In Tokio Marine Europe Insurance Limited v Novae Corporate
Underwriting Limited [2014] EWHC 2105 (Comm), Mr Justice Field
granted an application by Tokio Marine Europe Insurance Limited
(Tokio) for summary judgment, holding that a
defence raised by Novae Corporate Underwriting Limited
(Novae) that the underlying settlement was entered
into without the insured having taken all proper and businesslike
steps had no reasonable prospect of success.
The case concerned the application of a follow the settlements
clause to a payment made by Tokio to its reinsured, ACE European
Group Ltd (ACE), following the settlement made by
ACE with the original insured. A separate action involving the same
parties dealing with the proper construction of the follow the
settlements clause was reported
here and that decision is currently
on appeal. The present case concerned the application of the
well-known "second proviso"; namely it involved the
question of whether ACE had acted honestly and had taken all proper
and businesslike steps in reaching the settlement in
question.
Field J held that Novae's argument that ACE, in reaching the
underlying settlement, had failed to take all proper and
businesslike steps had no prospect of success. His principal reason
for making this finding was that the settlement reached (around
£80m) was well below the projected final figure for the total
adjusted loss (£90 to £100m). He held that in such
circumstances, ACE was entitled to conclude that there was nothing
to be gained by conducting further investigations as to possible
coverage issues under the underlying policy. He added that on the
assumption that Novae's pending appeal on the construction
issues fails "there is no good reason why the ordinary
presumption that Novae as the reinsurer will follow the settlement
of ACE as the reinsured should not apply."
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