UK: Aspen Underwriting v Credit Europe Bank: Determining Jursidiction In Insurance Recovery Claims

The claimant insurers had insured the owners of a vessel. The owners' bank was an assignee of the policy and named as a loss payee under the policy (but was not named as an insured). When the vessel was lost, the insurers paid out and entered into a settlement agreement with the owners. It was subsequently held by the Commercial Court that the vessel had been deliberately sunk by the master, at the request of the owners. The insurers sought recovery of the insurance proceeds and brought a claim against the owners and the bank in England. The bank argued that this claim against it should have been brought in its own country, the Netherlands. At first instance, it was held that the English court had jurisdiction to hear this claim, as well as the insurers' claim for damages under section 2(1) of the Misrepresentation Act 1967. The Court of Appeal has now rejected the appeal from those decisions. It held as follows:

(1) The decision in Brownlie v Four Seasons had not changed the test for whether a claim falls within one of the jurisdictional gateways listed in PD6B. A claimant still has to demonstrate a "good arguable case" ie something more than a prima facie case and something less than a case satisfying a balance of probabilities test. It did not suffice to establish a gateway if there was a plausible, albeit contested, evidential basis for it.

(2) The bank was not bound by the exclusive jurisdiction clause in favour of England in the settlement agreement between the insurers and the owners. It was not named as a party, even though it was referred to in other parts of the agreement. The judge had been entitled to conclude that the bank had not conferred authority on the owners to enter into the agreement on its behalf.

(3) The bank was also not bound by the exclusive jurisdiction clause in favour of England in the insurance policy. The judge had been correct to hold that, although an assignee seeking to enforce the terms of a policy for its benefit is subject to the terms of the contract, that principle did not apply here as the bank was not asserting its right to payment under the policy. The Court of Appeal added that "a jurisdiction clause is, by its nature, concerned with proceedings. Had the Bank commenced proceedings against Underwriters to enforce its insurance claim it would, doubtless, have been required to do so in accordance with the English jurisdiction clause contained in the Policy. But it did not do so and that, by itself, is an end of the matter".

(4) The claims brought against the bank were torts and so fell within Article 7(2) of the recast Regulation 1215/2012. The harmful event occurred in England (for reasons discussed under (5) below), so that the English courts would have jurisdiction on that basis.

However, the Court of Appeal agreed with the judge that the claims were "matters relating to insurance" under the recast Regulation and, as a result, Article 14 of the recast Regulation would have applied. Although the settlement agreement was "interposed", "as a matter of reality and substance, the foundation of the Underwriters' claims lies in the Policy". Central to the insurers' claims is that it was not liable to indemnify the owners under the policy as the vessel was not lost by reason of an insured peril.

Article 14 of the recast Regulation provides that an insurer can only sue an insured where the insured (or a beneficiary of the policy, and in this case the bank was clearly a beneficiary as it was an assignee and loss payee) is domiciled. There are carve-outs to this principle for, broadly, aviation and marine insurance and the insurance of "large risks" (as defined in Directive 2009/138/EC). If those carve-outs apply, the parties are bound by an express jurisdiction clause in the policy. However, In Societe Peloux v Axa Belgium (Case C-112/03),the CJEU held that a jurisdiction clause falling within one of these carve-outs could not be relied upon against a beneficiary under the insurance contract who had not expressly subscribed to the clause).

However, at first instance, the judge had held that Article 14 did not apply here as the bank could not be descried as "the weaker party". The Court of Appeal held that, although that view had "a strong common sense attraction" it could not be upheld in light of CJEU jurisdprudence, which does not permit a case-by-case factual assessment of whether a party is the "weaker party". However, the CJEU has held that the special protection of Article 14 is not warranted for "professionals in the insurance sector".

Here, it was acknowledged that "ship finance typically involves a mortgage and it is an ordinary incident of the ship finance business that mortgagees of ships become assignees and loss payees of the owners' hull (insurance) cover. Again, as an ordinary incident of its ship finance business, the Bank must have been involved from time to time "in the commercial or...professional settlement of insurance-related claims" (Kabeg v Mutuelles Du Mans Assurances (Case C-340/16))". Thus, although not strictly an insurance professional, it was held that the bank's business was analogous to that of an insurance professional, and for that reason, the bank was not entitled to the protection of Article 14.

(5) The insurers' claims for damages for negligent misrepresentation under the Misrepresentation Act 1967 was a matter relating to tort within the meaning of article 7(2) of the recast Regulation and the harmful event occurred in England. That was because the settlement agreement was signed in London (and the insurers would not have entered into the agreement if the owners had not given them the bank's letter of authority). Had it been necessary to do so, the Court of Appeal would also have concluded that the harmful event occurred in England because the settlement proceeds were paid into the brokers' account in London.

Finally, the judge had been right to hold that the insurers' claim for restitution could not be brought in England as this claim did not fall within Article 7(2) of the recast Regulation.

COMMENT: The decision by the Court of Appeal that the bank in this case fell within the meaning of "professionals in the insurance sector" is noteworthy. Prior CJEU caselaw has defined this phrase as including assignees who are professionals in the insurance sector or are entities "regularly involved in the commercial or otherwise professional settlement of insurance-related claims who voluntarily assumed the realisation of the claim as part of its commercial or otherwise professional activity". The Court of Appeal said that if any extension is required to that class, such extension in this case "is an extension of the most incremental kind – and, in substance, certainly does not enlarge or blur the subject-matter of the exclusions". However, no investigation was undertaken as to whether the bank in this case had in fact regularly been involved in the settlement of insurance claims in the past (because the CJEU has rejected a "case-by-case assessment").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.