Denby v English and Scottish Maritime Insurance Company Ltd Yasuda Fire & Marine Company of Europe Ltd v Lloyd's Underwriting Syndicates No 209, 356
| Jurisdiction | England & Wales |
| Judge | Hobhouse,Brooke,Chadwick L JJ |
| Judgment Date | 05 March 1998 |
| Date | 05 March 1998 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Hobhouse, Brooke and Chadwick L JJ.
Adrian Hamilton QC and Christopher Butcher (instructed by Ince & Co) for English and Scottish Maritime Insurance Co Ltd.
Richard Aikens QC and Sarah Lee (instructed by Norton Rose) for Denby.
Ian Hunter QC and Peter Hayward (instructed by Lovell White Durrant) for Yasuda Fire and Marine Insurance Company of Europe Ltd.
Gavin Kealey QC and Christopher Butcher (instructed by Lawrence Graham) for the Lloyd's underwriting syndicates.
The following cases were referred to in the judgment of Hobhouse LJ:
Axa Reinsurance (UK) plc v Field [1996] CLC 1169; [1996] 1 WLR 1026
Balfour v BeaumontUNK [1982] 2 Ll Rep 493; [1984] 1 Ll Rep 272 (CA)
Bartlett & Partners Ltd v MellerUNK [1961] 1 Ll Rep 487
Morrison v Universal Marine Insurance CoELR (1873) LR 8 Ex 197
Ocean A/S v Black Sea & Baltic General Insurance CoUNK (1935) 51 Ll L Rep 305
Touche Ross & Co v BakerUNK [1992] 2 Ll Rep 207
Reinsurance — Aggregate extension clause — Whether risks written when syndicate stamp affixed to line slip — Whether risks written when line slip accepted or when off slip signed — Whether insurers' losses under professional indemnity insurance could be aggregated under aggregate extension clause for presentation to reinsurers — Whether underlying insurance written on an aggregate basis.
These were two appeals from judgments of the Commercial Court which conflicted on the effect of the aggregate extension clause in reinsurance contracts.
The reinsurances were of insurers' liabilities under professional indemnity policies. The reinsureds paid claims under those policies and sought to combine those sums so as to result in a larger ultimate loss claim which would then exceed the deductible and give a recovery under the reinsurances. The reinsurances included an “each and every loss” deductible and limit which the reinsurers relied on in rejecting the insurers' aggregated claims. The insurers claimed to be able to rely on the aggregate extension clause in the reinsurances which provided for such aggregation in relation to “risks covering on an aggregate basis”. The question in relation to the aggregate extension clause was therefore whether the policies issued by the reinsureds to the original assureds (mainly accountancy firms) were written on an aggregate basis. The reinsureds argued that those policies were written on an aggregate basis because they contained aggregate limits and retentions. The reinsurers argued that the original policies were subject to an each and every loss excess and/or limit and were therefore not written on an aggregate basis.
The reinsurance contracts contained arbitration clauses which most parties waived. The case of Denby, representing syndicates 700 and 701 at Lloyd's, was selected as a lead action. The reinsurance cover in Denby was endorsed so as to cover only risks written prior to 22 October 1982. Before that date syndicates had accepted participation in a “line slip” which authorised a lead underwriter to sign an “off slip” binding the syndicates to particular insurances. The stamp of both syndicates 700 and 701 was affixed to the line slip but the underwriter only signed for a line of five per cent for syndicate 700. Waller J deciding preliminary issues ([1996] LRLR 301) held that both syndicates were bound. Waller J further held that the risks were written prior to 22 October 1982 because the syndicates were bound by the line slip before then even though the off slips were only signed afterwards. On the issue of the aggregate extension clause Waller J held that the losses on the underlying policies could be aggregated under the aggregate extension clause because the policies provided indemnity up to an aggregate limit. The reinsurers appealed.
Another reinsured, Yasuda, referred its claim under its reinsurance contract with various Lloyd's syndicates to arbitration. The arbitrators declined to follow the decision of Waller J in Denby and held that the unrelated losses on the underlying policies could not be aggregated: neither an aggregate limit nor deductible provided a “basis” of cover. Cresswell J ([1998] CLC 330) upheld that decision: the aggregate extension clause was a standard clause not intended to allow the unrelated losses under the original insurances which covered on an each and every claim basis to be aggregated. Yasuda appealed.
Held, allowing the Denby appeal and dismissing the Yasuda appeal:
1. The placing of the syndicates' stamps upon the slip was merely a preparatory step to the writing of a line. There was nothing to negative the ordinary practice of Lloyd's that it was the underwriter's signature or initial that bound those for whom he acted. The purpose of the stamp was to assist clearly to identify the syndicate or company and to provide a box in which the reference number could be written. The fact that the professional underwriter did not sign the slip over the syndicate stamp clearly showed an absence of an intention (at that time) to bind that syndicate. Further, it was an essential part of the underwriting process that the professional underwriter should state on the slip the line which he was accepting for that syndicate.
