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Gard Marine v Lloyd Tunnicliffe

The notation (100%) has a recognised meaning in the offshore energy market. When applied to an excess in a facultative reinsurance it meant the excess point would be scaled to reflect the insured's interest in the relevant asset.

Gard Marine & Energy Limited v Lloyd Tunnicliffe, Glacier Reinsurance AG and Agnew Higgins Pickering & Company Limited

  • [2011] EWHC 1658 (Comm)

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The insured, an oil exploration and production company, had interests in a number of oil wells and platforms in the Gulf of Mexico. 

On 23rd September 2005, Hurricane Rita hit the Gulf. The insured suffered substantial losses which were settled by its direct insurers for US$365 million in excess of the insured's retention of US$16 million.

Gard had a 12.5% line under the original policy. Its share of the payment was US$45,625,000. It was reinsured under a facultative policy with a "sum insured" clause that stated:

"To pay up to Original Package Policy limits/amounts/sums insured excess of USD250 million (100%) any one occurrence of losses to the original placement".

The issue was what "(100%)" meant in the context of an excess in an energy facultative reinsurance policy. 100% of what?

The policies

The original insurance policy had limits and deductibles variously expressed as "(for Assured’s interest)" and "(100% interest)".  A "partial interest" clause explained that in the event the insured's interest in any one oil well did not amount to 100%, the retention and any separate limit of liability would be reduced proportionately.

The terms of the original policy were incorporated into the reinsurance policy by "as original" wording. The sum insured clause in the reinsurance also referred back to the original policy:

"To pay up to Original Package Policy limits/amounts/sums insured excess of USD250 million (100%) any one occurrence of losses to the original placement".

Gard maintained that "(100%)" was used throughout the original policy to mean that the limit or deductible concerned would be "scaled" if the insured's interest in the well was less than 100%. The same applied to the term "(100%)" in the reinsurance policy. This, it argued, was the established meaning of "(100%)" when used with regard to an indemnity limit or excess in the energy market.

Conversely, the term "(Assured’s interest)" or "(for Assured’s interest)" meant the opposite – the limit or deductible did not scale.

Gard's calculation went as follows: the gross loss from the ground up was about US$912.5 million. The insured's interest in the gross loss was US$416 million or about 45.6%.  Scaling the excess proportionately to 45.6% of US$250 million resulted in an excess of US$114 million. This meant the reinsurance claim was US$251 million (US$365 million less the scaled deductible).

Some of Gard's reinsurers, however, argued that scaling did not apply. By referring to "losses to the original placement", they said the sum insured clause clearly referred to losses to the full market of insurers, not to Gard’s 12.5% participation. Without scaling, Gard's claim would be US$115 million (US$365 million less US$250 million deductible).


The judge agreed with Gard. In construing a document, the court will ascertain the meaning it would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time of the contract.

The factual matrix taken into account includes the terms of the underlying policy and can include evidence about relevant market practices if they are part of the background known to each party.

In this case, the judge found the evidence "overwhelming" that the notation "(100%)" in regard to an excess or limit had a recognised and established meaning in the direct insurance and   facultative reinsurance of offshore energy risks. Consequently the excess in this policy had to be scaled to reflect the insured's interest in the relevant assets.


The reinsurance policy used the term (100%) with reference to the excess but not to the indemnity limit. This left the reinsurers in the uncertain position of not knowing what their exposure would be from the outset, since the excess point would scale proportionately according to the insured's interest in the oil wells but the indemnity limit would not change.

The decision is restricted to the offshore energy market, where the judge accepted the (100%) notation has a special recognised meaning.