Insurance And Reinsurance - Weekly Update - 18 December 2012

Welcome to the forty-fifth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2012.

These updates are aimed at keeping you up to speed and informed of the latest developments in caselaw relevant to your practice.

Howden North America v Ace European

Court of Appeal overturns judge's ruling that English proceedings would serve a useful purpose

http://www.bailii.org/ew/cases/EWCA/Civ/2012/1624.html

Weekly Update 33/12 reported the first instance decision in this case. Numerous lawsuits have been brought against the insured, a US company, and it has commenced proceedings against its excess insurers in Pennsylvania. Two separate proceedings have been brought by the excess insurers in England, seeking declarations that the relevant policies are governed by English law and subject to English jurisdiction. In one set of proceedings (Faraday Reinsurance v Howden North America (see Weekly Updates 39/11 and 27/12)), the Court of Appeal agreed that the insurers had much the better of the argument that there had been an implied choice of English law/jurisdiction. In the other set of proceedings, Field J reached the same conclusion and dismissed an argument that the grant of the declaration would not be of sufficient utility. The insured appealed against that finding.

The Court of Appeal has now held that Field J erred on the utility point. It also held (in contrast to the Court of Appeal decision in Faraday) that his judgment on that point was not an exercise of discretion. This case differs from the Faraday proceedings in that insurers had already started the English proceedings prior to being sued in the US - and so the Court of Appeal here held that the decision of the court in Faraday was not binding on it.

The Court of Appeal held that a judgment in the English courts would not be "at the very least...of considerable assistance" to the US court. The Pennsylvanian judge had already held in an interlocutory hearing that it was unlikely that English law would apply. Even if English law was the applicable law, the foreign court could consider evidence of English law. Finally, and "most importantly", the Pennsylvanian judge is a well-respected federal judge and has expressed no request or need to be instructed by the English courts on what is (in their view and according to English conflict of laws rules) the applicable law of the policies: "I would regard the idea that the English court should give its unsolicited judgment as "advice"....as both presumptuous and condescending" (as per Aikens LJ).

Accordingly, the sole aim of starting the English proceedings had been to make a "pre-emptive strike in England in an attempt to undermine the legitimacy of any Pennsylvania judgment against the insurers in accordance with Pennsylvania law". Although that might be proper in some cases, no reason had been given as to why that would be a legitimate exercise in this case.

COMMENT: The English courts were at one time hostile to claims for negative declarations on the basis that they might be improper attempts at forum shopping. Although the courts now recognise that such claims can be legitimate, provided they serve a useful purpose and England is the appropriate forum, this case demonstrates the difficulty in predicting how a particular case might be decided. The Court of Appeal has now reached two conflicting decisions on the same point (the utility of the English proceedings) arising out of the same facts. Although the Faraday proceedings started before the US proceedings commenced against the insurers, that alone does not explain the difference in the Court of Appeal's approach - it only explains why the Court of Appeal in this case did not feel bound to...