Faraday Reinsurance Company Ltd v Howden North America Inc. and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Sir Stephen Sedley,Lord Justice Ward |
| Judgment Date | 20 July 2012 |
| Neutral Citation | [2012] EWCA Civ 980 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2011/2998 & A3/2011/2998(C) |
| Date | 20 July 2012 |
[2012] EWCA Civ 980
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE BEATSON
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Ward
The Right Honourable Lord Justice Longmore
and
The Right Honourable Sir Stephen Sedley
Case No: A3/2011/2998 & A3/2011/2998(C)
Mr Richard Jacobs QC (instructed by Covington & Burling LLP) for the Appellant
Mr John Lockey QC (instructed by Ince & Co LLP) for the Respondent
Hearing dates: 21 st June 2012
Introduction
1. This appeal raises a short point on the exercise of discretion by the Commercial Judge to refuse to set aside proceedings instituted in England by insurers against their American insured claiming (effectively) that they (the insurers) are not liable to their insured in respect of asbestos-related claims. To deal with the short point it is unfortunately necessary to set out the facts in some detail. I take them almost entirely from the judgment of Beatson J.
Facts
2. The underlying dispute in this case concerns one excess layer policy written by General Star International Indemnity Ltd (“GSIIL”) in respect of the liability of “Howden Group Ltd and/or subsidiary companies” (“Howden”) for asbestos claims. The period of insurance was 22nd July 1998 to 31st May 1999. With effect from 30th November 2010 all policies written by GSIIL, were transferred to the claimant, Faraday Reinsurance Co Ltd (“Faraday”) pursuant to section 111(1) of the Financial Services and Markets Act 2000.
3. Faraday issued proceedings on 6th December 2010. It did so after receiving a letter dated 23rd August 2010 on behalf of Howden from Charterbrook Associates LLC (“Charterbrook”) giving notice of occurrences which it was said might entitle Howden to claim under two subsequent policies. A later letter dated 14th January 2011 from Covington & Burling LLP (“Covington”) clarified that Howden also intended to refer to the 1998 policy.
4. Howden's coverage litigation against lower layer insurers in respect of asbestos claims in Pennsylvania has been in progress since 2003, and related mass tort proceedings by victims of asbestos have been on foot since 1999. Until very recently, GSIIL and Faraday have not been involved. The ultimate underlying substantial issue between the parties arises because of the differences of approach by the Pennsylvania courts and the English courts to the insurance of asbestos-related claims. The first difference is whether exposure to a hazardous condition is itself an injury. Under English law (see Bolton MBC v Municipal Mutual Insurance Ltd [2006] 1 WLR 1492 not overruled in Durham v BAI [2012] 1 WLR 867) it is not, but under the laws of United States jurisdictions including Pennsylvania, a theory of multiple triggers of periods of insurance from exposure to manifestation has been followed: see the authorities based on Keene Corporation v Insurance Corporation of North America 667 F2d 1034 (1981), and in Pennsylvania, J.H. France Refractories v All State Insurance Co 626 A2d 502 (1993).
5. The second difference is that, in English law, but not in the relevant United States jurisdictions, the period clause is a fundamental provision of an insurance policy: see Municipal Mutual Insurance Ltd v Sea Insurance Company Ltd and others [1998] Lloyd's Rep. IR 421 at 435–6 – “the stated period of time is fundamental and must be given effect to” – and Wasa International Insurance Co v Lexington Insurance Co [2009] UKHL [2010] A.C. 180 at [3], [39], [74] and [77]. There is also a difference between English and Pennsylvania law as to the relevant principles of the conflict of laws; it is in dispute whether that difference is substantial but, on any view, the English approach to determining the applicable law is concerned only with the circumstances at the time of contracting, whereas there is evidence that the approach in Pennsylvania permits consideration of factors applicable at the time of the dispute.
