Murray Arnold Campbell Scott (for and on Behalf of All Underwriting Members of Syndicates 401 and 857 at Lloyd's) v The Copenhagen Reinsurance Company (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Langley |
| Judgment Date | 11 July 2002 |
| Neutral Citation | [2002] EWHC 1348 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 11 July 2002 |
| Docket Number | Case No: 2000 Folio 617 |
[2002] EWHC 1348 (Comm)
IN THE HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand. London. WC2A 2LL
The Honourable Mr Justice Langley
Case No: 2000 Folio 617
Mr S. Boyd QC, Mr C. Wynter and Mr S. Catherwood (instructed by CMS Cameron McKenna) for the Claimant
Mr D. Kendrick QC and Mr A. Fenton and Miss C. Laband (instructed by Holman Fenwick and Willan) for the Defendant
Hearing dates: 8 th May to 14 th May 2002
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.
Mr Justice Langley
1. These proceedings are a further round in the insurance disputes arising out of the Iraqi invasion and capture of Kuwait International Airport in 1990. To quote the opening statement of the Defendant:
“Very considerable monies and claims are currently locked in the system in the London XL market relating to the loss of Kuwaiti aircraft (and spares) and one BA aircraft, while issues of aggregation remain unresolved. There have been various attempts at market resolution to avoid any need for litigation, but these have not borne fruit. In consequence a friendly action has been commenced to resolve the issues for the XL market. The named defendant, Copenhagen Re, has itself only modest sums at stake in the dispute, but has agreed to act as named defendant to represent the XL retrocessionaires market. In fact, of course, many individual companies will have interests on both sides of the fence, as retrocedents and also as retrocessionaires under different XL contracts, and where their best interests lie is not always clear”
2. Aggregation is indeed a concept which while it may assist a reinsured to pierce the limits of an XL layer may also operate so as to exhaust a layer and so damage his interests.
3. When Iraq captured the airport on August 2, 1990 15 aircraft owned by Kuwait Airways Corporation (KAC) and a Boeing 747 owned by British Airways (BA) were on the ground at the airport. There was also a considerable quantity (exceeding US $150 million in value) of aircraft spares belonging to KAC in various buildings at or within the perimeters of the airport. The aggregation issues relate to these aircraft and spares. The Claimant says they are all to be aggregated as one loss, “arising from one event”, in effect the invasion and capture of the airport. The Defendant says the loss of each aircraft arose from a separate event and the loss of the spares arose from a number of separate events, in effect the actual removal of the aircraft and spares from Kuwait to Iraq and (in the case of the BA aircraft) the outbreak of war between Iraq and the coalition forces, “Operation Desert Storm”, which began in January 1991.
4. The resolution of the issues depends on the interpretation of the facts and their application to the XL contracts concerned.
5. The relevant insurances and reinsurances can be summarised as follows:
The KAC Primary Insurance
6. KAC as Assured and four Insurance companies (the “Kuwaiti Insurers”) agreed to insure specified aircraft and spares owned by KAC against loss occurring between 1 st July 1990 and 30 th June 1991 caused by, inter alia, War Risks. The contract of insurance was subject to a ground limit of US$300,000,000 any one occurrence in respect of a loss or losses of aircraft, and a limit of US$150,000,000 any one location in respect of a loss or losses of spares.
7. The KAC Primary Insurance was subject to an “Aircraft Spares and Equipment Extension” which had the effect when read with the insuring clause in Section 1 of the wording of providing that the insurance covered “loss of or damage to the Aircraft nominated in the Schedule against claims … caused by:
War, invasion, acts of foreign enemies, hostilities (whether war be declared or not)[in relation to the specified aircraft only] …….
…..
e ….. seizure, restraint, detention, appropriation [in relation to both the specified aircraft and the spares]”
The KAC Primary Reinsurance
8. The primary reinsurance was an “as original” contract of direct proportional reinsurance made between the Kuwaiti Insurers and various Lloyd's and ILU reinsurers led by S. Merrett. The aircraft and spares were reinsured for 12 months at 1 st July 1990 under the same terms and conditions as the KAC Primary Insurance.
The BA Insurances
9. Contracts of insurance were concluded by BA with various market insurers who also agreed various reinsurances. The coverage provided to BA was in identical terms to that of the KAC Primary Insurance, save that there was no aircraft and spares extension.
