Equitas Insurance Ltd v Municipal Mutual Insurance Ltd, Court of Appeal - Civil Division, May 04, 2018, [2018] EWCA Civ 991

Resolution Date:May 04, 2018
Issuing Organization:Civil Division
Actores:Equitas Insurance Ltd v Municipal Mutual Insurance Ltd
 
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Neutral Citation Number: [2018] EWCA Civ 991

Case No:

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM LORD JUSTICE FLAUX

SITTING AS A JUDGE ARBITRATOR

IN THE MATTER OF THE ARBITRATION ACT 1996

IN THE MATTER OF AN ARBITRATION

AND IN AN ARBITRATION CLAIM

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 04/05/2018

Before :

LADY JUSTICE GLOSTER

Vice-President of the Court of Appeal, Civil Division

and

SIR JACK BEATSON

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Between :

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Colin Edelman QC and Keir Howie (instructed by Norton Rose Fulbright) for the Appellant

Alistair Schaff QC and Tim Kenefick (instructed by Cooley (UK) LLP) for the Respondent

Hearing dates: 14 December 2017

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Page 8 of 8

Lady Justice Gloster:

Introduction

  1. This is an application made by Equitas Insurance Limited (``the applicant'' or ``Equitas'') under s.69 of the Arbitration Act 1996 (``the 1996 Act'') for permission to appeal against the arbitration award dated 7 April 2017 (``the Award'') of Flaux LJ (sitting as a judge-arbitrator) (``the Tribunal''), in which he resolved all of the issues in favour of the reinsured, Municipal Mutual Insurance Limited (``the respondent'' or ``MMI'').

  2. The background to the arbitration is set out at [1-10] and [31-41] of the Award and need not be repeated here. It suffices to say by way of overview that the dispute raises questions concerning the treatment of mesothelioma claims for the purposes of certain contracts of employers' liability (``EL'') reinsurance; and more specifically

    i) whether MMI is entitled to present each outwards reinsurance claim to any single triggered reinsurance contract of its choice (i.e. whether it may `spike' the claims); and

    ii) if so, how the resultant rights of recoupment and contribution, arising from the Supreme Court decision in International Energy Group Ltd v. Zurich Insurance plc UK Branch [2016] AC 509 (``IEG''), are to be calculated.

  3. Mr Colin Edelman QC and Mr Keir Howie appeared on behalf of the appellant, Equitas. Mr Alistair Schaff QC and Mr Tim Kenefick appeared on behalf of the respondent, MMI.

    The issues arising from the Award which are relevant to this application for permission to appeal

  4. The relevant issues determined by the Award, so far as the application for permission to appeal is concerned, are the three issues articulated at [42(1), (2) and (4)] of the Award which are as follows:

    i) Is MMI to be treated as having settled the inwards claims on the basis that each EL policy on risk was contributing a pro rata share of the loss being paid by MMI (``implied allocation issue'')?

    ii) If not, is the basis on which MMI is presenting its reinsurance claim contrary to the duty of utmost good faith or an implied contractual duty requiring MMI to present its reinsurance claims in good faith (``good faith issue'')?

    iii) If MMI is entitled to present its reinsurance claim as it has, what rights of contribution and recoupment do the reinsurers, who are called upon to pay the claim, acquire against any other reinsurers who were also on risk for the claim, and against MMI in respect of any deemed ``self-reinsurance''; and how do those rights fall to be calculated? In particular, should they be calculated using:

    a) the `from the ground up' pro rata method of apportionment taking into account the first layer of retention in every year of reinsured exposure, as Equitas contends; or

    b) the `independent liability' method as MMI contends (``recoupment and contribution issue'')?

    The Award

  5. The Tribunal concluded that:

    i) MMI was entitled to `spike' each reinsurance claim to any applicable year of reinsurance cover of its choice; and

    ii) the rights of recoupment and contribution acquired by the reinsurers to whom a claim was `spiked' should be calculated using MMI's methodology.

    Implied allocation issue

  6. At [71] Flaux LJ held that MMI was entitled contractually to present the entire claim to any one year's reinsurance policy, albeit acknowledging that there would need to be equitable contribution and recoupment to iron out unfairness and anomalies. That, he stated, necessarily followed from the decision of the majority in IEG that each insurance contract covering the insured for the period...

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