Facts
The insured, one of a group of French aeronautical engineering
companies, claimed indemnity in respect of liabilities arising from
a helicopter crash in the US in 1993.
The underlying personal injury claim had been settled in 1995,
but in 2000 further proceedings were issued against the insured and
others, alleging the settlement had been induced by fraudulent
misrepresentation, including an understatement of the insurance
coverage.
Both French and English insurers participated in the group's
insurance programme. The English policy wording followed and very
largely adopted the wording of the French policy, which included a
clause giving the leading underwriters powers to settle claims
"within the limits of the powers conferred on them by the present
policy".
The English insurers declined cover on the grounds that
liability for fraudulent or negligent misrepresentations made in
court proceedings was not a risk covered by the policy.
But in July 2007, they learned that the insurance claim had been
settled and paid by the French insurers, who now sought to recover
US$2.45 million from the English insurers as their proportionate
share.
The English insurers claimed the settlement had been made
without authority and issued proceedings in England for a
declaration of non-liability. There was also a dispute whether a
French arbitration clause had been incorporated into the English
policy.
The French insurers, who had begun arbitration proceedings in
Paris, argued that they had been given irrevocable authority to
reach the settlement. They put forward an alternative claim as
assignee of the insured's rights against the English insurers.
The issue was whether the English court had jurisdiction over
the dispute. For the purposes of this hearing, the court assumed
French law applied to the English policy.
The Brussels Regulation
EU Regulation 44/2001 governs which court has jurisdiction to
hear disputes between parties in member states.
The general rule is that a person domiciled in a member state
must be sued in the courts of that state. In certain circumstances,
however, proceedings can be brought in another member state. For
example "in matters relating to a contract," a person can be sued
in the court of the place of performance of the obligation (article
5.1(a)).
Under section 3, however, there are special rules for "matters
relating to insurance" which in essence give the insured a choice
over where to bring an action against the insurer, but only allow
the insurer to sue the insured in the insured's domicile.
The French insurers said the dispute was a matter relating to
insurance, so the special jurisdiction rules applied.
Judgment
The judge disagreed. The aim of the special rules is to protect
the insured, who is generally the weaker party. The European Court,
however, has held that this should not be extended to those for
whom such protection is not justified, such as a reinsured in
dispute with its reinsurer (UGIC v Group Josi [2001]), or third
party proceedings between co-insurers (GIE Réunion Européenne v
Zurich España).
In the judge's view, the same principle applied to this action,
which involved a claim by the leading insurer to be reimbursed by
other insurers following a settlement. It also applied to any claim
brought by the French insurers as assignee of the insured. The
dispute fell outside the special insurance rules.
Although, arguably, there was no contract between the French and
English insurers, the judge was satisfied that both the direct
claim and the assignment claim were "matters relating to a
contract". Under French law, unless otherwise agreed, the place of
performance of a contractual obligation to pay money is the
domicile of the debtor. In this case, that was England.
The judge held that the English court had jurisdiction. But it
was open to the French insurers to apply for a stay of the English
proceedings under the Arbitration Act on the grounds that
arbitration proceedings had been started in Paris.
Commentary
This is the latest in a series of decisions preventing the
special jurisdictional rules for insurance from benefiting parties
other than the actual insured or a beneficiary under the
policy.
The judge in this case, however, thought it was "open to
question" whether the European Court would take a similar approach
to a subrogated claim brought by insurers in the name of the
insured. The same logic could easily apply, but the right of
subrogation is not recognised in many European jurisdictions.
