The Commercial Court has recently handed down judgment in relation to preliminary issues in the case of The Cultural Foundation (doing business as American School of Dubai) and Abu Dhabi National Exhibitions Company v Beazley Furlonge Limited and Ors.
The case arose from the appointment of a Scottish firm of architects by the claimants (ASD and ADNEC) under three separate contracts to provide services in relation to the (a) the construction of a new school campus at Al Barsha and (b) the construction of the Abu Dhabi National Exhibition Centre. Several disputes arose from these contracts resulting in two arbitration awards in favour of the Claimants, respectively the “ASD Award” and “ADNEC Award”. These arbitration awards were not paid and in September 2015, the architects became insolvent. Accordingly, ASD and ADNEC pursued the insurers directly under the Third Parties (Rights against Insurers) Act 1930.
The most significant preliminary issue dealt with the relevant policy year under which the awards would be covered. During the currency of the contracts, the architects made a number of notifications to their PI insurers across different policy years, including in relation to the issues which gave rise to the arbitration awards. It was common ground that the ADNEC Award had arisen from circumstances notified in the 2008/09 year of account. However, there was a dispute as to whether the ASD Award arose from circumstances notified during the 2008/09 or 2009/10 policy periods. The claimants argued for the latter – that way they would have the benefit of two separate limits of indemnity – Beazley argued that both claims ought to be dealt with under the 2008/09 policy.
The Judge held that the insured had made valid notifications of circumstances and/or claims, which could have resulted in the ASD Awards in both the 2008/09 and 2009/10 policy periods. He further held that the existence of a notification to an earlier policy did not preclude a claim on a later policy, providing that a valid notification was also made during that policy period and there was no exclusion of prior notified circumstances (which in this case there was not). Thus, an insured could potentially be in a position to make an election as to which policy period they pursued. The question of whether the ASD Award did in fact arise from the 2008/09 or 2009/10 notifications was not decided as a preliminary issue.
Insurers would be wise to take note of the decision on this issue and to take steps to avoid the possibility that a claim could be made on more than one policy period.
The judge also decided preliminary issues in relation to (a) equitable set-off of the claims against overpayment of defence costs by Beazley, (b) the recoverability of defence costs from the excess insurers and (c) the recoverability of interest under the policies.