Reinsurance: Notification Of Loss/Claims Co-Operation Clauses

The Commercial Court has reiterated that "loss" in a notification clause means actual loss to the reinsured.

In a number of recent decisions the courts have considered issues relating to claims provisions in reinsurance contracts. In AIG v Faraday the court held:

No loss was suffered by the reinsured unless an actual loss was a "proven fact".

"Potential loss" is a difficult concept and certainty was needed in view of the "draconian consequences" of breach of a condition precedent.

"Loss" is an essentially different term from "alleged", "claimed" or "potential" loss.

The decision marks a further move away from the decision in Lumberman's v Bovis - to see our Law Now please

click here. It is also a further demonstration of the courts' tendency to construe claims notification and co-operation clauses narrowly - especially where the clause is a condition precedent to the reinsurers' liability.

For more information about the case see below:

To view the article in full, please see below:

Full Article

The Commercial Court has reiterated that "loss" in a notification clause means actual loss to the reinsured.

In a number of recent decisions the courts have considered issues relating to claims provisions in reinsurance contracts. In AIG v Faraday the court held:

No loss was suffered by the reinsured unless an actual loss was a "proven fact".

"Potential loss" is a difficult concept and certainty was needed in view of the "draconian consequences" of breach of a condition precedent.

"Loss" is an essentially different term from "alleged", "claimed" or "potential" loss.

The decision marks a further move away from the decision in Lumberman's v Bovis - to see our Law Now please

click here. It is also a further demonstration of the courts' tendency to construe claims notification and co-operation clauses narrowly - especially where the clause is a condition precedent to the reinsurers' liability.

Further reading: AIG Europe (Ireland) Limited v Faraday Capital Limited [2006] EWHC 2707.

For information on the Commercial Court's recent decision on follow the settlements clauses

click here .

In more detail...

In the recent reinsurance case of AIG Europe (Ireland) Ltd v Faraday Capital Ltd the Commercial Court examined the issue of how to construe and interpret common claims cooperation clauses. The decision has important implications for reinsurers seeking to ensure timely notification of losses.

Morison J also commented on the role of extrinsic evidence in the ascertainment of losses and liability. The decision appears to be another nail in the coffin of Colman J's decision on the extrinsic evidence point in the Lumberman's case.

Background

AIG Ireland provided D&O cover to Smartforce, an Irish company providing e-learning courses and reference material for the IT industry. Faraday reinsured AIG Ireland. In September 2002 Smartforce merged with Skillsoft. On 19 November 2002 the...