London Market - December 2009

'Close connection of claims', Lugano Convention Art.6(1)

In Gard Marine & Energy Ltd v (1) Lloyd Tunnicliffe (2) Glacier Reinsurance Ag (3) Agnew Higgins Pickering & Co Ltd (9 October 2009) a reinsurance claim was made by Bermudian insurance company Gard Marine & Energy Ltd (“Gard Marine”) against Swiss reinsurance company Glacier Reinsurance Ag (“Glacier”).  The claim was deemed to be so closely linked to a claim against an English reinsurance company that it should be heard by the English courts.  The court determined that it had jurisdiction to hear a reinsurance claim under the Lugano Convention Art. 6(1) as the claim was ‘closely linked’.

Gard Marine had insured a US company in respect of property and business interruption. Gard Marine reinsured itself under two excess of loss reinsurance slips and two placements were made by the third defendant, one to London market underwriters, including the first defendant and also Glacier.  Gard Marine subsequently settled a claim by the US company and made claims against its reinsurers.  It calculated the reinsurance claim on the basis that the deductible in the sum insured clause was a deductible which was referable to 100 per cent property values, and where a claim was made in respect of property in which the US company had less than 100 per cent interest the deductible fell to be scaled down to reflect the lower interest. 

Glacier disputed the basis of scaling the deductible and proceedings were issued.  Gard Marine were subsequently given permission to add Agnew Higgins Pickering & Co Ltd (“Agnew”) as third defendant. The claim was for damages in the event that Glacier's defences to the reinsurance claim were successful.  Agnew contended that Swiss law applied, Gard Marine argued that English law was implied into Glacier's slip. Gard Marine submitted that the court had jurisdiction under the Lugano Convention 1988 Art.5(1) as the relevant contractual obligation was to be performed in London pursuant to an alleged custom and practice of the London market.  Gard also contended that the court had jurisdiction under Art.6(1) as the claim against Glacier was intrinsically connected with the claim against the other defendants.

Held

• The applicable law was English law as the circumstances of the placement pointed towards this as the choice of law.  The underlying policy was a London market policy.  Glacier was invited to participate in a London Market placement. Further, a Lloyd's slip was used, significantly incorporating a number of London wordings.
• The claims were ‘closely linked’ as the general factual matrix of both cases were likely to be similar as the substance of the two contracts and the legal issues to be determined were the same.
• The contingent claim against Agnew was only likely to arise if Gard Marine’s claims failed on the construction issue, therefore the implications of a differing judgment would be significant.
• The court determined that it was just and expedient that Gard Marine’s claims should be dealt with in a single jurisdiction, thus avoiding conflicting decisions.