ACE Insurance SA/NV v Zurich Insurance Company and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE RIX,MR JUSTICE JACOB,LORD JUSTICE KENNEDY |
| Judgment Date | 03 February 2001 |
| Neutral Citation | [2001] EWCA Civ 173 |
| Docket Number | Case No: A3/2000/3108 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 February 2001 |
[2001] EWCA Civ 173
Lord Justice Kennedy
Lord Justice Rix and
Mr Justice Jacob
Case No: A3/2000/3108
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Longmore)
Royal Courts of Justice
Strand, London, WC2A 2LL
Alexander Layton QC and Jamie Eadie (instructed by Messrs Kennedys) for the Appellant
Iain Milligan QC and Ms Sara Masters (instructed by Diarmuid Brennan & Co) for the Respondent
The claimant, Ace Insurance SA-NV (formerly Cigna Insurance Company of Europe SA-NV, "Ace"), has commenced these proceedings for a declaration of non-liability under a contract of reinsurance made with the first defendant, Zurich Insurance Company ("ZIC"). When subsequently it learned of ZIC's assignment of all rights and liabilities under the contract, as part of an overall carving out of the business of ZIC's US branch, to the newly formed Zurich American Insurance Company ("ZAIC"), Ace joined the latter as second defendant. ZIC, which is a Swiss company, and ZAIC, which is a New York company, have applied to have these proceedings stayed on the ground of forum non conveniens in favour of proceedings in Texas. This is an appeal from the judgment of Longmore J, who acceded to that application [2000] 2 Lloyd's Rep 423.
There are two main issues. Logically, the first is whether the power to stay proceedings on the ground of forum non conveniens is consistent with the Lugano Convention, of which both the UK and Switzerland are signatories. On behalf of Ace, Mr Layton QC submits that it is not. If that were the case, then jurisdiction in England against at least ZIC would be maintained, and it is not seriously disputed by Mr Milligan QC on behalf of the defendants that there is no virtue in separate proceedings concerning ZIC and ZAIC respectively. Their cases, it might be said, stand or fall together. The second issue is whether the proceedings should be stayed in favour of Texan jurisdiction. On both issues Longmore J decided in favour of the defendants.
The original insured is a Texan company by the name of Nabors Industries Inc ("Nabors"). It and its associated companies were insured by a fronting insurance company called Sol Insurance Ltd ("Sol") and Sol reinsured with ZIC. ZIC's policy ran for 36 months from 1 April 1996 and covered physical damage and business interruption on a worldwide basis. It contained (in condition 32) a Texan jurisdiction clause under which ZIC and Sol waived any objection to the state or federal courts of Texas on the ground of improper venue or forum non conveniens. Other terms relevant to the present dispute are conditions 24 and 36 and the blow out preventer ("BOP") warranty. Condition 24 ("Assignment of Insurance") stated that "This insurance shall be void if assigned or transferred without the prior written consent of Underwriters". Condition 36 (the "Claims Co-operation Clause") provided inter alia that it was a "condition precedent to any liability hereunder that the Reinsured/Original Insured shall as soon as practicable…give written notice" of any claim to ZIC and should "cooperate with [ZIC] in the appointing of adjusters, assessors and surveyors and the negotiating and/or adjusting and/or settling of all claims…" The BOP warranty stated that "A blowout preventer of standard make will be set on the surface casing per usual industry practice, same to be installed and tested in accordance with usual practices…"
The reinsurance slip contract by which ZIC was reinsured by Ace (strictly speaking a retrocession, but I shall call it reinsurance) covered only part of what ZIC's policy had covered. Thus it was for a shorter period (from 4 May 1998 to 1 April 1999), excluded USA and Canada, and was limited to 60% of a sum insured of $10 million any one occurrence. Its "Conditions" read as follows:
"As original and/or as original following the original in all respects including claims settlement. Full R/I clause (LM 1) NMA 1735…Service of Suit Clause NMA 1998…"
The Reinsurance Clause provided inter alia that –
"…this Contract reinsures the Reinsured's interest in payments made within the terms and conditions of the Original Policy…"
The Service of Suit Clause provided inter alia that –
"It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Insured (or Reinsured), will submit to the Jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of Underwriters' rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States."
