Assicurazioni Generali SpA v Arab Insurance Group (BSC)
| Jurisdiction | England & Wales |
| Judge | Ward,Clarke L JJ,Sir Christopher Staughton |
| Judgment Date | 13 November 2002 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 November 2002 |
[2002] EWCA Civ 1642
Court of Appeal (Civil Division)
Ward and Clarke L JJ and Sir Christopher Staughton.
Julian Flaux QC and Simon Picken (instructed by Holman, Fenwick and Willan) for the appellant.
Stewart Boyd QC and Richard Millett (instructed by LeBoeuf, Lamb, Greene and MacRae) for the respondent.
The following cases were referred to in the judgments:
Abrahams v Mediterranean Insurance and Reinsurance Co LtdUNK [1991] 1 Ll Rep 216.
Asiansky Television plc v Bayer-RosinUNK [2001] EWCA Civ 1792.
Audergon v La Baguette LtdUNK [2002] EWCA Civ 10.
Bessant v South Cone IncUNK [2002] EWCA Civ 763; [2003] RPC 5.
Biogen Inc v Medeva plcUNK [1997] RPC 1.
Designers Guild Ltd v Russell Williams (Textiles) LtdWLR [2000] 1 WLR 2416.
Edgington v FitzmauriceELR (1885) 29 ChD 459.
Edwards v BairstowELR [1956] AC 14.
Fairchild v Glenhaven Funeral Services LimitedUNK [2002] UKHL 22; [2003] 1 AC 32.
G v G (Minors: Custody Appeal) [1985] 1 WLR 647.
Glannibanta, The (1876) 1 PD 283.
Grayan Building Services Ltd, ReELR [1995] Ch 241.
JEB Fasteners Ltd v Marks, Bloom & CoUNK [1983] 1 All ER 583.
Joyce v YeomansWLR [1981] 1 WLR 549.
Mersey Docks and Harbour Board v ProctorELR [1923] AC 253.
Montrose Chemical Corp of California v Admiral Insurance Co (1992) 3 Cal App (4th) 1511.
National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer)UNK [1995] 1 Ll Rep 455.
Nocton v AshburtonELR [1914] AC 932.
Norowzian v Arks Ltd (No. 2) [2000] FSR 363.
Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1994] CLC 868; [1995] 1 AC 501.
Pro Sieben Media AG v Carlton UK Television LtdWLR [1999] 1 WLR 605.
Redgrave v HurdELR (1881) 20 ChD 1.
St Paul Fire & Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd [1995] CLC 818.
Tanfern Ltd v Cameron-MacDonaldWLR [2000] 1 WLR 1311.
Todd v AdamsUNK [2002] EWCA Civ 509; [2002] CLC 1050.
Insurance — Reinsurance — Quota share retrocession contracts — Avoidance for non-disclosure and misrepresentation — Materiality — Inducement — Whether reserving policy imprudent or unusual — Whether reinsured presented materially inaccurate loss statistics — Whether reinsurer misled as to participation of other reinsurers — Whether any inaccuracy in figures or representation about participation causative — Approach of Court of Appeal to review of decision of lower court — CPR, r. 52.11.
This was an appeal by the defendant retrocessionaires (“ARIG”) from a judgment or order of Morison J, which was finally made on 9 November 2001, in which he gave judgment for reinsurers (“Generali”) for US$8,751,000 plus interest of US$1,450,000 after the trial of an action in which he held ARIG liable under the terms of two quota share retrocession contracts (“the contracts”). He also ordered ARIG to pay Generali's costs, part on the standard and part on the indemnity basis, and refused permission to appeal. Tuckey LJ subsequently granted permission to appeal on the merits, but refused permission to appeal on indemnity costs.
Generali was an Italian insurer and reinsurer with a branch office in London. ARIG was an insurer and reinsurer based in Bahrain with an established place of business in London. The judge held that the contract between the parties was made on 9 September 1992. It related to the year from 2 July 1992 to 2 July 1993, but in March or April 1993 was extended for two months until 2 September 1993. The background to the contract was that in about 1989 Alexander Howden and others developed packages of insurance risks, which essentially concerned builders” risks in relation to small to medium sized construction projects in the USA, notably in California. Initially Generali acted as direct insurer of the contractors” risks. It was, however, decided that it was desirable, if not essential, to insert a US based insurance company between the insured and Generali. As a result, an insurance company called United National Insurance Group of Pennsylvania (“United”) entered into the direct insurance contracts with the insured as a front for Generali. United thus reinsured the risks with Generali, but subject to such reinsurance, or retrocession, as it sold on the market. In the event Generali retained part of the risk but retroceded part of the risk to others, including ARIG which took 7.5 per cent.
