BP Plc v Aon Ltd Aon Risk Services of Texas Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Colman,MR JUSTICE COLMAN |
| Judgment Date | 16 November 2005 |
| Neutral Citation | [2005] EWHC 2554 (Comm) |
| Docket Number | Case No: 2003 FOLIO NO. 429 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 November 2005 |
[2005] EWHC 2554 (Comm)
Mr Justice Colman
Case No: 2003 FOLIO NO. 429
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr A Popplewell QC, Mr R Masefield and Mr F Pilbrow
(instructed by Herbert Smith) for the Claimant
Mr T Weitzman QC and Mr P Ratcliffe
(instructed by Simmons & Simmons) for the Defendants
Hearing dates: 7 and 8 November 2005
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.
This application by the Claimants ("BP") was issued on 4 October 2005. That was to have been the first day of the trial, estimated to last 6 to 8 weeks in which BP claim damages in tort against their brokers, AON Limited. In the event the trial had to be postponed until 17 October. The application asks for permission to re-re-re-amend the Particulars of Claim in numerous respects, the most substantial amendment, and that to which this judgment relates, being to introduce a claim against the Eighth Defendant—to which I refer as "Aon Texas"—for a declaration that if and/or to the extent that claims are and/or have been brought by BP's and/or its affiliates' joint venture partners and/or contractors against BP and/or its affiliates' joint venture partners for failure to procure insurance arising out of the failure to make timeous declarations to certain of the insurers who subscribed to a Global Construction All Risks Open Cover ("the Open Cover"), those insurers being referred to as "the Frankona Insurers", Aon Texas will hold BP and/or its affiliates harmless against all such liabilities, demands, damages, expenses or losses pursuant to Clause 12 of a Service Agreement between BP and Aon Texas. It also introduces a claim for an indemnity under the same clause 12 in respect of certain settlement payments which are said to have been made to contractors for failure to procure insurance cover.
This is no ordinary application. It arises against the following remarkable background.
The Frankona Insurers constitute part of the following market who subscribed to the Open Cover. In BP v. G E Frankona Reinsurance Ltd and others [2003] 1 Lloyd's Rep 537, Cresswell J. in deciding certain preliminary issues with regard to claims under the Open Cover held that each of the insurers did not come on risk in respect of a given eligible project unless and until a declaration to the cover was made to that particular insurer within the period of the Open Cover. That period expired at the end of June 2000. That issue arose because it had been assumed by BP's brokers, Aon, that it was sufficient to engage cover if a declaration were made to the leading underwriters alone. In consequence of this decision, the Frankona Insurers were not liable for losses sustained by BP and/or affiliates and/or joint venture partners and/or their contractors in respect of a considerable number of projects that had been declared only to the leading underwriters by 30 June 2000. The judgment was given on 27 February 2003.
There was also a major issue before Cresswell J. as to when the level of development necessary to make a particular project eligible to be declared had occurred. The application of his decision on that issue enabled the parties to form a view as to whether the projects declared to the leading and other underwriters which Cresswell J. had not specifically considered amongst the sample projects dealt with in his judgment might be sufficiently far advanced to be eligible to be declared at the time of the declarations.
Following the judgment in the Frankona Case, BP and the Frankona Insurers settled their dispute on 10 July 2003.
In the meantime, BP and its co-insureds had commenced proceedings against the leading underwriters and certain other underwriters who had not been parties to the Frankona Case. I refer to them as "the Leading Market". The main issue in those proceedings was whether, as BP claimed, 26 declarations made to the Open Cover gave rise to valid and subsisting contracts of insurance and whether the Leading Market was obliged to indemnify the claimants in respect of claims subject to the contract terms and conditions. The real substance of this claim was as to the eligibility of each of the declared projects. It thus re-opened the eligibility issue already determined by Cresswell J. vis-à-vis the Frankona Insurers but not vis-à-vis the Leading Market. None of the component companies in the Aon group had at that stage been sued. That was unsurprising for it is standard practice for assureds to await the service of underwriters' defence before joining their brokers as co-defendants in the alternative. So it was not until July 2004 that BP joined as 6th to 10th defendants various of the Aon companies, including in particular the London company, Aon Limited (6 th Defendant), to which I refer as "Aon London" and Aon Risk Services of Texas Inc (8 th Defendant) to which I refer as "Aon Texas".
