or the collapse of, a building).

Having regard to prior legislation, the Supreme Court concluded that such legislation made it clear that statutory compensation was to be confined to only the cost of repairing physical damage to property. Nothing in the 1886 Act removed that limitation and the preamble to the Act did not suggest an intention to alter the basis on which compensation would be paid. It was concluded that: "A claim for loss of rent or loss of profits in addition to the cost of restoring or replacing a building is different from an estimation of the diminution in value of a commercial building, in which the valuation of the undamaged building had regard to its income earning potential. They are different heads of loss".

COMMENT: In reaching its decision, the Supreme Court did not refer to the point raised by the judge in the first instance decision that the Act is analogous to a form of statutory insurance and "most insurance policies will not cover consequential losses without an express provision to that effect". The Court of Appeal did not refer to, or overrule, that general principle but its finding did raise the possibility that an insured might argue that the Court of Appeal's interpretation of compensation "for" property damage should be applied to similar wording in an insurance policy. The Supreme Court's ruling therefore excludes that possibility, albeit for reasons unrelated to the general principle.

AXA Corporate v Weir Services: Whether England was the appropriate forum to hear an application for declaratory judgment brought by insurers

http://www.bailii.org/ew/cases/EWHC/Comm/2016/904.html

Clyde & Co (Michelle Crorie and Erina Kawai) for claimant

Insurers issued, broadly, two types of policies to the insured: global liability policies issued in England covering companies in the insured's group, including an Australian subsidiary, and a "broadform" liability policy issued in Australia in favour of the insured's Australian subsidiaries. When a dispute arose, insurers issued proceedings in England seeking declaratory relief in relation to the global policies, and the insured's Australian subsidiary subsequently issued proceedings in Australia, seeking an indemnity under both the global policies and the Australian policy. Insurers sought an anti-suit injunction to restrain the Australian proceedings insofar as they relate to the global policies, and the subsidiary sought to set aside permission to serve out for the English proceedings.

The key issue in the case was therefore whether England was the appropriate forum to hear the claim relating to the global policies. They did not contain a jurisdiction clause but did provide that "The Insurer proposes that the policy will be governed by the laws of England and Wales, unless the Insured and the Insurer agree otherwise". The insurer and insured did not agree otherwise, and so Blair J held that the policy was governed by English law. Even if there had not been an express clause, the policies would be governed by English law since they were issued by the English branch of AXA (see Articles 4 and 19 of the Rome I Regulation).

After taking into account the various factors involved in the case, Blair J concluded that England was the appropriate forum to hear the claim under the global policies: "In a relatively balanced debate, the point that seems to me decisive is that the global policies are subject to what is in effect a choice of English law. Further, they stand at the apex of the worldwide, integrated liability insurance programme which AXA at the material time provided for the Weir group, with local policies in various different countries coming in beneath. Further and importantly, the evidence is that this form of global policy is widely used by AXA and in general such policies are governed by English law. I accept AXA's submission that it is desirable that key provisions of such policies (including something as fundamental as the definition of "Product") should be construed by the English courts".

The judge drew support for this conclusion from prior caselaw and textbook commentary, for example an extract from Dicey and Morris, Conflict of Laws, stating that "In cases concerned with insurance written on the London market and governed by English law, there is a strong tendency for the court to consider England as the natural forum". However, the judge declined to grant an anti-suit injunction (even though the commencement of the Australian proceedings had plainly been "tactical").

Accordingly, proceedings are to continue in both England and Australia.

Howe v Motor Insurers' Bureau: Whether claimant who sought indemnity from the Motor Insurers' Bureau was entitled to the benefit of QOCS

http://www.bailii.org/ew/cases/EWHC/QB/2016/884.html

Weekly Update 12/16 reported the finding in this case that the defendant, the Motor Insurers' Bureau, was not liable to compensate the claimant, a driver who had been injured in a road traffic accident in France by an unidentified driver. Of issue in this decision was whether the claimant was entitled to the protection of Qualified One-way Costs Shifting (QOCS). This regime was introduced on 1 April 2013, and results in defendants generally being ordered to pay the costs of winning claimants but, subject to certain exceptions, they will not recover their own costs if they successfully defend the claim.

