An Application For A Stay Of A Reinsurer's Claim To Only Be Granted In 'Rare And Compelling Circumstances'

Amlin Corporate Member Ltd v Oriental Assurance Corp (2012)1 Court of Appeal, 17 October 2012 The Court of Appeal upheld a first instance decision refusing a stay of proceedings brought by the reinsurers against the reinsured, despite Philippine proceedings pending between the reinsured and the insured. The ruling determined that where, under the reinsurance contract, the reinsurers were bound to follow the settlements of the reinsured, there was no general exception to the normal position that a stay of proceedings could only be granted in rare and compelling circumstances2.

A shipping catastrophe off the coast of the Philippines in June 2008, in which a vessel (the "Princess of the Stars") sailed through and was lost in a typhoon, led to the loss of over 500 lives and the vessel's cargo. In numerous proceedings, cargo owners brought claims against the shipowner and Oriental Assurance Corp ("Oriental"), the Philippine cargo liability insurer.

The policy between Oriental and the insured contained a Typhoon Warranty that the vessel would not set sail whilst a typhoon warning had been issued at its docked port or if the vessel's route might come within the path of the typhoon. The insurers were reinsured by Amlin and others (the "reinsurers"). The reinsurance contract incorporated the conditions of the original policy including, in effectively the same terms, the Typhoon Warranty. Further, the reinsurance contract contained an English law and jurisdiction clause, and a follow the settlements clause.

The reinsurers issued English proceedings seeking a declaration that they were not liable to indemnify Oriental on the basis that the Typhoon Warranty had been breached. Oriental's application to stay the English proceedings was dismissed on 17 February 2012 by Andrew Smith J. Oriental appealed this decision.

Oriental argued on appeal that the normal position under reinsurance contracts (or, at the very least, in situations where the reinsurers were bound to follow the settlements of the reinsured) was that the reinsurers should wait for the reinsured to settle their claim before the reinsurers could determine their liability. This argument was rejected because such an exception would go against the...