The Insurance Company of the State of Pennsylvania v Equitas Insurance Ltd (Defendant/Applicant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field |
| Judgment Date | 29 November 2013 |
| Neutral Citation | [2013] EWHC 3713 (Comm) |
| Docket Number | Claim No. 2012 Folio 1578 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 November 2013 |
[2013] EWHC 3713 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Field
Claim No. 2012 Folio 1578
Stuart Isaacs QC and Rebecca Sabben-Clare QC (instructed by Berwin Leighton Paisner LLP) for the Claimant
Alistair Schaff QC and Fionn Pilbrow (instructed by Slaughter and May) for the Defendant
Hearing date: 18 September 2013
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.
Introduction
On 30 November 2012, the Claimant ("ICSOP") issued a Claim Form in this court claiming to be indemnified by the Defendant ("EIL") pursuant to three contracts of reinsurance subscribed to by Lloyd's Underwriters which reinsured risks covered by ICSOP's insurance of Castle & Cooke Inc ("C & C") under two umbrella excess liabilities policies 418–4200 and 4171–5059 (respectively "policy 418" and "policy 4171"). The reinsurance of the risk under policy 418 was for the period 1 October 1968 to 1 October 1971 and provided cover of US$5 million in excess of US$0 million and US$15 million in excess of US$ 5 million. The reinsurance of the risk under policy 4171 was for the period 1 October 1971 to 1 October 1974 and provided cover of US$15 million in excess of US$5 million. The percentage lines of the reinsurance contracts alleged to have been subscribed to by Lloyd's Underwriters in respect of the two layers covered by policy 418 and the layer covered by policy 4171 were 75%, 25% and 33.33% respectively. Policies 418 and 4171 are governed by Hawaiian law.
Since the late 1960's C & C (which changed its name to Dole Food Company Inc in 1991) has been involved in growing and selling bananas and between 1968 and the late 1970s it used Dibromochloropropane ("DBCP") as a soil fumigant and nematocide on its fruit farms and plantations. ICSOP alleges that: (i) large numbers of fruit farm and plantation workers have brought claims against C & C for a range of ill-effects caused by DBCP in respect of which ICSOP has indemnified C & C under the two umbrella policies and incurred certain costs in a total sum exceeding US$30 million; and (ii) by reason of the alleged reinsurance contracts the Defendant is liable to indemnify ICSOP in the sum of US$10,246,025.
The claim is brought against EIL rather than the subscribing Lloyd's syndicates because the rights and obligations of Lloyd's names in respect of 1992 and prior business (other than life business) were transferred to EIL pursuant to an order made by Blackburne J on 25 June 2009 under s.111 in Part VII of the Financial Services and Markets Act 2000. 1
ICSOP's claims against EIL were first raised in 2008 when sporadic discussions began between ICSOP's brokers, Heath Lambert and Mr Patrick Benedict Coldstream of Resolute Management Service Ltd ("RMS"), an English company which is a member of the Berkshire Hathaway Group in the U.S.A. RMS managed the run off of 1992 and prior business as agent for Lloyd's Names and has continued to do so for EIL since 2009. In 2009, RMS undertook a search for documents relating to the alleged reinsurances but found few of relevance and there was a meeting on 2 November 2010 between Mr Coldstream and Mr Irwin Nirenberg, a Vice President of ICSOP's parent company, AIG, at which Mr Coldstream handed over such documentation as had been located. Thereafter the discussions petered out but, by letter dated 16 October 2012 to RMS, ICSOP's then solicitors, Chadbourne & Parke, proposed that there be a standstill agreement in respect of ICSOP's claims while investigations continued. RMS did not respond to this proposal and, as already recorded, ICSOP issued the Claim Form herein on 30 November 2012.
A copy of the Claim Form was sent (but not by way of service) to EIL under cover of a letter dated 12 December 2012 from Berwin Leighton Paisner ("BLP") who were now acting for ICSOP. The letter recorded that it had been necessary to issue the Claim Form as there had been no response to the request for a standstill agreement and further stated that ICSOP "remain happy to talk to Equitas and the brokers, with a view to resolving this before further costs are incurred, when the Claim Form is formally served."
