Xl Insurance Ltd v Owens Corning
| Jurisdiction | England & Wales |
| Judge | Toulson J. |
| Judgment Date | 28 July 2000 |
| Judgment citation (vLex) | [1999] EWHC J0728-12 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2000 Folio 694 |
| Date | 28 July 1999 |
[1999] EWHC J0728-12
The Hon. Justice Toulson
Case No: 2000 Folio 694
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Commercial Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Jeffrey Gruder QC (instructed by Freshfields for the Claimant)
Mr Ian Hunter QC and Paul Stanley (instructed by Covington & Burling for the Defendant)
JUDGMENT: Approved by the court for handing down
(subject to editorial corrections)
Mr Justice Toulson:
Introduction
XL applies for an order to restrain Owens Corning from pursuing an insurance claim against XL in the Superior Court of the State of Delaware, USA, or any forum other than arbitration in London, on the grounds that the insurance policy contains a London arbitration clause and Owens Corning is acting in breach of contract by suing XL in Delaware. Owens Corning resists the application principally on the ground that the policy including the putative arbitration clause is governed by the law of the State of New York, under which Owens Corning is not acting in breach of contract by suing XL in Delaware, because under New York law the putative arbitration clause would not be recognised as enforceable.
The facts
XL is a Bermudan insurance company, based in Hamilton. Owens Corning is a Delaware corporation with its headquarters in Toledo, Ohio. It manufactures and supplies building material and owns properties in different parts of the world.
It is common ground that XL agreed to insure Owens Corning and its subsidiaries against property damage and associated risks. The contract was negotiated and effected on Owens Corning's behalf by a broker in the Bermudan branch of Marsh & McLennan, acting as Owens Corning's agent. All communications between Marsh & McLennan and XL in relation to the arrangement of the insurance took place in Bermuda.
Before 1998 Owens Corning had insured its North American property risks in one programme, underwritten by Allendale Mutual Insurance Company ("Allendale") , and had insured its non-North American property risks under a separate programme of insurance arranged on its behalf by Marsh & McLennan. In 1998 Owens Corning decided to have a single world-wide programme of property insurance, based on Allendale's "Spectrum" policy form but allowing Marsh & McLennan to participate in the placement of coverage. The primary layer was to be up to 100m.
On 2 March 1998 Mr Gareth Davies of Marsh & McLennan e-mailed Ms Danette Pengelly, an underwriter in XL's property division, asking if XL would be prepared to write a proportion of the risk. Ms Pengelly replied that XL would be happy to issue a quotation once the policy wording had been finalised.
On 9 March 1998 Mr Davies e-mailed Ms Pengelly, saying that Marsh had a conditional order to bind coverage with effect from 15 March 1998 and setting out various conditions that needed to be met prior to binding, one of which was that the Allendale Spectrum policy form was to be used. Ms Pengelly replied, confirming XL's willingness to provide coverage in accordance with her previous indication (subject to a minimum premium of 100,000) and asking for a copy of the Allendale Spectrum policy for XL's review.
On 10 March 1998 Mr Davies sent Ms Pengelly a copy of the Allendale Spectrum policy form. After reviewing it, on 13 March 1998 Ms Pengelly faxed Mr Davies with a quotation, which included the following terms:
Property Policy Form: Allendale Spectrum Policy form subject to XL modification as outlined in the Special Conditions section below.
Policy Period: 1 May 1998 to 1 May 2001 (36 months) .
Policy Occurrence Limit: 10m part of 100m�
Gross Annual Premium: 130.000 (13.000 per million of limit) .
Special Conditions: �2. The Manuscript policy wording will be modified as follows:
A. THE APPRAISAL and SUIT AGAINST THIS COMPANY clauses will be deleted and replaced with XL's London Arbitration clause.
B. The JURISDICTION clause will be deleted. XL's Policy shall be construed in accordance with the internal regulation laws of the State of New York (USA) .
XL's evidence is that it had standard arbitration and governing law clauses, well known to the brokers in Marsh & McLennan's Hamilton office including Mr Davies, to which these special conditions would have been understood as referring.