6. In the English proceedings Faraday seeks declarations that: (a) the policy by which GSIIL insured Howden is governed by English law and subject to the jurisdiction of the English courts; (b) as a matter of English law, effect must be given to the periods under each policy during which GSIIL was on cover, (c) under section 1 of each policy, Faraday is liable to indemnify Howden for any sums which Howden may become legally liable to pay in respect of claims made against it for damages, costs and expenses in respect or in consequence of personal injury and/or damage to material property only insofar as this happened (or occurred) during (and not before or after) the relevant policy period, and (d) under section 2 of each policy, Faraday is liable to indemnify Howden in respect of legal liability arising out of the matters set out in section 2 only insofar as (i) claims were made against Howden during the relevant policy period or (ii) claims have subsequently been made against Howden which arise out of any circumstances which could reasonably have been expected to give rise to a claim under section 2 of the policy, and of which AG Maclachlan Esq., of Howden Group Ltd, or a person nominated to act on his behalf in his absence shall have become aware during the relevant policy period. The application for permission to serve out (which originally related to all 3 policies referred to above) was made on 8th March 2011, permission was granted on 9th March by David Steel J, and Howden was served on 1st June.
7. Howden's application for David Steel J's order to be set aside was made on three grounds. First, it was said that it was not arguable that the policy was governed by English law. Secondly, there was a challenge to the utility of the proceedings. It was said that Faraday had failed to show that the present proceedings are justified and serve a useful purpose, because Faraday had instituted these proceedings in order to try and establish what was called “issue preclusion” on the above points in the Pennsylvania court or “deference” by the Pennsylvania court to the English court, but a judgment by the English court granting the relief sought in these proceedings would not achieve that purpose. Thirdly, it was said that, even if there is justification for the relief sought, Pennsylvania is the appropriate forum for these proceedings because of the longstanding insurance proceedings in Pennsylvania in relation to the dispute between Howden and its many historical insurers. After being served with these proceedings, Howden filed a motion to join Faraday/GSIIL as additional defendants to the most recent, 2011, Pennsylvania proceedings. Beatson J held that the proceedings did serve a useful purpose and that England was the convenient forum. There is now an appeal.
The terms of the GSIIL policy No LH9813364
8. The policy is an excess public and products liability policy. It is a composite policy. It identifies the assured as “Howden Group Ltd and/or subsidiary companies” with an address in Renfrew, Scotland. Under the heading “Trading”, the policy stated “Glasgow, Scotland and various anywhere worldwide as per policy”.
9. The period of the policy was from 22nd July 1998 to 31st May 1999, both days inclusive. The limits of indemnity are £40 million excess £10 million per occurrence and, in respect of products liability and financial loss, in the aggregate annually.
10. The policy was placed in London by Lloyd Thomson Ltd, now JLT, London brokers, and is set out in a London market underwriting slip. The slip refers to London market institutions such as ILU and LIRMA (London Insurers and Reinsurers Market Association), and London's “unique market reference” for numbering risks, although the pro forma containing these references is, save for the policy number, blank. GSIIL subscribed a 10% line on 28th September 1998.
11. The terms of the policy include a number of London market clauses; the Several Liability Notice LSW/1001 (Insurance) clause, and the brokers cancellation clause. GSIIL's stamp uses London market abbreviations, denoting LIRMA as the policy signing and premium collecting office and providing for “NCAD”, notice of cancellation at anniversary date. The policy states that liability is “as more fully detailed in the underlying policy wording”.
12. The underlying policy provided public and products liability cover of £9 million excess of £1 million. It too is a London market policy, broked and underwritten in London, and containing a number of London market clauses. These are: the Institute of London Underwriters radioactive contamination exclusion clause, the “several liability” notice, and the brokers cancellation clause. The policy provides that claims are to be notified to Lloyd Thomson Ltd in London. It also refers to the Motor Vehicles (Authorisation of Special Types) Order 1969, SI No 344.
13. The underlying policy provides inter alia:
i) “in the event of reduction or exhaustion of the aggregate limit or limits contained in such primary and/or underlying policy or policies, solely by payment of such losses in respect to accidents or occurrences during the period of such primary and/or underlying policies, it is hereby understood…that such insurance as is afforded by this policy shall apply in excess of the reduced underlying limit or, if such limit is exhausted, shall apply as underlying insurance and shall pay excess of the assured's retention where applicable…”,
ii) “[T]he...
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