In MIC Simmonds (Lloyd's Syndicate 994) v AJ Gammell (Lloyd's Syndicate 102)  EWHC 2515 (Comm), Mr Justice Cooke considered an appeal against the decision of an arbitral panel on whether certain reinsurance claims following the World Trade Center attacks on 11 September 2001 (the "WTC attacks") could be aggregated. The arbitrators had decided by a majority that the claims could be aggregated as losses "arising from one event". The Judge dismissed the appeal, concluding that there was no error of law by the arbitrators in reaching their decision, nor was the arbitrators' conclusion one which no reasonable arbitrator, properly directed, could reach.
The Port of New York ("PONY") owned the land on which the WTC stood and, following the attacks, carried out a massive clear-up operation. A large number of employees subsequently brought claims against PONY. Those claims included:
- Workers' Compensation Claims in respect of those who were struck by or trapped under the debris (the "WCA Claims"); and
- Claims for damages for negligence by thousands of firefighters, police officers, clean-up workers and others who claimed to have suffered respiratory damage due to the alleged negligence of PONY in failing to provide necessary protective equipment and/or training (the "Respiratory Claims").
PONY settled the claims and then sought to recover from its liability insurers, including Syndicate 102 (the "Reinsured"). The Reinsured in turn sought to recover from its reinsurers, including Syndicate 994 (the "Reinsurer"), under a USD1.5m excess USD1m excess of loss reinsurance contract (the "Reinsurance Contract"). The Reinsurance Contract, which incorporated the Joint Excess Loss Committee (JELC) wording, provided that the limits applied "each and every loss", with "Loss" defined as "loss, damage, liability or expense or a series thereof arising from one event".
A dispute arose as to whether the WCA Claims and Respiratory Claims could be aggregated. The Reinsured argued that they could, as they were losses arising from one event, namely the WTC attacks. The Reinsurer argued that the aggregation wording did not permit such a broad reading: failure to provide adequate equipment and training was not an "event" but a continuing state of affairs and the WTC attacks were too remote to constitute an "event". The Reinsurer also queried whether the Reinsured was in fact liable under the underlying policies, since there were "strong defences available" to the Respiratory Claims.
The dispute was referred to arbitration. On 21 December 2015, the arbitrators found in favour of the Reinsured, by a majority of two to one. The Reinsurer was granted permission to appeal on the aggregation point. The appeal was heard on 10 October 2016.
Cooke J summarised the relevant legal principles as follows:
- An 'event' is something which happens at a particular time, at a particular place, in a particular way (AXA v Field (1996)).
- An event cannot be a state of affairs or series of different negligent acts.
- Where a policy aggregates "a series of losses and/or occurrences arising out of one event", there should be: (a) a common factor properly described as an event; (b) that event must satisfy the test of causation; and (c) the event must not be too remote for the purpose of the insurance (Caudle v Sharp (1995)).
- An event must be something out of which a loss arises or series of losses arises, not a state of mind.
- An 'occurrence' (or 'event') could include a number of losses if there is the necessary degree of unity, as viewed from the point of view of an informed observer in the position of the insured, taking into account the four unities i.e. cause, locality, time and intentions of the human agents (KAC v KIC (1996)).
- Losses "arising out of one event" require: (a) something that can be called an event; (b) an event prior to the aggregated losses; (c) a causative link between the losses and event, which is looser than a proximate cause; and (d) that the event and losses are not remote (Scott v Copenhagen Re (2003)).
- Although the link is looser than that of proximate cause, the courts will look for a significant rather than weak causative link (Scott).
In this case, Cooke J was satisfied that the arbitrators cited the relevant authorities and fully understood the test they had to apply. In doing so, they were influenced by commercial experience and common sense. There was no error of law: the arbitrators exercised their judgement, applying the correct test.
The 'four unities' were merely an aid to determine whether there was the necessary degree of unity. It did not therefore assist the Reinsurer to point to the fact that, in their Award, the Arbitrators referred only to the unities of time and place.
When considering whether there was sufficient causal connection between the event and loss, the Arbitrators are not required to look for a proximate cause. It was appropriate for the Arbitrators to apply the 'but for' test (i.e. to ask whether there would have been any claims but for the WTC attacks).
It was also within the province of the arbitrators to find, as they did, that there was no new phase in the rescue and clean-up operations which would permit the Reinsurer to distinguish between Respiratory Claims arising from operations on 9/11 itself and Respiratory Claims arising from a later period.
In short, in reaching their decision on aggregation, the Arbitrators were involved in an exercise of finding fact or reaching mixed conclusions of law and fact. These were matters with which the court would not interfere. The conclusion reached by the Tribunal was not perverse, nor was it a conclusion which no reasonable arbitrator, properly directing himself, could reach. The fact that there was a dissenting opinion merely illustrated that judgement is often involved in applying the relevant legal test to the facts.
The 9/11 terrorist attacks have given rise to a number of reinsurance disputes, including on aggregation. In the case of, Aioi v Heraldglen  EWHC 154 (Comm), the Commercial Court considered an appeal from an arbitral award on whether the attacks on the twin towers should be aggregated as one event or two under excess of loss reinsurances. In both cases, the starting point was to consider the aggregation wording in the reinsurance contracts and the well-known legal authorities on aggregation. However, the outcome may ultimately turn on the tribunal's application of the relevant legal principles to the facts. Simmonds demonstrates that it is perfectly possible and reasonable for two arbitrators to reach different conclusions on the same facts and the English court will be slow to interfere with a tribunal's findings of fact or mixed fact and law.