CPR r44.13 states that QOCS applies "to proceedings which include a claim for damages...for personal injuries". Stewart J was therefore required to decide whether the claim here fell within that definition.

He concluded that it did not. The claimant's claim against the MIB was not one for damages for personal injuries. Although the glossary to the CPR merely defines damages as "a sum of money awarded by the Court as compensation to the Claimant", the judge noted that he was not bound by this definition and instead approved textbook commentary to the effect that it is an essential feature of damages that there is a "wrong". In this case, there was no breach of duty by MIB, or any other wrong alleged against them, and so a claim based on the 2003 Regulations (which were brought in by the UK to comply with the fourth Motor Directive requirements) was not a claim within the meaning of CPR r44.13.

Webb v Liverpool Women's NHS: Court of Appeal holds that an issues-based costs order should not have been made where a Part 36 offer was beaten

http://www.bailii.org/ew/cases/EWCA/Civ/2016/365.html

The first instance decision in this case was reported in Weekly Update 14/15. The claimant made a Part 36 offer covering her entire claim. It was rejected but she went on to beat it at trial. However, she lost on one issue. The judge held that, leaving aside the Part 36 offer, an issues-based costs order would have been appropriate in this case (the issue on which the claimant had failed having been a separate, self-contained and discrete claim). He then concluded that the fact that there has been a successful Part 36 offer does not mean that the court is unable to make an issues-based order. The claimant appealed and the Court of Appeal has now allowed that appeal.

It held that an issues-based costs order would not have been appropriate in any event in this case: it is not unusual for a claimant to succeed on some, but not all, allegations (particularly in a personal injury case such as this one) and there was nothing in this case to take it out the ordinary or to justify the claimant being deprived of her costs.

As to the issue of whether the claimant was entitled to all her costs after having beaten her Part 36 offer, reference was made to the earlier Court of Appeal decision of Kastor Navigation v AXA [2004]. In Kastor, it had been held that it was necessary to determine, on the application of Part 44, to what costs the winning claimant was entitled and then to order the defendant to pay those costs on an indemnity basis (unless it was unjust to do so). The Court of Appeal distinguished Kastor, though, on the basis that it was decided on provisions of Part 36 and Part 44 which have now been materially altered. It held that, since Part 36 is a self-contained code, the court does not first exercise its discretion under Part 44 before deciding what costs order to make. The only discretion of the court is that conferred by Part 36 itself.

Although Part 36 does not preclude the making of an issues-based or proportionate costs order, a winning claimant should be deprived of all or part of its costs only if the court considers (having regard to all the circumstances of the case) that it would be unjust to make such an order. On the facts of the case, it would not be unjust to award the claimant all her costs. The defendant could have avoided all the costs of the trial by accepting the claimant's favourable Part 36 offer.

Coral Reef v Silverbond Enterprises: Security for costs application and whether Master bound by earlier decision of a High Court judge

http://www.bailii.org/ew/cases/EWHC/Ch/2016/874.html

The defendants applies for security for costs on the grounds that the claimant is resident outside the EEA and will be unable to pay the defendants' costs, if so ordered. A key issue was that the claimant, which is resident in Hong Kong, had (lawfully) failed to file any financial information. In the recent Court of Appeal decision of Sarpd Oil v Addax (see Weekly Update 10/16), which reversed an earlier decision by Smith J (see Weekly Update 31/15), it was held that "If a company is given every opportunity to show that it can pay a defendant's costs and deliberately refuses to do so there is, in our view, every reason to believe that, if and when it is required to pay a defendant's costs, it will be unable to do so".

