UK: One Or More Events: Recent Ruling From English Court

Last May the Commercial Court heard what was described by the Defendant as a "friendly action" brought with the co-operation of the London reinsurance market to determine the excess-of-loss aggregation issues that arose out of the invasion of Kuwait and the capture of Kuwait International Airport in August 1990. The issue was whether the misappropriation by Iraq of 15 aircraft owned by the Kuwait Airways Corporation ("KAC") plus a considerable quantity of spares and the destruction of a Boeing 747 owned by British Airways arose out of one event or whether the loss of the aircraft and the spares each constituted a separate event under the standard excess-of-loss reinsurance wording used in the London market.

The Claimant argued that the capture of the KAC aircraft and spares was one of the principle objectives of the Iraqi evasion of Kuwait and, consequently, their loss should be aggregated as arising from one event, i.e. the invasion and capture of the airport. The Defendant asserted that the removal of the KAC aircraft and spares over a period of days and weeks after the invasion and the ultimate destruction of the BA B747 during the early phase of Desert Storm in January/February 1991 each constituted a separate event, or in the case of the spares, several separate events.

Mr Justice Langley’s view was that whether a set of circumstances constituted one or a number of events is "a question of impression which does not bear too much analysis". He concurred with the Claimant’s view that the KAC aircraft and spares were a specific target of the Iraqis. However, he did not accept that the BA aircraft fell into this category preferring to regard it as "stranded" when the invasion occurred. He then applied the "unities" approach set out by Lord Justice Kerr in the Dawson’s Field Arbitration in 1972, subsequently adopted and approved by Mr Justice Rix in the proceedings between KAC and the Kuwait Insurance Company in relation to the direct KAC war risk policy. Mr Justice Langley concluded that there was unity of intent on the part of the Iraqis both to capture and permanently deprive KAC of its aircraft and spares. There was unity of time insofar as the capture of the aircraft and spares was achieved as soon as the Iraqis had control of the airport. There was unity of location insofar as all of the aircraft and spares were at the airport and, finally, there was unity of cause – the invasion itself.

The fact that the aircraft were removed from the airport over a series of days or, in the case of one aircraft, weeks was not regarded as significant by Mr Justice Langley as it was his view that they were moved out as speedily as the logistics allowed, the last aircraft being flown out as soon as it was possible to render it airworthy.

However Mr Justice Langley took the view that there was no evidence that the Iraqis intended permanently to deprive BA of its aircraft. In the immediate aftermath of the invasion it was certainly trapped within Kuwait, but the cause of its eventual loss was the onset of military action (Desert Storm) some 5 months later. Consequently, there was no unity of time between the invasion and the aircraft’s eventual destruction. In addition, there was no unity of cause because the cause of the loss of the BA aircraft was its destruction or alternatively the war with Iraq or possibly the inevitability of such a war. Accordingly, Mr Justice Langley held that the loss of the KAC aircraft and spares, but not the loss of the BA aircraft, should be aggregated as arising out of one event.

This judgment approves the "unities" approach set out in the Dawson’s Field award, and adopted by Mr Justice Rix in determining the application of the direct war risk insurance ground loss limit to the loss of the KAC aircraft, as a method of determining whether circumstances which result in multiple losses or damage can constitute one event or occurrence.