Insurance And Reinsurance Weekly Update - 6 August 2013

Welcome to the twenty-ninth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2013.

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

This week's caselaw

Teal Assurance v WR Berkley & Anor The Supreme Court decides the order in which claims can be presented to liability (re)insurers.

Amlin & Ors v Oriental Assurance Court determines whether there had been a breach of warranty in a reinsurance contract.

JSC BTA Bank v Ablyazov Court of Appeal considers freezing orders and whether the right to borrow is an asset.

Tchenguiz & Anor v SFO A decision on litigation privilege and whether litigation was reasonably in prospect/loss of confidentiality argument.

Singh v Moorlands Primary School A case on whether a party could be sued for applying undue pressure on a witness.

Hackney Empire Ltd v Aviva Insurance UK Court decides the appropriate rate of discretionary interest where a claimant is a charity.

Teal Assurance v WR Berkley & Anor

Supreme Court decides order in which claims can be presented to liability (re)insurers

http://www.bailii.org/uk/cases/UKSC/2013/57.html

Clyde & Co for respondents

The first instance and Court of Appeal decisions in this case were reported in Weekly Updates 05/11 and 45/11. In essence, this was a dispute about whether a (re)insured could present its losses to its (re)insurance programme in whatever order it chose. The claimant insurer wanted to hold back incurred losses on two large Non-American claims until such time as the underlying policies in its insurance programme had paid out on future expected losses on an American claim (because the layer which the defendants reinsured excluded cover for US claims, whereas the underlying policies did not). Both the trial judge and the Court of Appeal found in favour of the defendant reinsurers and the Supreme Court has now unanimously rejected the reinsured's appeal.

Lord Mance, delivering the lead judgment, confirmed that an insurer's liability does not arise until the liability of the insured to a third party is established and quantified by judgment, arbitration award or settlement. He declined to comment on the claimant's criticism of the traditional view that an insurer's liability is a liability for damages for breach of duty in failing to hold harmless or to provide the indemnity. Instead, the appeal turned on whether policy cover is exhausted when a claim is ascertained or only when it is paid (so that a later claim can be presented first if it is paid before an earlier claim (even if liability under the earlier claim was established first)). That argument was rejected by the Supreme Court, which confirmed that "The policy thus serves the purpose of meeting each ascertained loss when and in the order in which it occurs". Although it is possible to withdraw a claim, if a claim is pursued, there can be no adjustment of its priority as against other layers.

Moreover, it was recognised that this issue had arisen only because the claimant was a captive insurer and hence willing to assist the insured in the presentation of its claims. A freedom to adjust the order of payment of claims "cannot in the present context readily be reconciled with the basic philosophy that insurance covers risks lying outside an insured's own deliberate control". On the other hand, Lord Mance conceded that it was true to argue that a (re)insured can exercise some control over the presentation of claims by eg delaying settlement so that a later arising third party claim would lead to an ascertained liability sooner than an earlier claim.

Much of the decision also turned on the wording of Clause 1 of the policy which provided that "liability to pay under this Policy shall not attach unless and until the Underwriters of the Underlying Policy/ies shall have paid, or have admitted liability or have been held liable to pay, the full...