For present purposes it is sufficient to summarise the main claims against Aon London and Aon Texas raised at that stage as follows.
i) A declaration that if the Leading Market or any of them were not liable under the Open Cover or the contract had not incepted in respect of certain of the declarations, whichever of the Aon defendants were responsible for the breach of duty in failing to procure cover, was liable to indemnify BP and the other claimants in respect of claims, alternatively for damages in an amount equal to the claims or to such amount as would have been recoverable had there been effective alternative cover.
ii) A declaration that Aon London was obliged to indemnify BP and other claimants in the Frankona Case to the extent that such parties were not insured by the Frankona Insurer, by reason of its failure to make declarations to those insurers within the period of the Open Cover and/or to pay damages to compensate the claimants in the amount of policy claims and costs which they did not recover from the Frankona Insurers under the terms of their settlement agreement.
iii) A declaration that if BP and the other claimants were in breach of contract with any of their contractors because of the failure of the Aon defendants to procure CAR insurance cover from the Frankona Insurers, for the benefit of those contractors, the Aon defendants were obliged to indemnify BP and the other claimants in respect of such liability to their contractors.
iv) The basis of these claims was that each of the Aon companies was under a contractual duty and/or a duty of care in tort to the Claimants to exercise reasonable skill and care in providing broking services, including in particular the making of timely declarations to the Open Cover. The only express brokerage contract relied upon was the Service Agreement dated 1 September 1998 between Amoco and Aon Texas and signed in April 1999. The claims were thus for damages for breach of that and/or other implied contracts of retainer and/or in negligence.
It is to be observed that at this stage no reliance was placed on clause 12 of the Service Agreement. That provided as follows; references to Aon Risk Services being to Aon Texas:
"Aon Risk Services agrees to hold AMOCO and its affiliates harmless against all liabilities, demands, damages, expenses or losses arising from any third party claim related to the Services and Aon Risk Services performance of the Services.
Aon Risk Services hereby agrees to indemnify AMOCO against all loss, damage, costs and other expenses of any nature whatsoever incurred or suffered by AMOCO, its directors, officers and employees or by a third party as a result of any and all representations, statements, tortuous (sic) acts or omissions including negligence or breaches of obligations arising under or in connection with this Agreement by Aon Risk Services to a maximum amount of Aon Risk Services remuneration noted in Clause 6 above except in the case of third parties where Aon Risk Services will be liable for all loss, damage, injury or death to the full extent of their negligence or fault".
Then in February 2005 the claimants abandoned all claims for breach of contract against the Aon companies, leaving the claims in negligence. In essence the Aon companies, including Aon London and Aon Texas, were said to be liable by reason only of their having been in breach of a duty of care in failing to effect cover.
However, in the summer of 2005 BP and the other claimants settled their claims against the Leading Market.
That left the claim against the Aon companies in tort, but the abandonment of the claims against the Leading Market had the effect that there ceased to be any pleaded case against Aon Texas. That is because Aon Texas had not been said to be in breach of duty of care with regard to the Frankona Insurers. Accordingly as at July 2005—just over two months before this trial was fixed to begin—it would seem that in the further re-amended particulars of claim which would now have to be served to reflect the fact that the Leading Market insurers were no longer defendants, all claims against Aon Texas would consequentially be dropped.
BP served its draft re-re-re-amended Particulars of Claim on 16 September 2005. However, instead of simply dropping the claim in tort against Aon Texas which it did, it included a completely new claim against that defendant for an indemnity based on clause 12 of the Service Agreement. The basis of the new claim was that Aon Texas had by entering into the Service Agreement undertaken to provide a contractual indemnity in respect of third party claims related to the performance of all the...
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