Lack of jurisdiction for co-insurer’s contribution claim

XL Insurance Company SE v AXA Corporate Solutions Assurance1

High Court, 27 November 2015

Court finds that defendant co-insurer in a contribution claim must be sued in the courts of its domicile; contractual and tortious exceptions were not applicable.

Summary

The Court held that a claimant co-insurer could not scale the hurdle of establishing a contractual or tortious basis for commencing a contribution claim England. The default position under the relevant EC provisions would apply – the claimant must sue the defendant co-insurer in the courts of the defendant’s domicile.

Background

This case is an application by AXA Corporate Solutions Assurance (”AXA“), the defendant in the main proceedings, contesting the English Court’s jurisdiction in the claim commenced by XL Insurance Company SE (”XL“). XL and AXA are co-insurers of a Delaware company, Connex Railroad LLC (”Connex“), which operated trains on behalf of the Southern Regional Rail Authority (trading as Metrolink). In September 2008, a collision between two trains (one of which was operated by Connex) resulted in 24 deaths and many more injured.

Proceedings on behalf of the victims of the accident were commenced in California and a federal interpleader fund of $200m was established. XL and other insurers contributed to the fund. AXA was also requested to contribute to the fund but refused on the bases that “local” insurers had exhausted the total liability of $200m and, under the policy terms, AXA was therefore relieved from liability. XL claimed that the case was a matter of double insurance and sought a $7.8m contribution from AXA for its proportionate risk (which XL had been obliged to pay into the fund given AXA’s refusal).

Grounds for jurisdiction

Jurisdiction of the proceedings was governed by the “recast” Brussels I regulation2 (the “Brussels I Recast“) which applies to proceedings commenced after 15 January 2015. However, the relevant provisions under the Brussels I Recast are substantively similar to the previous provisions in relation to contractual and tortious claims under the original Brussels Regulation3 and this note refers only to the relevant provisions of the Brussels I Recast.

The general rule under the Brussels I Recast is that a defendant should be sued in its country of domicile and exceptions to this rule must be narrowly interpreted.

Two relevant exceptions to the general rule under the Brussels I Recast are:

  • Article 7(1) – relating to contractual claims i.e. a defendant may be sued in a country other than its domicile if the dispute relates to a contract being performed in that other country.
  • Article 7(2) – relating to tortious claims i.e. a defendant may be sued in a country other than its domicile if the relevant “harmful event” occurred in that other country.

AXA argued that while XL’s claim relates to the insurance contracts between XL and AXA and their respective insureds, and is therefore a “matter relating to a contract”, the place of performance of the obligations was not England. AXA also argued that the matter was not a tort and Article 7(2) was not engaged (but even if it were engaged then the tort did not occur in England). Therefore, AXA contended that it must be sued in France rather than England.

XL argued that its claim did not fall within Article 7(1) but did comprise a tort falling within Article 7(2) i.e. payment of its contribution to the federal interpleader fund from England. In the alternative, XL argued that its claim fell within Article 7(1) as a contract claim and the place of performance was England.

Judgment

The Court held that it did not have jurisdiction over XL’s claim under either Article 7(1) or Article 7(2). As such, AXA’s application succeeded and XL’s claim was dismissed.

The Article 7(1) argument

For Article 7(1) to be engaged there must be a contractual relationship between the claimant and the defendant in the proceedings. It is not sufficient for there to be a contract“somewhere in the background”.

A valid basis for the proceedings existed between XL and AXA, namely the principle that once a co-insured has paid more than its share it could seek recovery of the “overpayment” from the other co-insurer(s). The Court cited International Energy Group v Zurich Insurance4 as relevant precedent.

However, in this case even though AXA was potentially liable to XL for contributions to the interpleader fund, AXA did not owe any contractual duty directly to XL and, therefore, Article 7(1) could not be engaged. The Court was not required to address the question of the place of performance for the purposes of Article 7(1).

The Court did note the recent opinion of the Advocate General in the case of Ergo Insurance v P&C Insurance5 which addressed a similar scenario relating to a contractual dispute but in relation to the question of applicable law (rather than jurisdiction) pursuant to the Rome I Regulation6. The Advocate General had concluded that the dispute constituted “matters relating to a contract” on the basis of the underlying contracts which the two separate insurers had with their insureds and that the “centre of gravity of the obligation to indemnify is in the contractual obligation”. The Court in this application, however, stated that this conclusion was incorrect (but that it did not need to address whether the Rome I Regulation and the Brussels I Recast needed to be applied consistently).

The Article 7(2) argument

The Court undertook a detailed review of previous ECJ and English cases and concluded that for Article 7(2) to be engaged there must have been a “harmful event” giving rise to liability and“liability” in this context must mean more than simply a claimant obtaining some award or relief. In this case, the contributions made by XL and its overpayment could not be characterised as a “harmful event” leading to “liability” on the part of AXA even though it did give rise to a right of action for XL against AXA. Therefore, Article 7(2) was not engaged either. The train accident could be constituted as a harmful event but it was not relevant to the claim between XL and AXA.

The Court was not required to address the question of the place of the harmful event for the purposes of Article 7(2) but noted in obiter comments that the place would likely have been in California as the place of the payment being made or the place of the underlying accident. It was not sufficient to argue that the effect of those events was felt in XL’s bank account in England.