Comment on the Decision of the House of Lords in Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHL 40

AuthorJie Zhang
PositionUniversity of Southampton
Pages15-18
[2015] Southampton Student Law Review Vol.5
15
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Comment on the Decision of the House of Lords in
Wasa International Insurance Co Ltd v Lexington
Insurance Co [2009] UKHL 40
Jie Zhang
University of Southampton
Introduction
he article discusses the House of Lords’ decision in the 2009 case Wasa
International Insurance Co Ltd v Lexington Insurance Co1 hereinafter called
Wasa v Lexington”, in which arose disputes regarding which law would be
applied to the interpretation of the reinsurance contract, where the primary
insurance and facultative proportional reinsurance, with an “as original” clause, were
governed by different law. Further, this article will assess the reasonableness of the
House of Lords’ decision by comparing it with a previous influential case Vesta v
Butcher2 in similar circumstances.
Background
On 30 July 2009, the House of Lords issued judgment in Wasa v Lexington. In this
case, the insurer (“Lexington”, a Massachusetts insurer) provided cover to the
assured (Alcoa”) under an American “all risks difference in conditions” (DIC)
property damage insurance policy, for a three-year period from 1st July 1977. Two
London reinsurers (“Wasaand AGF”) reinsured Lexington with a 2.5% line on the
proportional facultative reinsurance slip for the same period covering “All Risks of
Physical Loss or Damage…&/or as original”.
The assured was required to incur some clean-up costs because they caused pollution
with long-term effects of damage from 1946 to 1990. The assured sued the insurer at
the Supreme Court of Washington, which adopted Pennsylvanian law under which
the insurance policy was to be construed as covering damage to property occurring
both before and after the stated period of cover, provided that some of the damage
occurred during the period of cover. Therefore the court’s decision exposed
Lexington to liability against Alcoa for this pollution, despite the fact that the
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2 Forsikringsaktieselskapet Vesta v Butcher [1989] 1 All ER 402
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