A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Simmonds v Gammell: Court decides that arbitrators did not err in finding "one event" in a reinsurance aggregation clause


The reinsurance contract which the parties entered into provided for a limit and excess of USD 1.5 million and USD 1 million, respectively, "each and every loss". Loss was defined as meaning "loss…or a series thereof arising from one event".

The reinsured had insured the Port of New York during the 9/11 WTC attacks. The Port was the subject of multiple claims from employees, many of which arose from respiratory complaints sustained by employees engaged in rescue and recovery operations. It was alleged that the Port had negligently exposed the employees to personal injury because of a failure to provide adequate protective equipment or to provide adequate training.

The reinsured submitted that the respiratory claims and the WTC attacks were sufficiently linked to amount to loss arising from "one event" and so the claims could be aggregated together. The reinsurers countered that the WTC attacks were too remote and instead there had been a "continuing state of affairs" (ie an ongoing failure to provide equipment/training) which did not amount to an event. The dispute went to arbitration and the arbitrators found in favour of the reinsured. The reinsurers appealed to the court, arguing that the arbitrators had erred in law.

The judge has now found as follows:

  1. A factor to be taken into account was the arbitrators' view that the underlying claims had been properly settled by the reinsured. The reinsurance contract had contained a follow the settlements clause and reinsurers had sought to argue that the reinsured had failed to pursue "strong defences", but the arbitrators had found that the settlement was made for "good practical reasons". The judge commented that "The reality, as the Arbitrators and the parties would have been aware, was that, faced with some 10,000 claimants, the realities of mass tort litigation in the United States of America and the general approach adopted by the courts towards E&O Insurers, a compromise settlement where liability was highly questionable made very good sense, as well as falling within the ambit of the insurance and reinsurance contracts".
  2. The judge also found that the arbitrators had applied the correct legal test. It has been established by prior caselaw that there should be:
    1. a common factor which could be described as an event (in assessing whether there is a sufficient degree of unity to find an event, the court will take into account factors such as cause, locality and time, and the intentions of the human agents);
    2. a causative link (which is looser than proximate cause) between the losses and event; and
    3. an absence of remoteness for the purposes of the (re)insurance.

Applying that test here, the judge found that the arbitrators had been entitled to find that there had been sufficient causal connection between the attack on the WTC and the respiratory claims, even if the negligence of the Port was sufficiently causative for liability to be established: "the claims against [the Port] all arose as a result of the attack on the WTC and the destruction of the Twin Towers with resultant debris and the exposure of people at the site at the time, and following the event, to harmful and toxic substances, whether or not there was any failure on their part to protect those who came to rescue or clear up the site". It was held that such a conclusion had been within the ambit of the exercise of judgment with which the court would not interfere. Put another way, the conclusion was not one which no reasonable arbitrator could reach.

COMMENT: It is interesting to contrast this case with the only other reported English decision so far on aggregation and the WTC attacks, Aioi Nissay Dowa v Heraldglen (see Weekly Update 06/13). In that case, the arbitrators had found that the attacks on the WTC themselves constituted two events, whereas in this case, the arbitrators decided that the same attacks were one event (albeit, whilst focusing on the connection between that "event" and the claims against the insured, rather than on whether the attack on the WTC itself was one or two events – indeed, it does not appear from the judgment that this had been a contested issue between the parties). In both cases, though, the context was an appeal under section 69 of the Arbitration Act 1996 and so the Commercial Court's role was not to consider the question of law afresh and impose its own conclusion. The court would only interfere if the decision reached by the tribunal was outside the range of permissible decisions open to them in the circumstances.

The point concerning the follow the settlements clause is also noteworthy. It reflects the earlier decision of Tokio Marine v Novae Corporate (see Weekly Update 25/14), which considered one of the provisos of an unqualified follow the settlements clause: namely, that the reinsured has acted honestly and "taken all proper and businesslike steps in making the settlement". There, it was held that the reinsured had been entitled to conclude that there was nothing further to be gained from an investigation of potential legal defences because the settlement figure reached was “undoubtedly a good settlement”. Similarly, here, although the issue was not whether the proviso of the settlements clause had been met, the judge again adopted a pragmatic approach, taking into account commercial and practical realities.

Dixon v Radley House: When claim is "brought" for purposes of Limitation Act/payment of correct court fee


Prior caselaw has established that a claim is "brought" for limitation purposes (and so time stops running) when the claim form is delivered to the court office, accompanied by a request to issue and the appropriate fee. The issue in this case was what exactly is meant by "the appropriate fee".

Here, there was a dispute about the value of the money claim which the claimant had, and also intended to advance, and therefore the amount of the appropriate fee. The court did not request a different fee and issued the claim form, but it subsequently transpired that the correct fee had not been paid (but not because of any "abusive conduct" by the claimant – as had been the case in Lewis v Ward Hadaway (see Weekly Update 2/16), where the claimants' solicitors had deliberately under-stated the value of claims in order to pay lower court fees for the issue of a claim form).

The judge held that: "assuming that the Claimant's behaviour is not abusive, the fact that the Claimant hopes or intends to bring a claim which cannot be either articulated or quantified at the time of the issuing of proceedings should not require payment of the fee that would have been payable if it had been articulated or quantified. It is common experience that a Claimant will issue a claim form when he is able to articulate and quantify one claim or one aspect of a claim but not others, even though he hopes and intends to bring them when he can. In such a case it is, in my judgment, both conventional and proper for the Claimant to protect himself by including general words which, he hopes, will be sufficient to be a vehicle for the further claims or quantification if they can subsequently be pleaded. If and when the further claims or quantification can be pleaded, further fees may become properly payable".

Thus it was sufficient that the claimant here had paid the correct fee for the claim which had been articulated in the claim form, even if the claimant intended to later claim further amounts, and so the claim had been properly "brought" for limitation purposes. Of course, the risk for the claimant is that if the further claim is not identified with sufficient clarity in proceedings when initially issued, a later amendment may involve a new claim after the end of the limitation period (and so the court may refuse permission to amend the claim).

Wall v Royal Bank of Scotland: Security for costs and identifying a third party funder


CPR r25.14 permits the court to make a security for costs order against someone other than the claimant. Weekly Update 29/16 reported the decision in Dawnus Sierra Leone v Timis Mining, in which the judge accepted that the court had the power to order a claimant to disclose the identity of a third party funder funding its litigation (although he declined to make the order in that case because there was no evidence that CPR r 25.14(2)(b) had been satisfied, ie that the third party has contributed or agreed to contribute to the claimant’s costs in return for a share of any money or property which the claimant may recover in the proceedings)

The same issue came up again in this case (which did not refer to Timis Mining, perhaps because it had only recently been handed down). The judge agreed that the court had power to order disclosure of the identity of the funder, where there is good reason to believe that the claimant has funding falling within CPR r25.14(2)(b): "Where the defendant does not know that identity, but the claimant does, ordering the claimant to reveal it to the defendant is doing no more than making an order that is necessary to make effective the primary power (to grant a security for costs remedy under CPR 25.14)". The claimant was ordered to provide the name and address of the funder within 7 days (although he did not decide whether that should be by witness statement or a solicitors' letter).

COMMENT: Although these two recent decisions confirm that the identity of a funder can be ordered, it is worth bearing in mind that Reeves v Sprechter [2007] confirmed that the court has no power to order disclosure of the funding agreement itself.