Insurance: Allocation Of Losses

The Court of Appeal recently confirmed the rule that as soon as the insured's liability is established then its insurer also becomes liable.

A tower of insurance contracts provided Black and Veatch (a group of engineers) with worldwide cover of US$60 million in excess of the deductible and self insured retention. Lexington wrote the primary layer, whilst B&V's captive insurer, Teal, wrote the next three layers in the tower.

A top and drop insurance provided further cover of £10 million upon the exhaustion of the tower. This insurance was also written by Teal, but was different in that it excluded US and Canadian claims. Teal's participation in the top and drop insurance was reinsured by WR Berkley.

In its December 2011 Judgment, the Court of Appeal considered the order in which losses would be allocated to the...