As the direct insurer or lead reinsurer, Generali had a system for investigating and evaluating the claims which it received from the insured contractors. It entered into a contract dated 1 July 1991 with Gay & Taylor Inc (“G&T”), which was a company of loss adjusters, to evaluate and process the claims. That contract included an obligation upon G&T to establish a claim file and “to investigate all claims and to recommend the amount of loss Reserve to be established with respect to such claim”.
Generali paid claims under the insurances and made claims against ARIG under the contract. ARIG continued to accept premium and to pay claims until 7 February 1999 but thereafter refused to pay any more claims. As a result Generali commenced proceedings against ARIG which argued that it was entitled to avoid the contract for both non-disclosure and misrepresentation on grounds that Generali (i) failed to disclose that the reserving policy adopted by G&T was imprudent or unusual; (ii) presented materially inaccurate loss statistics; and (iii) misled ARIG as to the participation of Munich Re by stating or implying that it was participating in the whole package and not (as was the case) in only one section.
The judge made findings of fact as to what the reserving policy was, although he said that the methodology used was never really in dispute. He rejected ARIG's case that the policy was unusual or imprudent. He therefore rejected point (i) and, with regard to point (ii), held that ARIG had not shown that the figures with which it was presented were materially inaccurate. Further he was not satisfied on the balance of probabilities that, had the files been reserved as ARIG's reserving expert said they should have been, it would have made any difference to ARIG's decision to participate, either initially or for the additional two months in 1993. As to point (iii), the participation of Munich Re, he held that there was no relevant misrepresentation and, in any event, he did not consider that any such representation as there was played any part in ARIG's decision to take part in the programme. ARIG appealed.
Held, dismissing the appeal:
1. In the type of appeal in which the Court of Appeal was asked to reverse findings of fact based upon the credibility of the witnesses, the same approach should be adopted whether the appeal was by way of review or re-hearing. The approach of the court to any particular case would depend upon the nature of the issues determined by the judge. In appeals against conclusions of primary fact the approach of an appellate court would depend upon the weight to be attached to the findings of the judge and that weight would depend upon the extent to which, as the trial judge, the judge had an advantage over the appellate court; the greater that advantage the more reluctant the appellate court should be to interfere. That was the approach of the Court of Appeal on a “rehearing”under the RSC and should be its approach on a “review” under the CPR. Some conclusions of fact were not conclusions of primary fact but involved an assessment of a number of different factors which had to be weighed against each other. That was sometimes called an evaluation of the facts and was often a matter of degree upon which different judges could legitimately differ. Such cases were closely analogous to the exercise of a discretion and appellate courts should approach them in a similar way.
2. G&T operated a system of one-time reserving, which did not mean that a reserve was set once and for all but that “stair-stepping”, in the sense of frequent alterations to reserves, was avoided. That was a sensible approach, given that it was G&T's duty (as ARIG's pleading put it) to establish the full circumstances surrounding an event that had given rise to such a claim and, having done so, to set a reserve which properly represented underwriters” most likely financial exposure. G&T's system of reviewing reserves was not properly open to independent criticism. Not all loss adjusters adopted the same reserving policy but there could be more than one usual and prudent system. G&T's system was not unique but used by others in the industry. The judge's findings of fact were not wrong. The policy was neither abnormal nor unusual, viewed as at 1992 or 1993. The figures did not demonstrate with hindsight that the system was imprudent or unusual. The judge was justified in reaching the conclusion that ARIG failed to discharge the burden of proving that the claims handling procedure, including the reserving, was imprudent and unusual.
3. The case on misrepresentation of the loss statistics could not succeed once ARIG's case on the reserving policy had failed.
4. It was open to the judge to conclude that what was said or written about the participation of Munich Re played no part in ARIG's decision to participate so that even if there was any material misrepresentation it did not induce the making of the reinsurance contract. (Per Ward LJ dissenting) Generali misrepresented Munich Re's true participation and it was incumbent on Generali or its brokers expressly to bring the true position to the attention of ARIG. The fact of Munich Re's participation was material and the judge erred in concluding that the information was not a contributory cause in the making of the contract.
Clarke LJ:
1. This is an appeal by the defendant retrocessionaires (“ARIG”) from a judgment or order of Morison J, which was finally made on 9 November 2001, in which he gave judgment for reinsurers (“Generali”) for...
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