A Lloyd’s syndicate’s whole account stop loss reinsurance was on terms which were agreed to be the equivalent of a follow the settlements clause. The question was whether the reinsurer was liable where the insurers, acting in a proper and business-like way, had made payments for which they were not legally liable under the Wellington agreement, a claims handling facility set up by producers and their insurers to deal with large numbers of asbestosis claims.
Held: The reinsurers were not liable. Reinsurers are bound by reasonable compromises on liability and quantum between the insurers and their assured under the terms of the original policy. The insurer does not have to prove that if the original claim was fully argued it would in fact have succeeded. No investigation as to whether it was arguably within the terms of the original policy is required.
Evans J said: ‘In my judgment, the reinsurer is always entitled to raise issues as to the scope of the reinsurance contract, and where the risks are co-extensive with those of the underlying insurance he is not precluded from raising such issues, even when there is a ‘follow the settlement’ term of the reinsurance contract. Ultimately, this is the only sure protection which the reinsurer has against being called upon to indemnify the reinsured against payments which were not legally due from him to the original insured, however reasonable and business-like the payments may have been. But this is subject to one proviso which I have already assumed in the syndicate’s favour, and which is supported by the judgment of Hunter J.A. in the Grand Union case, quoted above. The reinsurer may well be bound to follow the insurer’s settlement of a claim which arguably, as a matter of law, is within the scope of the original insurance, regardless of whether the court might hold, if the issue was fully argued before it, that as a matter of law the claim would have failed.’
Evans J
[1991] 2 Lloyds Rep 524
England and Wales
Cited by:
Appeal from – Hiscox v Outhwaite CA 1991
. .
At first instance – Hiscox v Outhwaite (No 1) HL 29-Jul-1991
An arbitration award is perfected in the place where the arbitrator signs it, irrespective of where the arbitration to place. If the award is signed in a country party to the 1958 convention, being and forcible as a conventional Ward under the . .
Lists of cited by and citing cases may be incomplete.
Updated: 28 August 2021; Ref: scu.667376
