Insurance And Reinsurance Weekly Update - 30 September 2014

Starlight Shipping v Allianz

Whether the reference to "Underwriters" in a settlement agreement included a reference to employees and agents

http://www.bailii.org/ew/cases/EWHC/Comm/2014/3068.html

Clyde & Co (Mike Roderick Angela Haylett and Sophie Shiffman) for certain parties

This case has been previously reported in Weekly Updates 46/11, 46/12, 40/13 and 28/14. The insured's claim for damages (after its insurers refused to pay) failed in English court proceedings. The parties then entered into two settlement agreements which provided for English law and jurisdiction and contained an indemnity agreement, whereby the insured agreed to indemnify the insurers against any claim brought by the insured's companies. Three years after the settlement, the insured commenced proceedings in Greece against the insurers, seeking compensation for loss of hire and loss of opportunity. The insurers commenced proceedings in England alleging a breach of the settlement agreements and/or exclusive jurisdiction clauses in the policy and settlement agreements and the Court of Appeal ruled in favour of the insurers.

This issue in this case was who exactly was covered by those settlements agreements: was it the Underwriters alone or also the individual underwriters and employees of those insurers (the insured having made certain allegations against these individuals). The relevant wording in the settlement agreement had referred to "full and final settlement of all and any claims" that the insured may have "against the Underwriters [i.e. the Hellenic] and/or against any of its servants and/or agents".

However, the insured sought to rely on the fact that there had been no reference to agents or servants of the insurers in the preamble to the settlement agreement, arguing that where a contract contains a defined term which clearly in the preamble means one thing (i.e. the corporate entities or Lloyd's syndicates and not their employees, servants or agents), the court will not conclude that the defined term must mean something else when it is used elsewhere in the contract, unless that construction would be absurd.

That argument was rejected by Flaux J. It would result in an absurd commercial result if the insured was still, post-settlement, entitled to sue the insurers' employees who would then seek an indemnity from those insurers (thus leaving the insurers still exposed to liability following the settlement). It is a principle of English law that general releases...