Gard Marine and Energy Ltd. v. Glacier Reinsurance AG, Civil Court of Appeal (London, England)
In a dispute over the proper jurisdiction to determine the calculation of benefits owed under an excess of loss reinsurance agreement, a suit was filed in the Courts of England by the insurer, Gard, a Bermudian Company. The suit was filed against all non-settling participants in the reinsurance, including both a London domiciled reinsurer and a Swiss reinsurer. The Swiss reinsurer, Glacier, had an action pending in Switzerland against Gard for the return of benefits it claimed it overpaid. The claims were made after the primary insured company sustained losses in the Gulf of Mexico covered under the primary policy of $365 million as a result of Hurricaine Rita.
The primary insurance covered a company’s property and business interruption risks with a combined single limit of $400 million for any one accident in excess of a self insured retention. The excess of loss reinsurance, in which Glacier participated at 5%, was issued by a London broker as part of a renewal of a London Market placement.
Gard had invoked the jurisdiction of the Courts of England under Article 6 of the Lugano Convention. Although generally the Lugano Convention provides that a defendant must be sued in the country of its domicile, the convention further provides that a person domiciled in a participating country may also be sued where he is one of a number of defendants in the courts for the place where any one of them is domiciled. English courts have held that this exception should be applied only where “it was expedient to hear and determine them together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings.”
Gard contended that the Courts of England had proper jurisdiction as it had brought proceedings against a London domiciled participant in the excess of loss reinsurance and it was expedient to hear the claims together in order to avoid the risk of irreconcilable judgments. Glacier contended that there was no such risk as its agreement for participation was governed by Swiss law and that there was no risk of irreconcilable judgments.
The English Court of Appeals held that English law applied to the reinsurance agreement. The court further held that the contract’s closest connection was with England. Accordingly, the court held that the dispute over the application of the reinsurance agreement is appropriately venued in England to avoid the risk of irreconcilable judgments and for the convenience and expedience of trying all claims in one jurisdiction.
For a copy of the decision click here
Bryan Richmond and Tom Segalla