Thereafter, there were further discussions between the parties, some open and some on "without prejudice" terms, in the course of which papers were served by each side on an open basis in which their respective positions on various issues were set out. In EIL's paper it was contended that ICSOP had to prove that a valid reinsurance policy was in place and had to identify the specific syndicates who were alleged to have subscribed to the policy and in respect of what percentage. It was not enough for ICSOP to rely on the fact that the rights and obligations of Lloyd's names in respect of 1992 and prior non-life business had been transferred to EIL. Apart from anything else, this approach was inconsistent with the terms of the Part VII transfer scheme under which: (i) EIL was entitled to all defences, claims and rights of set-off under the transferring policies as would have been available to the Names; and (ii) EIL was novated to the outwards reinsurances that protected the Names in respect of inward liabilities. EIL also raised the question of limitation and called for proof that the claims were covered by the underlying policy and the reinsurance contracts.
In its reply paper, ICSOP argued that since EIL was the assignee of the rights, title and interest of all Lloyd's syndicates in respect of all 1992 and prior non-life liabilities under contracts of insurance and reinsurance underwritten by Lloyd's syndicates, it was not necessary for ICSOP to identify the specific syndicate or syndicates who underwrote the reinsurances sued on. The question whether the syndicates purchased their own reinsurance was a matter for those syndicates and EIL (and their outwards placing broker), not ICSOP. ICSOP also relied on certain lay-off sheets as evidencing the level of participation of Lloyd's underwriters in the reinsurances and provided details of the DBCP claims against C & C that had been settled. As to limitation, ICSOP stated that to the extent EIL relied on such a defence ICSOP reserved the right to allocate sums paid under the umbrella policies going forward, such that the layers would be exhausted in any event.
On 8 March 2013, EIL agreed to extend time for the service of the Claim Form to 26 April 2013. By an email dated 22 April 2013, ICSOP sought an extension to 31 May 2013, stating that the process of filtering what was required to answer EIL's concerns was taking time. ICSOP also stated in this email: "We have been working with our client, US coverage counsel and UK counsel to formally particularise the claim and in doing so address a number of the points that have been raised in your note of 15 February 2013". Thereafter, two further extensions of time were agreed on 25 April 2013 (to 28 June) and 26 June 2013 (to 26 July), the latter being at the request of EIL.
ICSOP's Claim Form and Particulars of Claim were served on EIL on 26 July 2013. Three days later, EIL received a letter dated 29 July 2013 from BLP informing it that on 26 July 2013 ICSOP had filed a Complaint in the United States District Court, Southern District of New York ("the US Court") making the same claim as was made in this court in London. The letter continued:
We can confirm that it is not the intention of our client to proceed with litigation in England at the same time as the New York proceedings (i.e. there will not be concurrent proceedings in different jurisdictions addressing the same issues). If, however, for whatever reason, the New York proceedings cannot proceed, then our client will proceed with the English action.
In the circumstances we would invite you to agree to stay the English proceedings. If you do not agree, then we will file an Application with the English court requesting that the English proceedings be stayed.
The Complaint claims that the US Court has subject matter jurisdiction pursuant to 28 U.S.C.§ 1332 (a)(2) and personal jurisdiction by virtue of a service of suit clause alleged to be contained in the reinsurance contracts sued on which provided:
SERVICE OF SUIT CLAUSE (USA)
It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the insured (or reinsured), will submit to the jurisdiction of any Court of competent jurisdiction and will comply with all the requirements necessary to give Such Court jurisdiction and all matters hereunder shall be determined in accordance with the law and practice of such Court.
This wording is taken from a document entitled "Certificate of Insurance" bearing the reference number 12–0078/A and which was apparently issued by CV Starr & Co, the underwriting agent to ICSOP for the 1971–1974 reinsurance policy. This Certificate refers to insurance from "Companies in England" and cross refers to "Certificate #12–0078". A partial copy of a "Certificate of Insurance" bearing the number #12–0078 refers to "Underwriters at Lloyd's, London". At the bottom of the document there is a "Service of Suit Clause (U.S.A.)", but it is illegible. A further unsigned document dated 8 October 1971 states that it is "attached to and forming part of 12–0078" and provides that the reinsurance is said to be "a reinsurance of and warranted same gross rate, terms and conditions as to and to follow the settlements of [ICSOP]". This document...
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