Toomey v Banco Vitalicio De Espana SA De Seguros Y Reaseguros
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Andrew Smith,Mr Justice Andrew Smith |
| Judgment Date | 20 May 2003 |
| Neutral Citation | [2003] EWHC 1102 (Comm) |
| Date | 20 May 2003 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2001/178 |
[2003] EWHC 1102 (Comm)
Before:
The Honourable Mr Justice Andrew Smith
Case No: 2001/178
George Leggatt QC and Simon Salzedo (instructed by CMS Cameron McKenna) for the Claimant
Anthony Boswood QC and David Edwards (instructed by Thomas Cooper & Stibbard) for the Respondent
Hearing dates: 4, 5, 10, 11 March 2003
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.
The claimant in this case represents a number of reinsurers in the London market ("the reinsurers") who subscribed to a policy of facultative reinsurance of the defendant, Banco Vitalicio de Espana SA de Seguros y Reaseguros ("Vitalicio"). Vitalicio wrote an insurance policy in respect of losses resulting from the performance of the Spanish football club, Club Atletico de Madrid SAS ("Atletico"), in the 1999/2000 season, either because their first team was relegated from the first division of the Spanish Professional Football League, so that Atletico lost income from broadcasting rights for their home matches, or because their success in the League or the Copa del Rey meant that they had to pay bonuses to their players and staff in the first team squad.
The claimant represents his own Lloyd's syndicates, (nos 2021 and 102), five other syndicates (nos 1069, 1239, 1234, 3020 and 994), the Tyche Consortium, who through ASU International act for Lloyd's underwriters, and three insurance companies, Reliance National Insurance Company (Europe) Limited ("Reliance"), Lexington Insurance Company Limited ("Lexington") and Global Speciality Risk ("GSR"). Together they reinsured Vitalicio as to 31.54% of the risk. In all Vitalicio resinsured 98% of the risk, in London and the European markets.
The reinsurance was placed on a slip policy, which in its final form contained the following provisions:
"Type:
Facultative reinsurance slip
Form:
J(A)NMA 1779 slip policy
As original
Assured:
Atletico de Madrid
Reassured:
Vitalicio Seguros
Retention
2%
Period:
22 nd August 1999 until the end of tournaments detailed hereafter nominally 22 nd August 2000
Interest:
(A) This insurance to indemnify the assured for their net ascertained loss of contracted television rights arising directly as a consequence of the relegation of the assured from the 1 st division of the Professional Spanish Football league.
Limit: pts 2,900,000,000
(B) To indemnify the assured in respect of the contracted bonuses to be paid to the squad in the event of obtaining the following classifications in different tournaments:
To win the Spanish Football League Limits
(1 st division) pts 1,000,000,000
To win the Copa del Rey pts 500,000,000
Conditions: Full reinsurance clause.
Claims control clause (as attached)
Proof of interest and sight of contracts
Legal clause (as attached)
In the event of the assured being relegated to the 2 nd division, there will not be any indemnity in respect of the section B)
All other terms as original policy.
Order hereon: 49%
Premium: Pts 158,000,000 in full
…
Information: At Madrid last 25 years best results:
First division league titles: 1976, 1995
Copa del Rey titles: 1985, 1991, 1992, 1996
UEFA Cup titles: nil
At Madrid historically has never been in the 2 nd division.
New acquisitions: …"
The reinsurers allegation is that he underlying insurance was not properly described in the statement of "Interest" on the slip in two respects relating to the insurance of losses resulting from relegation: firstly, in that Vitalicio agreed to indemnify not Atletico, but a television company called Audiovisual Sport SL ("Audiovisual"); and secondly, in that the underlying insurance did not provide an indemnity for ascertained loss with a limit of pts. 2.9 bn., but was for an agreed value of pts. 2.9 bn. As a result, the reinsurers say, Vitalicio were in breach of a warranty in the reinsurance policy. Alternatively they say that Vitalicio misrepresented the terms of the original policy, and that misrepresentation was material and induced them to subscribe to the reinsurance.
Accordingly the reinsurers seek a declaration that they are not liable to Vitalicio. Vitalicio make a counterclaim for a declaration that the contract of reinsurance is valid and binding, and for payment under it.
The original policy, which was executed on 23 August 1999, was written in Spanish. There is an agreed translation of it. It comprised two parts, General Conditions and Special Conditions.
