Allianz alleged that Aigaion had agreed to reinsure 30 percent of the cover provided by Allianz in respect of a fleet of tugs. The proposed terms and conditions of the reinsurance were set out in a marine hull slip that listed a number of conditions including one which read “Deffered [sic] Premium Clause“. The slip was revised in negotiations between Allianz, its broker and Aigaion but the condition relating to deferred premium payment remained. Negotiations concluded with an email from Aigaion to the broker on 2 April 2005 stating that “Cover is bound with effect from 31.3.05 as we had quoted…Our documents to follow“.
On 15 April 2005 Aigaion issued a reinsurance policy that included a warranty that the premiums were payable by 31 March 2005 and 30 June 2005; there was no reference to deferred payment of premium. Aigaion also issued a debit note stating that the instalments were payable within 60 days of the same dates as those shown in the policy document. Both the policy document and the debit note went unacknowledged by the broker and neither was forwarded to Allianz. Allianz paid two instalments of the premium to the broker but the broker failed to make onward payment to Aigaion.
There was a constructive total loss of a tug insured by Allianz under the underlying policy and Allianz sought an indemnity from Aigaion in respect of the loss. Aigaion, in reliance of the terms of the reinsurance policy, denied that it was liable to make the payment on the basis that the “policy automatically lapsed on 31 May 2005 due to non-payment of premium as per payment warranty. As such reinsurance policy is null and void.” Aigaion argued that the inclusion of the term “Deffered [sic] Premium Clause” in the reinsurance slip was so uncertain as to be of no contractual effect in itself and to vitiate the whole contract. Consequently, Aigaion asserted there had been no concluded agreement before the reinsurance policy document was sent and the broker’s failure to respond to the document created a contract by silence.
His Honour Judge Chambers QC found that an agreement had been concluded between Allianz and Aigaion by Aigaion’s email on 2 April 2005. The judge said that the reinsurance contract was not made ineffective by the term “Deffered [sic] Premium Clause” in the reinsurance slip since the meaning of the term was found in the use of the phase in the underlying insurance. It did not matter that Aigaion had not been notified of its terms. In respect of the reinsurance policy document, HHJ Chambers QC considered it “hopeless” to suggest that silence by the broker or Allianz imposed upon Allianz obligations that did not exist under the agreement concluded on 2 April 2005. Accordingly, the judge noted that for the reinsurance to have been cancelled for non-payment of premium it would have been necessary to serve a cancellation notice. Since Aigaion had not served a cancellation notice, the judge held that it was liable for its share of the loss.
This case provides useful guidance on the interpretation of terms found in the slip. It suggests that the reinsurer need not be notified of the meaning of the terms found in the slip for the reinsurance contract to be effective. However, it is necessary for the meaning of such terms to be readily ascertainable.
