Munchener Ruckversicherungs Gesellschaft v Commonwealth Insurance Company [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morison |
| Judgment Date | 28 April 2004 |
| Neutral Citation | [2004] EWHC 914 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 28 April 2004 |
| Docket Number | Case No: 2003 FOLIO NO 1113 |
[2004] EWHC 914 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Honourable Mr Justice Morison
Case No: 2003 FOLIO NO 1113
Mr C. Wynter (instructed by Clyde & Co) for theClaimant
Mr D. Bailey (instructed by Holman Fenwick & Willan) for the Defendant
Hearing dates: Friday 2 nd April 2004
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 is an application to set aside the order made by Moore-Bick J. on 8 December 2003 granting the Claimants, Munich Re, permission to serve their claim form out of the jurisdiction of the Court on the Defendants, Commonwealth, at their head office in Canada. The claim concerns Munich Re's liability if any to Commonwealth under a retrocession contract: Commonwealth were the cedant and Munich Re the retrocessionaire.
The Insurance contracts underlying the retrocession are as follows. A corporation incorporated under the laws of Illinois, where it is based, called Allegiance is one of America's largest providers of health care products and management services for hospitals and other such institutions. It owns and operates a number of factories and distribution centres both in the USA and elsewhere. Allegiance, through its brokers, Marsh & McLennan, based in Chicago, Illinois, obtained, in 1997, a Master Policy insurance with Zurich American for the period of three years from 30 September 1997. The precise terms of the Master Policy are not relevant to the questions which presently arise for determination. The Master Policy provided that the insurance cover would sit over the top of any other policy in force as an excess policy but that it would 'drop down' in the event of any local policy being exhausted or reduced. There was no warranty requiring the Insured to keep or maintain local policies in force. The Master Policy appeared to insure non USA based property on "difference in conditions" terms.
For the second year of the Cover under the Master Policy, Commonwealth reinsured 10% of Zurich American's exposure on the terms of a certificate of facultative reinsurance. This reinsurance contained a term that Commonwealth would be bound by loss settlements made between Insured and Insurer. Under the reinsurance contract, Commonwealth agreed to accept service of suit at an address in California.
Commonwealth ceded 50% of its participation to Munich Re. The retrocession contract was broked to Munich Re's London Office through London based brokers, the Paul Group. A broking entity, based in California, called THB, were Commonwealth's producing brokers. The cover is on a Lloyd's form, NMA [non-marine association] 1779 and was expressed to be subject to "the same terms, clauses and conditions as in the Original except as may be expressly provided hereby". The conditions included two provisions on which the parties relied:
"Service of Suit Clause (Canada) NMA 1998" and
"THB Intermediary Clause"
There is no service of suit clause for Canada, numbered NMA 1998; there is a service of suit clause for Canada numbered NMA 1970a. There is also a service of suit clause (USA) NMA 1998. The two service of suit clauses seem to me to have very different legal consequences. The real service of suit clause for Canada [NMA 1970a] reads as follows:
"In any action to enforce the obligations of the Underwriters liable hereunder they can be designated or named as "MJ Oppenheim in his quality as Attorney in Fact in Canada for Lloyd's Underwriters, Members of Lloyd's, London England" and such designation shall be binding on the Underwriters liable hereunder as if they had each been individually named as Defendant. Service of such proceedings may validly be made upon MJ Oppenheim, CA whose address for service is 1155, rue Metcalfe, Suite 1540, Quebec, H3B 2V6."
The service of suit clause for the USA [NMA 1998] provides:
"It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Insured (or Reinsured) will submit to the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this clause constitutes or should be understood to constitute a waiver of Underwriters' rights to commence action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States or of any State in the United States."
The clause goes on to provide for an identified person to be served with any suit.
It seems to me that the USA clause amounts to a submission to the jurisdiction of the courts within the USA; whereas the Canadian clause simply provides for service. I have some doubt whether the Canada suit clause has any practical effect when the insurance contract is between two companies, not involving any Lloyd's syndicates or Names.
Commonwealth say that the country was wrongly specified in the retrocession slip; Munich Re say it was the number of the NMA that was wrong, Canada was correct. The practical effect of this aspect of the dispute is, I think, that if Commonwealth are right, Munich Re have no sound basis for resisting the present application. Having submitted [ex hypothesi] to the jurisdiction of courts in America, including the District [Federal] Court in California, they would have little credibility in contending that this court was the more convenient forum. The position may be different if the retrocession contract simply provided for a method of service in Canada on a Canadian based Corporation, such as Commonwealth. I shall return to this point in due course.
The terms of the Intermediary Clause are as follows:
"The intermediary named herein is hereby recognized as the intermediary negotiating the reinsurance for all business hereunder. All communication including but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, loss adjustment expense, salvages, and loss settlement(s) relating thereto shall be transmitted to the Company or the Reinsurer(s) through the Intermediary. Payment by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer(s). Payment by the Reinsurer(s) to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company."
In addition to the retrocession slip, Commonwealth say that there was a further contractual document in the form of a certificate allegedly provided by THB to Munich Re. Munich Re deny ever having received this document and say that it can have no contractual effect. The Certificate is dated 1 October 1998. It contains two conditions relevant to the present dispute. The first is a 'follow the settlements' clause; the second is an arbitration clause which provides for arbitration to be held "in the city in which the [Cedant] Company's Head Office is located" unless any other place is mutually agreed. The only contractual documents which Munich Re accept and assert they received from THB are two faxes from THB which are referred to in the retrocession slip "All information as per THB's Facsimiles dated 11 th and 23 rd September 1998". The slip was scratched on 8 October and was stamped with Munich Re's UK General Branch Stamp with the acronym LIRMA.
The fax of 11 September identifies properties, property values and deductibles. The fax of 23 September 1998, which was sent by THB to a Mr Billinge of the Paul Group, with instructions to them to "present and secure Munich Re's participation on an authorization basis as follows" stated that "this structure contemplates local retentions etc." The fax was used as part of the broke and was scratched by Munich Re on 25 September 1998.
The claim with which this case is concerned relates to a severe fire which occurred on 13 January 1999 at one of Allegiance's insured properties in Juarez, Mexico. In the earlier fax the total insured value for this property, its contents and cover for business interruption is listed at US$27,335,000. Allegiance made a claim under the policy for some US$50 million and Zurich American settled the claim for US$48,895,700 and, in turn, made a claim for 10% of that sum against Commonwealth. Commonwealth paid just under 10% of the claim and in turn sought to recover a half share from Munich Re. The sums paid by Commonwealth were in tranches. Munich Re has paid, on a without prejudice basis, US$1.3 million on 29 February 2000. They did not believe that their concerns about the inadequacy of the total insured value of the location and the existence of a locally issued policy which was linked to the Coinsurance deficiency Clause within the Master Policy, and to the fax, had been answered. On 7 November 2001 Munich Re made their position clear. They pointed out that the original Master Policy "responds for Difference in Conditions coverage only for Non-USA property. Our understanding is that this section of the Policy can only be triggered by an underlying policy and not in circumstances where there is no underlying policy at all." They considered that the claim should be adjusted "as though there was a local policy"; they also pointed out that in the Reinsurance Certificate [the contract between Zurich American and Commonwealth], the premises covered by the reinsurance were "as per Schedule on file with company". The schedule they had seen suggested that...
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