The Special Conditions read, so far as is relevant, as follows:
"Contingency Insurance Special Conditions
INSURER
…VITALICIO …
POLICY HOLDER AND INSURED
Policy Holder: …ATLETICO …
Insured: The same
POLICY NUMBER, EFFECTIVE TERM AND AGENT
…
Effective term of policy: from: 00.00am, August 22, 1999
until: 00.00am, August 22, 2000
…
RISKS AND POLICY COVERAGE
SECTION ONE
To indemnify AUDIOVISUAL… for economic loss which may arise from the fact of ATLETICO … losing its status as member of the first division… all of it, due to items linked to the assignment of T.V. and audio-visual rights entered into with AUDIOVISUAL … for the exploitation of static and dynamic advertising rights and other, which has been assessed, by mutual consent and not subject to any review or subsequent valuation, in Pesetas 2,900,000,000 …
Scope of the coverage provided for in this section one is limited to the losing of such status which arises only and exclusively from strictly sport reasons.
SECTION TWO
To indemnify the amount of the bonuses agreed between … ATLETICO and the players, trainers, doctors, mates, masseurs, etc. of the first team squad should it achieve any of the aims set forth herein below:
CHAMPION of the First Division Professional Football League. Insured amount: Pesetas 1,000,000,000…
CHAMPION of the King's Cup (Copa del Rey). Insured amount: Pesetas 500,000,000…
INSURANCE NET PREMIUM
It amounts to Pesetas 158,000,000… for all the options covered as a whole…Such amount shall be paid by the Insured Company on the following dates…
ADDITIONAL CLAUSES
This insurance shall not cover…
Loss arising from financial reasons of any kind whatsoever including, but not limited to: financial loss, insolvency, breach or violation of any legal provisions in force, changes of currency exchange or stability."
In setting out these provisions, I have corrected the translation of the provision about the premium: the translation refers to payment by "the Insurance Company", a clear mistranslation of "la Entidad Asegurada". Although the Additional Clauses are not grammatical, it is clear and uncontroversial that Additional Clause 12 was by way of an exception from the cover.
The General Conditions of the policy included the following:
At clause 1, which was headed "People intervening in the Contract";
"1.1 The Taker of the insurance who has requested and contracted the policy.
1.2 The Insured, that is to say, the person who has an economic interest in the asset covered by the insurance. He may if he is interested, fulfil the duties and obligations which in principle, correspond to the Taker of the Insurance. Transferring, unless a different Beneficiary has just been designated, the rights deriving from the contract.
1.3 The Company, which is the Insurer, the fundamental aim of which is to offer insurance."
At clause 2.2 under the heading "Documentation of the Contract";
"Subsequent to its formalization, the policy may be amended by agreement with the Taker of the Insurance, by means of annexes, numbered correlatively, as many times as necessary."
At clause 13.1, "… the laws of Spain shall apply to this Contract".
The claim arises because Atletico's first team was relegated from the first division to the second division of the League at the end of the 1999/2000 season, on 7 May 2000. One consequence of this was that, under the rules of the League, their second team was automatically relegated from the second division.
Vitalicio settled the resulting claim under the policy for pts 2.7 bn in late 2000, making this payment to Audiovisual. They have recovered some two thirds of the loss through reinsurance but the reinsurers represented by the claimant have denied liability.
The issues between the parties are these:
i) Did Vitalicio give a warranty to the reinsurers that the interest insured was an obligation to indemnify Atletico for their net ascertained loss of contracted television rights resulting from relegation?
ii) If so, were Vitalicio in breach of their warranty (a) because the underlying insurance policy, being for an agreed value in the sum of pts 2.9bn, was not for an indemnity of ascertained loss, and/or (b) because the policy provided an indemnify for Audiovisual's loss, and not for that of Atletico?
iii) Did Vitalicio misrepresent the underlying insurance policy in these respects?
iv) If so, (a) was the representation material, and (b) were the reinsurers thereby led to enter into the reinsurance contract?
When the trial before me started, Vitalicio also asserted that the reinsurers were prevented (by a waiver or an estoppel or an affirmation) from asserting that the reinsurance contract was discharged or avoided, but Mr A Boswood QC, who appeared for Vitalicio, did not pursue this argument, in my judgment rightly.
I heard oral evidence of fact from six underwriters who wrote the risk for reinsurers, and from three employees of Vitalicio; Mr Eduardo Llinas, their director of the International and Companies Division; Mr F J Zuazo, who works in their...
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