The clause went on to make provision for service either upon a specific name, which had to be inserted, or upon the officers designated by any statute in any state or district of the United States for the service of such process.
On 26 May 1998 one of Nabors' associated companies, Nadrico Saudi Ltd ("Nadrico"), suffered a loss when a well blew out in Saudi Arabia. The blow out preventer was in the process of being installed. There is now a dispute as to whether this was being done in accordance with usual practice. For present purposes, it is accepted (as sufficiently arguable) that ZIC did not give immediate written notice of Nabors' claim to Ace and gave no notice until January 1999. In the meantime ZIC had appointed loss adjusters and investigated the claim for itself, but without Ace's input, and had settled the claim for some $11 million. $7,624,000 was paid in November 1998 in respect of the physical damage, $3,667,947 in December 1998 in respect of business interruption, and in June 1999 a further $1,138,023 in respect of additional physical damage.
Ace disputed the claim, raising issues under the claims co-operation clause and the BOP warranty. On 8 September 1999 Ace was first into the field of litigation, claiming a declaration in these proceedings that it had no liability to ZIC because of breaches of both those terms, which it said were incorporated into its contract.
ZIC's response was (wholly mistakenly) to assert that it was not a party to the contract of reinsurance, that the contract was made instead with a company called Zurich Illinois, and that the Zurich Illinois contract contained an arbitration clause. On 19 January 2000 ZIC therefore applied to set aside service of Ace's claim form on these grounds.
In the course of further investigation into these issues ZIC for the first time, in April 2000, brought to Ace's attention the fact that and documentation under which the contract of reinsurance in question had been transferred with all the rest of ZIC's US branch's business to ZAIC. This transfer had been achieved by means of a Domestication Agreement made on 17 December and taking effect on 31 December 1998. Clause 1 of that Agreement provided for the transfer of "all of the business, assets and liabilities of the United States Branch". The transfer appears to have taken place subject to and in accordance with the Insurance Law of New York and seems to resemble some form of statutorily endorsed universal succession by ZAIC to ZIC's American business. News of this development led to the further allegation by Ace that its reinsurance is void under the prohibition of assignment or transfer without prior written consent contained in condition 24 of the underlying policy, also said to be incorporated into the reinsurance contract.
On 28 April 2000, shortly before the hearing of ZIC's challenge to the jurisdiction in England, ZIC and ZAIC commenced their own proceedings in Texas, in the district court of Harris county, pursuant to the service of suit clause, claiming an indemnity under the contract of reinsurance.
On 3 May 2000 ZIC's challenge to the jurisdiction in England came before Thomas J. The parties had already agreed an order in the following terms, which was then made by the judge:
"1. Subject to the following provisions of this order, there be no order on the application of [ZIC]…save that…[ZIC] be at liberty to make such further application pursuant to CPR Part 11…as it may be advised to make and as it may be entitled to make on grounds other than those set out in the said Application…
"2. The Claimant have permission to add [ZAIC] as Second Defendant to this action;
"3. Without prejudice to the right of the [ZAIC] to apply…to have such permission revoked, the Claimant do have permission on a without notice basis…to serve [ZAIC] out of the jurisdiction…"
Pursuant to that order ZIC and ZAIC applied on 14 June 2000 for a declaration that the English court would not exercise its jurisdiction against them and for a stay of these proceedings, on the ground of forum non conveniens and the existence of a distinctly more appropriate forum in the district court of Harris, Texas.
That application came before Longmore J on 18 July 2000. On the same day ZIC entered a new acknowledgment of service. ZIC there stated that it intended to defend the claim and left the box, which was there to indicate that it intended to contest the jurisdiction, unticked. However, Mr Layton does not submit that this prevented ZIC from arguing before Longmore J that "the court should not exercise...
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