Insurance Disputes and Jurisdiction Clauses | Allen & Overy LLP

Dispute over jurisdiction over an insurance claim

The case involved a multinational engineering business incorporated in Scotland and its Canadian subsidiary (together, the defendants). The defendants were the liability insurers of the defendants ( Redundant insurers). The primary insurers were not a party to the proceedings.

The Canadian subsidiary is the defendant in a lawsuit in Alberta in which the plaintiff claims it was responsible for a pipeline rupture in July 2015 and sought CAD 450 million in damages. The subsidiary commenced proceedings in Alberta against the primary insurer and the Excess Insurers for compensation for any damages it was ordered to pay ( Alberta Compendium). The Excess Insurers obtained an injunction against the case from the Commercial Court in London to prevent the subsidiary from suing the insurers in Alberta. The defendants appealed to the Court of Appeal.

Different policies with different applicable laws and regulations for jurisdiction

The policies issued by the insurers include an extraordinary liability insurance scheme marketed in London. The excess program included a global general policy, then the First, Second and Third Excess Policies ( Redundant policies).

The Master Policy contained no applicable law or jurisdiction clause, but each of the Excess Policies contained a clause ( Primary Policy Jurisdiction Clause), stating that any dispute will be “subject to the same law and the same jurisdiction as the underlying policy.” Each Excess Policy also contained different applicable law and/or jurisdiction clauses as follows:

1. The Global Hat Policy provides for the applicable English law and states that the English courts “shall have jurisdiction in respect of any dispute under this Policy”.

2. The First and Third Excess Policies provide for English governing law and the exclusive jurisdiction of the English courts.

3. The second excess policy provides for English governing law but does not contain a jurisdiction clause.

4. An insurer under both the Second and Third excess policies included English arbitration in its standard terms and annotated the policies to indicate that the jurisdiction clause of the primary policy was not agreed.

Dispute over jurisdiction

In the High Court the insurers relied on the various English law and English court jurisdiction clauses contained in the excess policies to argue that the English courts had exclusive jurisdiction over any claim under the policies. Defendants contend that: (a) because the primary policy does not contain any jurisdiction clause, under the jurisdiction clause of the primary policy, defendants may sue the excess insurers in any court of competent jurisdiction; and (b) the jurisdiction clause in the Global General Policy does not confer exclusive jurisdiction on the English courts, leaving the parties free to bring proceedings under this policy in any court of competent jurisdiction.

At first instance Mr Justice Jacobs held that:

  • Where the primary policy did not mention jurisdiction, the jurisdiction clause of the primary policy did not mean that the parties to the Excess Policies could simply fill in the gap with a jurisdiction of their choice, overriding the express provisions of the separate jurisdiction clauses in those policies.
  • The jurisdiction clause in the Global Umbrella Policy provides for the exclusive jurisdiction of the English courts, although it uses the word “exclusive” (applying Hin-Pro International Logistics Ltd v Compania Sud Americana de Vapores SA (Southern Company).

The English courts therefore had exclusive jurisdiction over claims under the Global Umbrella, First and Third Excess Rules and Mr Justice Jacobs granted an injunction against claims in respect of those policies. In this part, the first-instance decision is appealed.

The judge reached the same conclusion for the insurer with the English arbitration clause, but not for the other insurers under the Second Excess policy, which did not contain an English jurisdiction clause. These conclusions have not been appealed.

Court of Appeal

The Court of Appeal dismissed the defendant’s appeal regarding the Global Umbrella, First and Third Excess rules and affirmed the Supreme Court’s decision.

Exclusion of English jurisdiction for some of the policies

Lord Justice Malles gave the leading judgment. He concluded that if the underlying policy contained a governing law and jurisdiction clause different from those in the Excess Policies, the former should prevail over the latter. However, he held that it was clear from the language and context of the primary policy’s jurisdiction clause that this rule applied only where the primary policy contained such a clause, and in the absence of such a clause, the primary policy’s jurisdiction clause did not apply.

Lord Justice Malles concluded that there was no conflict between the primary jurisdiction clause of the policy and the exclusive jurisdiction clauses in the First and Third Excess policies and the English courts had exclusive jurisdiction over claims under those policies.

Global General Policy – Jurisdiction is exclusive even though not expressly stated

The Court of Appeal upheld the High Court’s decision that the absence of the word “exclusive” in the jurisdiction clause in the Global Umbrella Policy did not mean that the English court’s jurisdiction was non-exclusive. Application Southern Companythe following factors are relevant to this conclusion:

1. The words “subject to” are imperative and indicative, they are not words which merely provide an option.

2. A non-exclusive jurisdiction clause creates uncertainty so there is no point in adding England and Wales as an optional additional court. The natural commercial purpose of such a clause is to determine what law will govern and which court will have jurisdiction over the dispute.

3. England is the appropriate forum for the application of its own law.

4. An agreement on English law and jurisdiction in this form is likely to be construed as binding on English law and exclusive jurisdiction of the English courts.

Comments

This case is a salutary reminder of the importance of ensuring that dispute resolution clauses in complex transactions are unambiguous, consistent and consistent across the range of transaction documents to avoid litigation, costs and delays. The outcome of this case leaves the defendants pursuing essentially the same insurance claim against the primary insurer in the Canadian courts, the Additional Insurers – with one exception – in the English courts and one Additional Insurer in separate English arbitration proceedings.

It also confirms that English courts are likely to interpret English court jurisdiction clauses as conferring exclusive jurisdiction, even in the absence of the word “exclusive”.

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