The Inward XL Reinsurances
10. Various contracts of excess of loss reinsurance were concluded by which the Claimant Syndicates covered (either directly or through intermediary insurers) the insurers/reinsurers of the KAC Primary Reinsurance and the BA Insurances.
The Outward XL Reinsurance
11. By a contract of excess of loss reinsurance, contained in and/or evidenced by a slip policy No.900401114 the Defendant (in its proportion of 2.273%) agreed to reinsure the Claimant Syndicates on their Whole Account.
12. The Outward XL Reinsurance (the reinsurance with which the Court is directly concerned), provided, in material respects, as follows:
“PERIOD: Losses occurring during 12 months at 1 st April, 1990, Local Standard Time at the place where the loss occurs.
TYPE: WHOLE ACCOUNT EXCESS OF LOSS
REINSURANCE
…..
LIMITS: £ 15, 500, 000 or US or CAN$ 31, 000, 000 each and every loss, as defined, EXCESS OF £15,500,000 or US or CAN $ 31,000,000 each and every loss, as defined, WHICH IN TURN IS EXCESS OF the Combined Limit(s) and Retention(s) of the Reassured's Specific Excess of Loss Protections, as per Schedule attached.
CONDITIONS:
WORDING: Full wording as Joint Excess Loss Committee Clauses 1.1.90 with additional clauses, deletions, endorsements, special conditions and warranties ………..
War included.”
13. The Joint Excess Loss Committee Clauses 1.1.90 (“JELC Clauses”) provided materially as follows:
“…
2. NET LOSS
“Net Loss” under this contract means the sum paid by the reassured in settlement of loss, damage, liability or expense (other than the reassured's office and salary expenses) after deduction of all salvage and recovery including recovery from all reinsurances other than those specified in section D of the schedule.
………..
Nothing in this clause shall be construed to mean that a claim is not recoverable until the net loss has been finally determined.
EVENT CLAUSE
“Loss” under this contract means loss, damage, liability or expense arising from any one event or as described in section J of the schedule.
……..
WAR
This contract excludes loss, damage, liability or expense arising from war or civil war.
Notwithstanding the foregoing, if specified in section K of the schedule this contract shall be extended to include loss, damage, liability or expense arising from war and civil war as covered in
The original policies”
14. The “additional clauses, endorsements, special conditions and warranties” contained within the Inward XL Reinsurance provided, as regards sections J and K, as follows:
“J LOSS DESCRIPTION
Each and every loss or series of losses arising from one event.
K ADDITIONAL CLAUSES, ENDORSEMENTS, SPECIAL CONDITIONS AND WARRANTIES
WAR INCLUDED YES”
15. It is the application of the words “arising from one event” in the “Loss Description” to The facts which is in issue in these proceedings.
16. There has already been very substantial litigation on the primary insurance between KAC and the Kuwaiti insurers. The issues were ultimately decided in the House of Lords in Kuwait Airways Corporation v Kuwait Insurance Company SAK [1999] 1 Lloyd's Reports, 803. However of more immediate relevance to the issues in these proceedings is the decision of Rix J at first instance reported in [1996] 1 Lloyd's Reports 664. Rix J had to consider the meaning of the ground limit of US $300 million “any one occurrence” and its application to the facts of the invasion so far as the KAC aircraft and spares but not the BA aircraft were concerned.
17. That part of Rix J's decision was not appealed. He concluded that the losses of all the KAC aircraft and the KAC spares arose out of a single “occurrence” namely the successful invasion of Kuwait incorporating the capture of the airport and with it the aircraft on the ground and the spares. I shall have to return to Rix J's reasoning for this conclusion later in this judgment, but it is right to note here that substantially the same evidence was before him as was before me in the present proceedings and, as he really acknowledged, Mr Kendrick, had to submit that the decision was wrong as he could identify no real distinction between the wording or the issues involved in these proceedings.
18. Helpfully and consistent with the nature of these proceedings the parties produced a Schedule of Agreed Facts for the purposes of the determination of the issues and it (together with the provisos to the agreement) is annexed to this judgment.
19. Much of the evidence before the court was contained in written statements from aviation employees based in Kuwait.
20. The evidence relates to the circumstances of the invasion and occupation of the airport, the presence and whereabouts of the KAC aircraft and spares and the dates of departure of the KAC and other aircraft and the fate of the spares. This evidence is not agreed as such (save to the extent that it is reflected in the Schedule of...
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