Insurance disputes and jurisdiction clauses | Allen & Overy LLP

A jurisdictional dispute over an insurance claim

The case involved a multinational engineering business incorporated in Scotland, and its Canadian subsidiary (together, the Defendants). The respondents were the Defendants’ excess liability insurers (the Excess Insurers). The primary insurers were not a party to the proceedings.

The Canadian subsidiary is a defendant to proceedings in Alberta, in which the claimant alleged that it was responsible for the rupture of a pipeline in July 2015 and sought damages of CAD450 million. The subsidiary commenced proceedings in Alberta against the primary insurer and the Excess Insurers for an indemnity for any damages that it is ordered to pay (the Alberta Proceedings). The Excess Insurers obtained an anti-suit injunction from the Commercial Court in London to stop the subsidiary from suing the insurers in Alberta. The Defendants appealed to the Court of Appeal.

Different policies with different governing law and jurisdiction provisions

The policies issued by the Insurers comprised a program of excess liability insurance placed in the London market. The excess program comprised a Global Umbrella Policy, then the First, Second and Third Excess Policies (the Excess Policies).

The primary policy did not contain a governing law or jurisdiction clause, however, each of the Excess Policies contained a clause (the Primary Policy Jurisdiction Clause) stating that any dispute would be “subject to the same law and the same jurisdiction as the primary policy”. Each Excess Policy also contained varying governing law and/or jurisdiction clauses, as follows:

1. The Global Umbrella Policy provided for English governing law and stated that English courts “shall have jurisdiction in respect of any dispute under this Policy”.

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

3. The Second Excess Policy provided for English governing law, but did not contain a jurisdiction clause.

4. One insurer on both the Second and Third Excess Policies included an English arbitration in its standard terms, and annotated the policies to indicate that the Primary Policy Jurisdiction Clause 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. The Defendants argued that: (a) as the primary policy did not contain any jurisdiction clause, under the Primary Policy Jurisdiction Clause the Defendants could sue the excess insurers in any court of competent jurisdiction; and (b) the jurisdiction clause in the Global Umbrella Policy did not grant the English Courts exclusive jurisdiction, leaving the parties free to sue on that policy in any court of competent jurisdiction.

At first instance, Mr Justice Jacobs held that:

  • Where the primary policy was silent as to jurisdiction, the Primary Policy Jurisdiction Clause did not mean that the parties to the Excess Policies could simply plug the gap with a jurisdiction of their choice, displacing the clear provisions of the separate jurisdiction clauses in those policies.
  • The jurisdiction clause in the Global Umbrella Policy provided for the exclusive jurisdiction of the English courts, notwithstanding that it did use the word “exclusive” (applying Hin-Pro International Logistics Ltd v Compania Sud Americana de Vapores SA (Compania Sud).

Therefore, the English courts had exclusive jurisdiction over claims under the Global Umbrella, First, and Third Excess Policies, and Mr. Justice Jacobs granted an anti-suit injunction in respect of those policies. This part of the first instance decision was appealed.

The judge reached the same conclusion regarding the insurer with the English arbitration clause, but not for the other insurers on the Second Excess Policy, which did not contain an English court jurisdiction clause. These conclusions were not appealed.

Court of Appeal

The Court of Appeal dismissed the Defendant’s appeal as to the Global Umbrella, First, and Third Excess Policies, and upheld the decision of the High Court.

Exclusion English jurisdiction for some of the policies

Lord Justice Males gave the lead judgment. He concluded that, if the primary policy had 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 Jurisdiction Clause that this rule only applies when the primary policy contains such a clause, and, in the absence of such a clause, the Primary Policy Jurisdiction Clause does not apply.

Lord Justice Males concluded that there was no conflict between the Primary Policy Jurisdiction Clause 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 Umbrella Policy – ​​jurisdiction is exclusive despite not explicitly stating so

The Court of Appeal upheld the High Court’s judgment that the absence of the word “exclusive” from the jurisdiction clause in the Global Umbrella Policy did not mean that the jurisdiction of the English Court is non-exclusive. Applying Compania Sudthe following factors were relevant to this conclusion:

1. The words “shall be subject to” are imperative and directory, they are not words that simply provide an option.

2. A non-exclusive jurisdiction clause creates uncertainty, so it makes little sense to add England and Wales as a merely optional additional court. The natural commercial purpose of such a clause is to stipulate 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 to English law and jurisdiction in this form is likely to be interpreted as having both the mandatory application of English law and the exclusive jurisdiction of the English court.

Comments

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

It also reaffirms that the English courts will likely interpret English court jurisdiction clauses as providing for exclusive jurisdiction, even in the absence of the word “exclusive”.

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