The clauses in their full form were as follows:
ARBITRATION
Any dispute, controversy or claim arising out of or relating to this Policy or the breach, termination or invalidity thereof shall be finally and fully determined in London, England under the provisions of the Arbitration Act 1996 ("Act") and/or any statutory modifications or amendments thereof for the time being in force, by a Board composed of three arbitrators to be selected for each controversy as follows. [In summary, one arbitrator would be appointed by each party, and the third arbitrator would be appointed by the first two arbitrators, with default provisions for appointment by a judge of the High Court of Justice of England and Wales.]
The Board of Arbitration shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may prescribe reasonable rules and regulations governing the course and conduct of the arbitration proceeding, including without limitation discovery by the parties.
The Board shall, within ninety (90) calendar days following the conclusion of the hearing, render its award as respects the matter or matters in controversy in writing and shall cause a copy thereof to be served on all the parties thereto, but the Board shall not set forth any reasons for its award. In case the Board fails to reach a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board, and the same shall be final and binding on the parties thereto. Such decision shall be a complete defense to any attempted appeal or litigation of such decision in the absence of serious irregularity under Section 68 of the Act. Without limiting the foregoing, the parties waive any right to appeal to, and/or seek collateral review of the decision of the Board of Arbitration by, any court or other body to the fullest extent permitted by the applicable law, including, without limitation, any right to make application to the court under Section 45 or to appeal under Section 69 of the Act.
GOVERNING LAW AND INTERPRETATION
This Policy shall be construed in accordance with the internal laws of the State of New York, United States except in so far as such laws:
A. pertain to regulation under the New York Insurance Law, or regulations issued by the Insurance Department of the State of New York pursuant thereto, applying to insurers doing insurance business, or issuance, delivery or procurement of policies of insurance, within the State of New York or as respects risks or insureds situated in the State of New York; or
B. are inconsistent with any provision of this Policy.
provided, however, that the provisions, stipulations, exclusions and conditions of this Policy are to be construed in an even handed fashion as between the Insured and XL. Without limitation, where the language of this Policy is deemed to be ambiguous or otherwise unclear, the issues shall be resolved in the manner most consistent with the relevant provisions, stipulations, exclusions and conditions (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the Insured or XL and without reference to parol or other extrinsic evidence) .
It was submitted on behalf of Owens Corning that on the face of the quotation sent by Ms Pengelly to Mr Davies, there is no warrant for reading special condition B as referring to XL's standard governing law clause.
Later on 13 March 1998 Ms Pengelly sent to Mr Davies a fax beginning "XL Insurance Company Limited confirms to you as the Broker of Record for the listed Named Insured that we are binding coverage as follows�", but otherwise in the form of her earlier quotation (including the same special conditions) , except for a variation in the policy period (now stated to be from 15 March 1998 to 15 March 2001) . It was followed by a third fax on the same day from Ms Pengelly to Mr Davies in identical terms to the second, except that the policy period was now stated to be 14 March 1998 to 14 March 1999. It would seem reasonable to infer, although it is not important, that the second and third faxes would have been sent after conversations between Ms Pengelly and Mr Davies.
More importantly, Mr Davies responded in writing to Ms Pengelly on the same day as follows:
I can confirm that we would like to buy coverage with you for 10% of the Primary 100m of the property program of the above mentioned company, as per your quotation.
I would be grateful if you could sign and return the attached binder as quickly as possible. If you have any questions, please do not hesitate to contact me.
(Emphasis added)
The attached binder showed the period as 12 months from 14 March 1998 (the period stated in Ms Pengelly's third fax) . It contained a summary of the main terms of coverage. It included reference to the "Factory Mutual Spectrum Policy" but made no reference to XL's special conditions. Ms Pengelly signed and returned the binder as requested.
On 22 April 1998 Mr Davies sent Ms Pengelly a request to remove an exclusion from the policy regarding leakage of dams and dykes.
Puzzled by the request because she could not find the exclusion in the Spectrum policy form, Ms Pengelly replied to Mr Davies:
I was not able to find the leakage of Dams and Dykes exclusions in the captioned policy wording.
If Allendale are providing this coverage, then so are we by virtue of...
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