Reinsurers take stock of legal developments on thorny issues

A seminar at The Old Library at Lloyd’s hosted by UK national law firm, Weightmans,and with a leading QC as guest speaker,...

...highlighted the meaning of important recent decisions in some of the fundamentals of insurance and reinsurance law.

Chaired by Colin Peck, a partner in the London Market Team at Weightmans, over 110 delegates were given an invaluable reminder of where English law had reached on the regularly troublesome topics of claims notification, condition precedents, claims co-operation, follow the settlements and aggregation.

Ling Ong, another partner in the London Market Team at Weightmans, summarised the case law and current position on claims notification, condition precedent and claims co-operation and in particular the recent important cases of HLB Kidsons, Kajima v TUIC, Kosmar Villa Holidays and Lexington v Multinacional de Seguros.

She commented that “because of the nature of claims notification clauses, it is often not clear when a claim should be notified, what should be notified, and what is actually notified”. Further, even if there had been a breach, there has been much debate as to the basis on which underwriters can lose their right to rely on that breach where the claims notification clause is a condition precedent to liability. This issue has now been settled following the important decision in Kosmar which was subsequently followed in Lexington v Mutinacional in the context of an alleged breach of a claims co-operation clause.

Leading insurance and reinsurance silk, Aidan Christie QC of chambers 4 Pump Court, clarified where the English courts had got to on the knotty subjects of follow the settlements, back–to-back cover and aggregation, in the light of recent decisions such as Faraday v Copenhagen Re, Aegis v Continental and Wasa v Lexington.

He commented that where insurance and reinsurance contracts were consciously arranged on the same terms so as to provide co-extensive coverage and included an unqualified follow the settlements clause, there was limited scope for reinsurers to challenge any bona fide settlement reached by its reinsured.