2. No risk was written by anybody until the off slip was signed by the leading underwriter. The line slip merely conferred an authority on the leading underwriter to write risks on behalf of (among others) the plaintiffs. In that respect it did not differ from any other discretionary authority. The risks were written when the leading underwriter signed the relevant off slips and were therefore not written before 22 October 1982.
3. It was an essential feature of the cover provided by the reinsured to the assureds that each claim satisfy an each and every loss criterion and that was the antithesis of providing cover on an aggregate basis. An overall policy limit was a neutral feature and did not serve to identify when cover was provided on an aggregate basis. An aggregate retention would be a feature of such cover but was not conclusive.
Hobhouse LJ:
Both these appeals from the Commercial Court to this court arise out of policies of reinsurance subscribed to by underwriters at Lloyd's over ten years ago. In each case various reinsured are seeking to recover from the reinsurers sums which the reinsured have paid under liability policies to various original assureds, typically firms of accountants. Each of the relevant reinsurances were written on terms which included an “each and every loss” deductible and limit. The reinsurers have relied upon these “each and every loss” deductibles as justifying their rejection of the claims which have been made. The reinsured have responded by contending that they are entitled to rely upon the aggregate extension clause included in the reinsurance contracts so as to present aggregated losses which meet the requirements of the reinsurance contract and so give them a right to an indemnity.
The relevant reinsurance contracts contained arbitration clauses but most of the parties agreed to waive those clauses and actions were started in the Commercial Court. Those actions were marshalled and one of the actions went forward as a lead action. This was the action in which Mr Denby was named as the plaintiff suing on his own behalf and on behalf of all other members of syndicates 700 and 701 at Lloyd's for the years 1984–1990 inclusive. The representative defendant in that action was originally Mr Marchant but by agreement between the parties there has been substituted as a representative defendant on this appeal the English and Scottish Maritime Insurance Co Ltd: this substitution is purely a matter of form and does not affect any of the questions which we have to consider. The Commercial judge ordered the trial of three preliminary issues in the lead action, the third of which raised the point under the aggregate extension clause. At the trial of the preliminary issues before Waller J in May 1996, Waller J decided all three issues in favour of the plaintiffs, that is to say the reinsureds. The reinsurers have appealed to this court against his decision on all three of the preliminary issues.
Meanwhile another reinsured, the Yasuda Fire and Marine Insurance Company of Europe Ltd, had referred its claim under its reinsurance contract with various Lloyd's underwriting syndicates to arbitration. With the agreement of the parties the arbitrators were invited to make an interim award on various preliminary points which arose in the arbitration. The first issue concerned the aggregate extension clause. The other issues were subsidiary to that issue and only arose if the primary issue under the aggregate extension clause was decided in favour of the claimants, the reinsured. The arbitration panel consisted of Sir Michael Kerr, Mr Veeder QC and Mr John Butler. After a hearing where the parties were represented by counsel, the arbitrators published their interim award dated 15 October 1997. They reached a different conclusion about the main point, the correct understanding of the aggregate extension clause, to that of Waller J and made a declaration in favour of the respondent reinsurers. All the other issues then became academic. But most of them had been resolved anyway by agreement and there was only one outstanding issue, the fourth, relating to the effect of the reinstatement clause which, if it had been material, the arbitrators would have answered in favour of the reinsured. The parties consented to an appeal to the Commercial Court under the Arbitration Acts 1950–1979. After a hearing before Cresswell J in December when the aggregate extension clause was again fully argued, Cresswell J delivered a judgment on 16 January 1998, upholding the...
To continue reading
Request your trial
-
HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [QBD (Comm)]
...Carter (John) (Fine Worsteds) Ltd v Hanson Haulage (Leeds) LtdELR [1965] 2 QB 495. Denby v English & Scottish Maritime Insurance Co Ltd [1998] CLC 870. E E Caledonia Ltd (formerly Occidental Petroleum (Caledonia) Ltd) v Orbit Valve plc [1994] CLC 647 [1994] 1 WLR 1515. Glasgow Assurance Cor......
-
VTB Commodities Trading DAC (formerly VTB Capital Trading Ltd) v JSC Antipinsky Refinery
...on what Hobhouse LJ would characterise as “knowledge of light entertainment” ( Denby v English and Scottish Maritime Insurance Co Ltd [1998] CLC 870, 877), I am satisfied that at this hearing we have reached “make your mind up 67 I accept Lord Wolfson KC's submission that VTB has failed to ......
-
Zeus Tradition Marine Ltd v Bell [QBD (Admiralty)]
...437. Bradley & Essex and Suffolk Accident Indemnity Society, ReELR [1912] 1 KB 415. Denby v English & Scottish Maritime Insurance Co Ltd [1998] CLC 870. Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] CLC 1243; [1998] 1 WLR 896. Ocean (A/S) v Black Sea & Baltic Gen......