The Defendant reinsureds sought an indemnity from Markel in respect of their share of a claim on an underlying directors’ and officers’ policy. Markel denied that it was liable under the reinsurance contract to indemnify the reinsureds because the reinsureds had not satisfied a condition precedent to liability found in a claims co-operation clause which provided that if the reinsureds knew of any circumstance which may give rise to a claim against them, they should advise Markel within 30 days.
The main issue for determination by the Court was whether the wording of a claims co-operation clause had been agreed as a term of the reinsurance contract. The slip provided that no formal policy was to be issued. One of the “Conditions” read “Claims Co-operation Clause (wording to be agreed)“. Markel asserted that the claims co-operation clause had been agreed when a copy of it was scratched by one of its underwriters, who submitted it to the broker. The broker proceeded on the basis that the clause scratched by Markel was a term of the reinsurance contract and submitted it to the London Policy Signing Office who included it in the reinsurance contract that they processed. The reinsureds contended that the parties had not agreed upon the wording of the claims co-operation clause and, therefore, it had not been agreed as a term of the reinsurance contract.
A further issue concerned whether knowledge of VOV GmbH (VOV), who had acted for the reinsureds in the placement of the reinsurance contract, triggered the condition precedent in the claims co-operation clause. Markel argued that the description of “Reinsured” in the slip as Gothaer and Continentale “as per VOV” was to be understood as the definition of “Reinsured” that applied whenever the term was used in the reinsurance contract and the use of the term “Reinsured” in the claims co-operation clause meant that knowledge of VOV was knowledge triggering the condition precedent. Conversely, the reinsureds submitted that the words “as per VOV” in the description of the “Reinsured” referred only to the fact that VOV acted for the reinsureds in connection with the placement of the reinsurance contract.
On the issue of whether the claims co-operation clause had been agreed as a term of the reinsurance contract, Mr Justice Andrew Smith declined to give summary judgment for Markel, and therefore declined to give summary judgment for the reinsureds against the broker. Smith J could not accept that the issue should be decided summarily and could not accept that the reinsureds had no real prospect of success in defending the claim. Some questions arose as to whether the broker might have made some mistakes in its procedures that led to the claims co-operation clause being included in the reinsurance contract and the judge considered that the trial judge might well be assisted by hearing oral evidence on the point. As to the description of “Reinsured“, Smith J was unable to accept Markel’s interpretation since the meaning did not fit some of the uses of “Reinsured” in the slip contract. Smith J went on to invite submissions from the parties as to what determination he should make about the proper meaning and effect of the description of “Reinsured”. The trial is listed for December 2008 and we will report any further developments on this case at www.insurereinsure.com.
