This case was the subject of an article in our December 2013 Dispute Resolution Bulletin. There has now been a further judgment of the English Commercial Court, in Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG and Others (26 September 2014).

The ALEXANDROS T sank on 3 May 2006. The vessel was insured under three policies. The first policy was underwritten by a number of companies (CMI). The second was placed in the Lloyds market (LMI). The third was insured by the Hellenic Hull Mutual Association PLC (Hellenic). All were subject to English Law. The CMI and LMI policies contained an English jurisdiction clause. The Hellenic policy contained an arbitration clause.

Claims for the loss were made against CMI and LMI in the English Commercial Court. Arbitral proceedings were commenced against Hellenic.

The cases were fought very hard and then settled. However, following the settlement agreements, the insured sued again in a different jurisdiction, Greece, for losses relating to allegations of skullduggery that were not capable of being pursued in England. These claims were brought not only against the insurers, but also their employees and others involved in acting against them. Eventually, the English Supreme Court held that the settlement agreements prevented those different causes of action being pursued in Greece. Further details in relation to this aspect of the case can be found in the December 2013 article http://www.hfw.com/Dispute-Resolution-Bulletin-December-2013.

The insured did not leave it there and the most recent issue before the English Court was whether parties who were not signatories to the settlement agreements (the employees and officers of CMI, LMI and Hellenic, Charles Taylor Consulting and Mr Elliott) could be protected by them.

The Hellenic settlement agreement expressly provided that it covered claims made against “underwriters and/or against any of its servants and/or agents”. It was plain that these words were apt to cover the employees, officers and legal representatives of Hellenic.

The CMI and LMI settlement agreements were slightly different. They named the first party as “Overseas Maritime Inc and Starlight Shipping Company as managers and/or owners and/or Associated and/or Affiliated Companies for their respective rights and interest in the ship”. In each settlement agreement the second party was named as “Underwriters” and in each case went on to name the CMI and LMI companies represented. Employees and agents were not themselves party to any of the settlement agreements.

There is also a principle in English law to the effect that where there is a joint cause of action by two or more persons, a discharge as against one operates as a discharge against all. In this case, a discharge as against one of the insurers would act as a discharge against the others. The insured was deemed to know and/or to have understood this principle of English law and with the settlement agreement to have agreed to release the others.

It remains to be seen whether this decision will be challenged further. In the meantime, the following conclusions can be drawn:

  1. Settlement agreements should expressly cover not only the immediate parties to the agreement, but also other persons who have acted for and/or on behalf of those parties.
  2. A party releasing another from liability should consider whether expressly to reserve a right to sue a different party who would have been jointly responsible.
  3. Insurers should not rely on the absence of an effective remedy for dealing with claims in bad faith under English law as a means of protecting themselves. Had the facts of this case been slightly different, the insured might have succeeded in a claim against persons to whom the insurers were legally or morally responsible with the result that the insurers would ultimately have had to pay. Policies of insurance ought to include provision for such eventualities.