Lloyd's Maritime and Commercial Law Quarterly
ENGLISH INSURANCE LAW
Margaret Hemsworth*
71. Beazley Underwriting Ltd v Al Ahleia Insurance Co 1
Reinsurance—construction—claims control clause
The claimant reinsurer disputed liability to indemnify the defendant reinsured by reason of alleged breaches of a claims control clause. That clause read as follows:
“Notwithstanding anything contained in the Reinsurance Agreement and/or the Original Policy wording to the contrary, it is a condition precedent to any liability under this Reinsurance that: (a) the Reinsured shall upon knowledge of any loss or losses which may give rise to a claim under this policy, advise the Reinsurers thereof as soon as reasonably practicable; (b) the Reinsured shall furnish the Reinsurers with all information available respecting such loss or losses and the Reinsurers shall have the right to appoint adjusters, assessors, surveyors or other experts and to control all negotiations, adjustments, and settlements in connection with such loss or losses; (c) no settlement and/or compromise shall be made and no liability admitted without the prior approval of Reinsurers. In the event of a claim under the Original Policy Wording Reinsurers hereon agree that settlement shall take place at the same time as settlement or advance of funds under the said Original Policy Wording.”
The reinsurer’s case was that negotiations with the insured had been conducted without the reinsurer’s involvement or knowledge (in breach of limb (a) of the claims control clause); that liability has been admitted without any prior approval; and that the reinsured had been in breach of the claims control clause in settling part of the insured’s claim (in breach of limb (c) of the clause). It was accepted by the parties that the clause took effect as a condition precedent.
Decision: there had been no breach by the defendant of the claims control clause.
Held: (1) As a matter of construction the claims control clause operates as a form of exemption to liability; as such the scope must be clear on a fair construction.2 The reference in the clause to “loss or losses . . .” refers back to the wording in sub-clause (a), ie, it concerns only losses which might give rise to a claim under the [reinsurance] policy. To result in an obligation to indemnify the reinsured, the reinsurer is to be given opportunity to control negotiations, adjustments and settlements. The evidence was that the defendant had not entered into any negotiations; there had been a telephone conversation during which the insured had communicated its demands. The reinsured was not in breach of the
* Senior Lecturer, Plymouth University.
1. [2013] EWHC 677; [2013] Lloyd's Rep IR 561 (Comm) (QB, Comm Ct: Eder J).
2. Royal & Sun Alliance v Dornoch [2005] EWCA Civ 238; [2005] 1 All ER (Comm) 590; [2005] Lloyd's Rep IR 544, [19] (Longmore LJ).
ENGLISH INSURANCE LAW
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