Aioi Nissay Dowa Insurance Company Ltd (Formerly Chiyoda Fire and Marine Insurance Company Ltd) v Heraldglen Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field,MR JUSTICE FIELD |
| Judgment Date | 08 February 2013 |
| Neutral Citation | [2013] EWHC 154 (Comm) |
| Docket Number | Claim No 2012 Folio 272 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 08 February 2013 |
[2013] EWHC 154 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
AND IN AN ARBITRATION CLAIM
The Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Field
Claim No 2012 Folio 272
Michael Crane QC and Patrick Goodall (instructed by Addleshaw Goddard LLP) for the Claimant
Alistair Schaff QC and Nicholas Craig (instructed by Holman Fenwick Willan LLP) for the Defendants
Hearing date: 23 November 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an appeal under s. 69 of the Arbitration Act against an Award dated 26 January 2012 ("the Award") made by a Tribunal of three arbitrators, Mr Ian Hunter QC (Chairman), Mr David Peachey and Mr Richard Outhwaite.
One of the questions the Tribunal had to decide was whether the losses sustained by the Defendants on 10 ("inward") reinsurance contracts arising out of the 9/11 attack on the Twin Towers of the World Trade Center were caused by one or more occurrences or series of occurrences "arising out of one event" for the purpose of applying policy limits and deductibles in four retrocession excess of loss reinsurances written in favour of the Defendants by the Claimant 1.
With the agreement of the parties, the Tribunal relied for their findings of primary fact on the relevant findings in the Final Report of the National Commission on Terrorist Attacks upon the United States. The retrocession excess of loss reinsurances ("the outward XL reinsurances") were governed by English law and the Tribunal set out to apply to the facts the well-known test of the "unities" deriving from Mr Michael Kerr QC's award in the Dawson's Field Arbitration and applied and developed by Rix J in Kuwait Airways Corporation v Kuwait Insurance Co SAK [1996] 1 Lloyd's Rep 664.
In paragraph 83 of the Award the Tribunal concluded that the losses arising on the 10 inward reinsurances were caused by two separate occurrences arising out of separate events. It is that conclusion and how it was reached which is the subject of this appeal.
The outward XL reinsurance contracts
The four outward XL reinsurance contracts were subject to LSW (London Standard Wording) 351 and covered "all business underwritten by the Reinsured and classified by them as Aviation" for a stated limit (ranging from US $1 million to US $3 million) "each and every loss" in excess of US $100,000 where the "total original incurred aviation loss" (under the Original Aviation Loss Warranty Clause) exceeded the sum there specified (ranging from US $200,000,000 to US $500,000,000). The cover therefore only responded in the event of a major market catastrophe causing a loss of at least US $200 million to US $500 million depending on the contract under consideration.
"Hull War written as such" was excluded but war risk and allied perils losses were written back by the contracts providing cover for the risks set out in the London aviation market standard wording AVN 48B when assumed as part of some wider aviation account. Included in AVN 48B are claims caused by (d) any act of one or more persons, whether or not agents of a sovereign Power, for political or terrorist purposes and (g) hi-jacking or any unlawful seizure or wrongful exercise of control of the Aircraft in flight made by any person or persons on board the Aircraft acting without the consent of the Insured.
Article 4 of LSW 351 provided, inter alia, that the term 'each and every loss' shall be understood to mean 'each and every loss or accident or occurrence or series thereof arising out of one event'".
The fact that the outward reinsurances were whole account catastrophe excess of loss covers means that the losses flowing through to these covers were likely to be from a variety of original insurers and to represent a variety of different types of original loss, eg property damage, personal injury and liability claims.
The "unities" doctrine.
