In the recent case of Simmonds v Gammell [2016] EWHC 2515, the Commercial Court considered an appeal from an arbitration award on the issue whether the 9/11 attack on the World Trade Organisation Centre constituted "one event" for the purpose of claiming the resulting loss under a reinsurance contract.  As such, this case bears striking similarities to AIOI Nissay v Heraldglen [2013], which Addleshaw Goddard acted on. 

In Simmonds v Gammell, however, the Court endorsed the arbitrators' decision that the WTC attacks constituted only one event; whilst in the AIOI v Heraldglen case, the Court upheld the arbitrators' decision that the WTC attacks comprised two events.  How did the Court come to what may seem to be a contradictory conclusions?

Appeals on a point of law

The first point to note is that both decisions were appeals against an arbitration award on a point of law under section 69 of the Arbitration Act 1996.  This requires proof that the arbitrators have made an error of law in their award.

Whilst the arbitrators in the above cases drew differing conclusions in relation to the number of "events" that the WTC attacks constituted, the courts followed the same approach when considering the appeals brought under section 69. In both cases, the courts refused to interfere with the arbitrators' interpretation of the facts.  Instead the courts solely focused on the issue whether there was an error in the arbitrators' application of the law.  In both cases, the courts found that the arbitrators had applied the relevant legal tests correctly and therefore the arbitral awards had to be upheld.

The cases are a helpful reminder that appeals on a point of law do not lead to a complete re-trial of the issues covered by an arbitration award.  Such appeals are only meant to provide a safeguard against genuine errors of law made by arbitrators.

Background

Simmonds v Gammell [2016] EWHC 2515 was a dispute concerning the reinsurance (Reinsurance) of a liability insurance programme (Liability Programme) covering the Port of New York (PONY). 

Following the 9/11 attacks, PONY had engaged its employees in rescue and clean-up operations.  As a result of this process, PONY faced a multitude of workers compensation and respiratory claims.  The employees alleged that PONY had been negligent in failing to provide adequate training and protective equipment. 

PONY's claims under the Liability Programme were accepted by the Reinsured, who then made a claim under the Reinsurance.

Aggregation Issue

The Reinsurance, which incorporated the JELC Wording, provided cover for up to US$1.5 million in excess of US$1 million "each and every loss".  It also contained the following clause "Loss' under this Contract means loss, damage, liability or expense or a series thereof arising from one event." (Aggregation Clause). 

The key issue was whether the multitude of claims received by PONY could be aggregated.

The Reinsured sought to identify the claims as relating to a "continuing state of affairs" for the purposes of the Aggregation Clause. 

The Reinsurers argued that on its proper construction, the Aggregation Clause did not permit such a broad approach to the causative requirement of the phrase "arising from one event".

Decision

When evaluating the facts, the arbitrators had relied on the decision of Caudle v Sharp [1995] (the earliest reinsurance authority on the meaning of "event") and on the well-known "Unities Guidelines" considered in the cases of Kuwait Airways Corporation v Kuwait Insurance [1996] and Scott v Copenhagen Re [2003]. 

The guidelines establish that multiple losses can be said to arise from one event or occurrence if there is sufficient unity between them as regards time, location, cause and/or intent.  The cases also make it clear that a causative link is required between the event and the losses but this requirement is "looser than that of proximate cause".

By a majority decision, the arbitrators found that the WTC attacks constituted one event and that the consequential debris and exposure to harmful toxic substances that led to the claims were caused by the WTC attack.  In their view, the claims were significantly linked and therefore both the liabilities and losses arising from them could be aggregated together.

The Court concluded that the arbitrators had applied the "essential relevant authorities" required to properly decipher the issue of aggregation of loss.  The Court upheld the award concluding that there was "no fertile ground for an appeal on a point of law".

Comment

This case seems to stretch the definition of "event" beyond all recognition.  However, it must be remembered that this was not, technically, a decision on aggregation but a decision on whether an arbitral tribunal had applied the correct legal test.  In this case, the majority arbitrators were very experienced market professionals and the Court clearly recognised the ambit of their power to exercise judgment on issues of fact, which included the issue of whether there was sufficient causal link between the WTC attacks and the claims.  More generally, the decision provides yet further evidence of the English Courts' support for the arbitration process by showing how unwilling judges are to interfere with arbitrators' decisions.