Unfortunately for the claimant in this case, the Court of Appeal's ruling came out on the day of its hearing before Master Matthews. It sought to argue that it had relied on the earlier decision by Smith J, but the Master said that argument had "a strong air of unreality": other judges have reached different conclusions on the same issue and there would have been a doubt as to whether the decision would be followed. The Master pointed out that "the claimant was taking an obvious and significant risk in refusing to provide any information".

The Master acknowledged that the claimant could realistically have expected the application to be heard by a Master in the Chancery Division, and the claimant argued that a Master is bound by the decision of a High Court Judge. There is little prior caselaw on this point, but, having reviewed the available materials, the Master concluded that a Master exercising the jurisdiction of the High Court is bound by relevant decisions of the Court of Appeal and Supreme Court, but is not bound by a relevant decision of a High Court judge. He went on to conclude that Smith J had been wrong on the issue in this case. He found that there was reason to believe that the claimant would not pay a costs order in favour of the defendant, and so ordered security for costs.

Dinglis Properties v Dinglis Management: Freezing orders, disclosure and the consequences of a defendant accepting that that claimant has a good arguable case

http://www.bailii.org/ew/cases/EWHC/Ch/2016/818.html

The defendants applied to discharge a freezing order made against them and, for the purposes of the application, they accepted that the claimants have a good arguable claim on the merits, as pleaded in the particulars of claim. The defendants initially submitted that the claimants should be confined to their pleaded case, which did not allege fraud, but that argument was withdrawn when reference was made to The Lord Chancellor v Blavo [2016], in which it was concluded that there was a real risk of dissipation even though the pleaded allegation was simple breach of contract.

The judge held that, where the defendants have conceded a good arguable case on the merits, and where the pleaded facts are consistent with the breach of duty being either innocent or dishonest, the claimants will need further evidence of a propensity to dissipate assets (which they are free to adduce). (If the pleaded facts are consistent only with the breach of duty being dishonest, then those facts can show both a good arguable case and a propensity to dissipate, and no further evidence will be necessary). On the facts of the case, no propensity to dissipate assets was proven, since the defendants had taken no steps to dissipate, despite the parties being at war with each other since 2012.

An alternative argument, that there had been non-disclosure by the claimants when applying for the freezing order, was also considered by the judge. He rejected an argument that it would never be appropriate for the court to investigate allegations of non-disclosure of the merits of the claim where the defendant has admitted that there is a good arguable case. There is still a duty to disclose all material information at the without notice hearing (in order to protect the administration of justice), but any non-disclosure is "unlikely to be at the egregious end of the spectrum".

One further point made by the judge was that: "it is trite law that a claimant is deemed to join issue with every allegation in the defence and hence has no need to serve a reply unless he wishes to rely on additional facts or matters".

Prudential Assurance Company v HMRC: Court of Appeal explains procedural requirements for cases conducted under a Group Litigation Order ("GLO")

http://www.bailii.org/ew/cases/EWCA/Civ/2016/376.html

A GLO has been made in this case. CPR Part 19 Section III allows courts to make GLOs where there are, or are likely to be, a number of claims giving rise to the same issues. Although the claimant here had pleaded a claim in its particulars of claim, it did so only in very general terms, without any factual allegations. The defendant also pleaded a defence in only very general terms. Matters of contention were not identified in the pleadings.

The justification for this approach was said to be derived from observations of Lord Woolf in Boake Allen Ltd v HMRC (see Weekly Update 23/07). In this case, the Court of Appeal pointed out that Lord Woolf's observations were only obiter and that his comments that each procedural step need only be taken once where a GLO was in place did not suggest that basic steps in litigation may be ignored or not taken at all: "All that Lord Woolf was saying was that the steps in question need only be taken once, collectively, on behalf of all members of the group, rather than being taken by each litigant individually". It was in that context that he said that, for a GLO, "a claim form need be no more than the simplest of documents". He was not referring, though, to particulars of claim (or a defence).