The genesis of this doctrine was Mr Michael Kerr QC's award made in 1972 in the Dawson's Field arbitration which was cited to and quoted by Rix J in the Kuwait Airways Corporation case. One of the questions to be decided by Mr Kerr was whether the destruction of three aircraft hijacked by the PLO represented a loss or occurrence or series of occurrences arising out of one event for the purposes of an aggregation clause in an excess of loss reinsurance contract. Four planes in total were hijacked as part of a planned and co-ordinated operation. The objective was to use the aircraft and the hostages taken with them as bargaining counters to reinforce a demand for the release of Palestinian prisoners. One of the four aircraft was detained in Cairo, the other three were held at Dawson's's Field, a remote desert airstrip near Zarka, Jordan. The one aircraft at Cairo was blown up because the hijackers did not have sufficient control over it or the hostages on board for their ransom demand operation. This action also underlined the hijackers determination in relation to the three aircraft and hostages held at Dawson's's Field. As for these three latter aircraft, they were blown up together as one operation when no progress had been made in the negotiation of the hijackers' demands. Mr Kerr took the view that the aggregation clauses were intended to deal with cases in which a single cause or factual situation may lead to a plurality of loss and/or damage i.e. a plurality of "losses" in the sense in which this word was used in the clauses, and that "occurrence" and "arising out of one event" must therefore be given a meaning which reflected this intention. He went on to say:
Whether or not something which produces a plurality of loss or damage can properly be described as one occurrence therefore depends on the position and viewpoint of the observer and involves the question of degree of unity in relation to cause, locality, time, and, if initiated by human action, the circumstances and purposes of the persons responsible.
I consider that I have to approach the present problem by putting myself in the position of an informed observer at Dawson's's Field on 12th September 1970, watching the preparations for the blowing up of the aircraft, the evacuation of the immediate vicinity and the blowing up of the aircraft. During this period he would of course have seen a multiplicity of actions and events including a number of separate explosions which destroyed the aircraft. Would he then say that the destruction of the aircraft was one occurrence or a series of occurrences? The answer must be subjective. No one contended that each explosion was a separate occurrence. In my view there was one occurrence, one event, one happening; the blowing up of three aircraft in close proximity more or less simultaneously, within the time span of a few minutes, and as a result of a single decision to do so without any one being able to approach the aircraft between the first explosion and their destruction.
In Kuwait Airways Corporation one of the issues Rix J had to decide was whether the seizure of 15 aircraft belonging to the plaintiff from Kuwait Airport by Iraqi forces in August/September 1990 was one "occurrence" for the purpose of an aggregation clause in a single direct war policy. Iraq invaded Kuwait in the early morning of 2 August 1990 and by mid-morning Iraqi forces were in control of Kuwait airport, which was one of the primary targets of the invaders. By 8 August 1990, 14 of the 15 aircraft had been flown to Iraq. The 15 th, an Airbus in the colours of Egypt Air which had been re-delivered at the end of a lease, was the last to be removed since it was not initially airworthy. It was flown to Iraq some time later in August or September 1990. Having considered The Alexion Hope [1988] 1 Lloyd's Rep 311, Forney v Dominion Insurance Co Ltd [1996] 1 Lloyd's Rep 502, Caudle v Sharp [1995] L.R.L.R. 433 and quoted extensively from the Dawson's Field award, Rix J said (at p 686):
It seems to me that these authorities justify the following propositions. An "occurrence" (which is not materially different from an event or happening, unless perchance the contractual context requires some distinction to be made) is not the same as a loss, for one occurrence may embrace a plurality of losses. Nevertheless, the losses' circumstances must be scrutinised to see whether they involve such a degree of unity as to justify their being described as or arising out of, one occurrence. The matter must be scrutinised from the point of view of an informed observer placed in the position of the insured.
I would suggest that as in the case of analysing a situation for the purpose of deciding whether a constructive total loss has occurred, the scrutiny must be performed on the basis of the true facts as at that time, and not simply on the facts as they may have appeared at the time (see Polurrian Steamship Co. Ltd. v Young [1915] 1 KB 922, Marston Fishing Co Ltd v Beer (1936) 56 LlL. Rep 163); and that, as in the case of frustration, the probabilities as to the true facts as at that time may be tested by reference to subsequent events (see Bank Line Ltd v Arthur Capel & Co [1919] AC 435 at 454). In assessing the degree of unity regard may be had to such factors as cause, locality and time, and the intentions of the human agents. An occurrence is not the same thing as a peril, but in considering the viewpoint or focus of the scrutineer one may properly have regard to the perils insured against.
Applying these principles, Rix J found 2...
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