Claims were made for personal injury caused by asbestos. The re-insurers sought declaratory relief against the head insurers, and the administrators of the insolvent company. The administrators sought declarations in turn. Curzon insured the company for ultimate net loss, and then had re-insurance with Centre Reinsurance. Ultimate net loss meant all sums paid out less substantial excesses, but control of the claims was transferred to the insurer if the principal company became insolvent. A re-organisation was intended to be created so as to ring fence the company’s liabilities.
Held: The provision transferring control of the claim to the insurers meant that the re-insurance contract was voided by the 1930 Act. The phrase ‘the rights of third parties’ in s1(3) was to be construed to refer only to the rights of the parties in respect of the liability incurred by the insured to the third party, and further only those rights which if altered would give rise to a statutory transfer, and nullify the rights which the statute required to be transferred undiminshed. Parliament could not have intended to strike down provisions intended to put a third party in the same or a better position on a statutory transfer. As to claims handling costs, these were to be taken as part of the ultimate net loss, and the company was liable to reimburse the expenses incurred before the loss reached the retained limit.
Lord Justice Chadwick: ‘The relevant question . . is whether liabilities for claims handling expenses incurred on the instructions of the insurer – acting under the rights conferred by the policy . . are properly to be treated as liabilities incurred by the administrator in carrying out his functions . . ‘
Judges:
Lord Justice Chadwick Lady Justice Arden Lord Justice Latham
Citations:
[2005] EWCA Civ 115, Times 28-Feb-2005, [2005] 2 All ER (Comm) 65
Links:
Statutes:
Third Parties (Rights Against Insurers) Act 1930 1(3)
Jurisdiction:
England and Wales
Citing:
Cited – Bradley v Eagle Star Insurance Co Ltd HL 1989
Mrs Bradley was employed by Dart Mill several times from 1933 and 1970 and acquired byssinosis from inhaling cotton dust. The company was wound up in 1975 and dissolved in 1976. In 1984 she applied to the court for pre-action disclosure under . .
Cited – First National Tricity Finance Ltd v OT Computers Ltd; In re OT Computers Ltd (in administration) CA 25-May-2004
The company had gone into liquidation. They had sold consumer policies as extended warranties on behalf of the claimant. The company had insured its own joint liability under the contracts, and the claimant sought information from the company’s . .
Cited – Cox v Bankside Members Agency Ltd and Others CA 16-May-1995
Successful Lloyds names were entitled to enforce their claims in the normal time sequence. The transfer of the rights of the insured against the insurer under section 1(1) the 1930 Act takes place on the event of insolvency, even if the insured’s . .
Cited – Firma CF-Trade SA v Newcastle Protection and Indemnity Association (the ‘Fanti’) QBD 1987
The court considered the effect of section 1(3) on a ‘pay to be paid’ clause in a re-insurance contract.
Held: If, as a matter of construction of the membership rules, the condition survived the making of a winding-up order – which he thought . .
Cited – Re Allobrogia Steamship Corporation 1979
The court considered the effect, on the insolvency of the insured, of ‘pay to be paid’ conditions in contracts of insurance. It was asked to order the winding-up of a foreign registered company. The company had to own assets within the jurisdiction . .
Cited – Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association Ltd (Padri Island) (No 2); Firma CF-Trade SA v Similar (Fanti) CA 30-Nov-1989
The court considered appeals from conflicting interpretations of the effect of s1(3) of the 1930 Act on pay to be paid clauses in the event of the insolvency of the insured.
Held: The condition did not purport to avoid the contract or to alter . .
Cited – Socony Mobil Oil Co Inc and others v West of England Ship Owners Mutual Insurance Association Ltd (the ‘Padre Island’) (No 2) 1987
. .
Cited – Socony Mobil Oil Co Inc and others v West of England Ship Owners Mutual Insurance Association Ltd (Padri Island) (No 2); Firma CF-Trade SA v Similar (The ‘Fant’) HL 14-Jun-1990
The House was asked as to the effect of section 1(3) of the 1930 Act on policies including ‘pay or be paid’ clauses.
Held: The central question was whether the condition of prior payment was rendered of no effect by section 1(3) of the Act of . .
Cited – Re Harrington Motor Co Ltd, Ex parte Chaplin 1928
A person injured in a road accident had obtained judgment for damages against the company, but had been unable to enforce the judgment before the company went into liquidation. The company’s motor insurers paid the amount of the judgment to the . .
Appeal From – Centre Reinsurance International Co and Another v Curzon Insurance Ltd ChD 12-Feb-2004
It was a necessary part of the system of statutory transfers of insurance obligations under the Act, that the rights should be transferred before exhaustion of any policy excess, and notwithstanding the insolvency. The rights (inchoate at this . .
Cited by:
Appeal from – Freakley and others v Centre Reinsurance International Company and others HL 11-Oct-2006
When it became clear that the company would be financially overwhelmed by asbestos related claims, a voluntary scheme of arrangement was proposed under s425. The House was now asked whether the right to re-imbursement of the company’s lawyers after . .
Lists of cited by and citing cases may be incomplete.
Personal Injury, Insurance, Insolvency
Updated: 29 June 2022; Ref: scu.222782