The rules plainly envisage that particulars of claim will be served, and the Court of Appeal pointed out that relevant facts must be pleaded: "If they are facts generally applicable to all claimants, they may be pleaded in Group Particulars of Claim; if they are specific to a particular claimant they may be set out in a schedule".

Axon v Ministry of Defence: Whether losing claimant should pay the Third Party's costs

http://www.bailii.org/ew/cases/EWHC/QB/2016/883.html

The claimant lost against the defendant, and so the Third Party joined to the proceedings by the defendant did not have to indemnify the defendant. There was no dispute that the claimant should pay the defendant's costs. Of issue here, though, was who should pay the Third Party's costs.

Nicol J noted that, under the general rule that additional claims are treated as if they are claims, and the loser pays the winner's costs, that would result in the defendant having to pay the Third Party's costs. However, that is only the starting point. According to the White Book, where the claimant is not impecunious (and that was not the case here, the claimant having adequate insurance cover), the claimant should usually be liable for the costs of both the defendant and the Third Party.

In this case, though, there had been an additional reason as to why the Third Party would never have been liable even if the claimant had won, and so it had not been reasonable for the defendant to join it to the proceedings. Accordingly, it was concluded that the claimant should not pay all the Third Party's costs. Nor was it relevant that the claimant had sufficient insurance cover: "insurance is a precaution against liability, not the cause of liability".

However, the claimant had chosen to obtain disclosure by encouraging the Third Party proceedings to continue, and so the claimant was ordered to pay the Third Party's costs up to the end of disclosure (and the defendant had to pay the Third Party's costs thereafter).

OTHER NEWS

Law Commissions' Reforms: Insurable Interest

Weekly update 13/15 reported the issues paper published by the Law Commissions regarding their proposed reform of insurable interest. They have now reported that their proposals were well supported and a draft bill (linked to below) has been drafted to give effect to the proposals (and they hope that the bill will be able to follow the uncontroversial Law Commission bill route). A short consultation period on the bill will close on 20th May 2016. A paper on parametric insurance has also been produced, explaining how the insurable interest reforms will work with these products.

The main reforms introduced by the draft bill are as follows:

  1. Insurable interest is extended to include an interest in the lives of the insured's children and grandchildren and of a civil partner (where they are the subject of a life-related insurance policy). Group insurance policies are also covered. However, the Law Commissions stopped short of providing an automatic insurable interest in the lives of parents and grandparents.
  2. Insureds will meet the economic loss test if they have a reasonable prospect of suffering economic loss on the occurrence of the insured event.
  3. For non-life policies, it is confirmed that a policy will be void if the insured does not have an insurable interest at the time the policy is taken out, or a reasonable prospect of acquiring such an interest during the policy period. The insured must also have an insurable interest at the time of the insured event, in order for a claim to be payable (although the policy will not otherwise be void). It should be noted that, in any event, the indemnity principle requires an insured to suffer a loss in order to claim under a policy. An insurable interest includes where the insured would suffer an economic loss if the insured event occurs. The Law Commissions describe this provision as "very wide".
  4. The draft bill will, if enacted, repeal the Life Assurance Act 1774, the Marine Insurance (Gambling Policies) Act 1909 (which makes it a criminal offence to take out a marine insurance policy without an insurable interest) and the Marine Insurance Act 1788.

http://www.lawcom.gov.uk/wp-content/uploads/2016/04/draft_Insurable_Interest_Bill_April_2016.pdf

http://www.lawcom.gov.uk/wp-content/uploads/2016/04/accompanying_notes_draft_Insurable_Interest_Bill_2016.pdf

(Re)insurance Weekly Update 14- 2016

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 Mondaq.com.

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

Authors
Nigel Brook
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (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 www.mondaq.com

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 Mondaq.com’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.

Disclaimer

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.

Registration

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 unsubscribe@mondaq.com 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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Security

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 webmaster@mondaq.com.

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 EditorialAdvisor@mondaq.com.

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 enquiries@mondaq.com.

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