|
Enterprise
Oil had been involved in proceedings ("the actions") brought
in Texas and in London between various parties relating to their respective
interests in certain North Sea oil exploration contracts. Enterprise
was insured by its captive, Strand Insurance Company, which in turn
was reinsured by Lloyds and by UK and overseas companies. Reinsurers
exercised their rights under a claims control clause to defend the claims
brought by Enterprise for indemnity against Enterprise's contribution
to the settlement of the actions.
The settlement
involved a payment of approximately $84.225 million. The Settlement
Agreement provided for joint and several liability on the part of the
contributors, but contained no allocation of the payment as between
the various heads of claim, although some were not covered by the Strand
policy.
The court
found that to recover from Strand, Enterprise would have to establish
that it had been actually legally liable, not arguably liable, to the
relevant third parties under Texas law to at least the amount of the
Settlement Agreement, for an insured cause of action. Aikens J found
that there was no actual liability under Texas law, so Strand did not
have to indemnify Enterprise.
Notwithstanding
this, Aikens J went on to consider, obiter, whether, had Enterprise
been liable it would have been able to recover from Strand. Strand asserted
that in this event it would not have been liable under the policy because
the Settlement Agreement did not allocate the settlements between the
various claims and the court was not allowed to look at extrinsic evidence
in order to establish what part of that sum related to claims covered
by the policy. This was indeed the conclusion Colman J had reached in
Lumbermen's Mutual Casualty Co v Bovis Lend Lease Limited [2005]
1 Lloyds Rep 494. In that case Colman J held that an insured cannot
recover at all under a liability policy if its claim is founded on a
Settlement Agreement which does not specifically identify an amount
that refers to the liability of the third party that is covered by an
insured peril under the policy.
Aikens
J, however, declined to follow that decision. He found that it is possible
to look at extraneous evidence to establish the liability settled by
the Agreement. He also commented that if this were not the case "it
would lead to great commercial inconvenience and to artificial statements
in judgments, awards and settlement agreements. Commercial law tries
to avoid forcing parties to engage in commercially inconvenient and
artificial practices".
In the
course of argument Aikens J also observed that the Lumbermen's decision
should in any event not apply to reinsurance.
|