In Simmonds v Gammell  EWHC 2515 (Comm) the respondent insurer had participated in various layers of an excess liability insurance programme, insuring the Port of New York (PONY). The appellant reinsurer had participated in one of the relevant reinsurance contracts, reinsuring the respondent. The reinsurance contract provided cover of US$1.5 million, excess of $1 million, in respect of “each and every loss”. Loss was defined as a “loss…or a series thereof arising from one event”.
Following the World Trade Centre attacks of 2001, PONY was subject to roughly 10,000 respiratory claims. The respondent accepted PONY’s claims against it and subsequently claimed on its reinsurance, submitting that the respiratory claims and the 2001 attacks were sufficiently linked to constitute loss arising from “one event”, such that the claims could be aggregated together for the purposes of the reinsurance. The appellant refused the claim, stating that the losses in question did not arise from one event.
The dispute went to arbitration. In the Award, the majority decision (Mr Jeremy Fall dissenting) was that there was a sufficiently significant link between the claims and the attack, regardless of any possibility of negligence by PONY, to say that the claims “arose from one event” such that they could be aggregated as losses or liabilities arising from one event for the purposes of the reinsurance. The appellant appealed the arbitration award, arguing that the majority Arbitrators made an error of law in that they had failed to understand the test in respect of aggregation as set out in the relevant authorities.
On appeal, Sir Jeremy Cooke summarised the relevant authorities as setting out three basic requirements which had to be met when construing a clause allowing aggregation where there was a “series of losses and/or occurrences arising out of one event”:
1) That there was a common factor which could properly be described as an event;
2) That such event could satisfy the causation test; and
3) That the event could not be too remote for the purposes of the reinsurance.
Cooke J held that the arbitrators had applied the correct test and had been entitled to come to the conclusion that there had been a sufficient causal link between the 2001 attacks and the respiratory claims, even if the negligence of PONY was sufficiently causative to establish liability. The conclusion of the arbitrators was not one which no reasonable arbitrator could reach; consequently there was no basis to challenge the decision and the appellant’s argument was dismissed.