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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Beazley Underwriting Ltd & Ors v Al Ahleia Insurance Company  EWHC 677 (Comm) (27 March 2013)
Cite as:  EWHC 677 (Comm)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
|(1) BEAZLEY UNDERWRITING LIMITED
(for and on behalf of itself and all other members of Lloyd's Syndicate
AFB 2623 as constituted for the 2005 underwriting year of account)
|(2) NEIL PATRICK MAIDMENT
(Suing on behalf of himself and on behalf of members of Lloyd's Syndicate
AFB 623 as constituted for the 2005 underwriting year of account)
|(3) SWISS REINSURANCE EUROPE S.A.|
|(4) TRANSATLANTIC REINSURANCE COMPANY|
|(5) RICHARD PAXTON BARDWELL|
|(Suing on behalf of himself and on behalf of members of Lloyd's Syndicate 1221 and 4472 (together, the Millennium Consortium 9128) as constituted for the 2005 underwriting year of account)|
|(6) LIBERTY MUTUAL INSURANCE EUROPE LIMITED|
|(7) XL INSURANCE COMPANY LIMITED||Claimants|
|- and -|
|(1) AL AHLEIA INSURANCE COMPANY|
|(2) WARBA INSURANCE COMPANY|
|(3) BAHRAIN KUWAIT INSURANCE COMPANY|
|(4) GULF INSURANCE COMPANY|
|(5) FIRST TAKAFUL INSURANCE COMPANY|
|(6) WETHAQ TAKAFUL INSURANCE COMPANY||Defendants|
Ms P Melwani QC and Mr B Coffer (instructed by Ince & Co) for the defendants
Hearing dates: 14 -17 January 2013
Crown Copyright ©
Mr Justice Eder:
"Notwithstanding anything contained in the Reinsurance Agreement and/or the Original Policy Wording to the contrary, it is a condition precedent to any liability under this Reinsurance that:
a) the Reinsured shall upon knowledge of any loss or losses which may give rise to a claim under this Policy, advise the Reinsurers thereof as soon as reasonably practicable;
b) The Reinsured shall furnish the Reinsurers with all information available respecting such loss or losses and the Reinsurers shall have the right to appoint adjusters, assessors, surveyors or other experts and to control all negotiations, adjustments, and settlements in connection with such loss or losses.
c) No settlement and/or compromise shall be made and no liability admitted without the prior approval of Reinsurers.
In the event of a claim under the Original Policy Wording Reinsurers hereon agree that settlement shall take place at the same time as settlement or advance of funds under the said Original Policy Wording."
In essence, the claimants say that the defendants (in particular the first defendant, "AIC", which handled the underlying claim on behalf of the other defendants and at all material times acted on their behalf) committed various breaches of this clause; and that the claimants are therefore under no liability for the Tank 84 loss.
i) Tobin Ryan. He was from 2003 until 2012 the Claims Manager at Beazley Underwriting Limited ("Beazley"), i.e. the first claimant.
ii) Dean Rebello. At the time, he was employed by the third claimant. He is currently the Swiss Re Corporate Solutions Engineering Claims Manager and Vice President at Swiss Re Services Ltd ("Swiss Re"). He has worked at Swiss Re since 1993.
iii) Tony Peters. He is and has been since 2002 the Claims Examiner at Transatlantic Reinsurance Company ("Trans Re"), i.e. the fourth claimant.
iv) Andrew Norris. He is and has been since 2011 an Engineering Underwriter at Swiss Re. Prior to this role, he was a claims adjuster at Navigators Underwriting Limited, responsible for the conduct of the Tank 84 claim on behalf of the fifth claimant.
The Reinsurance Contract
The underlying Insurance Policy
"The scope of the LEG 2 defects exclusion is quite clear. It excludes the costs that "would have been incurred if replacement or rectification of the Insured Property had been put in place immediately prior to the said damage". This means the cost that would have been incurred to carry out the necessary remedial works to have put in place adequate foundations if they had been carried out after the construction of Tank 84 but before the hydrotest. Additional repair costs arising out of the damage are covered by the policy, subject to the application of the $150,000 deductible."
" This is most strange. How come AIG were allowed to take over Mouchel who initially were instructed for the whole market?
The Robertson letter does not consider any exclusions whatsoever.
Why did KOC not allow HHI to attend the meetings?
I wonder whether KOC really understood who Capewell was representing. (i.e. only one of may [sic] Insurers)
I bet the final cost of this solution is rather more than the budget.
Does this mean we cannot show this letter to Beazley? If not, will AIG send teh [sic] letter to Beazley at any point?"
"Reference our telephone conversation today on the above captioned claim.
As discussed, KOC have agreed to the final claim settlement (US$19,213,173 net of the applicable deductible) as proposed by Mr. Eric Capewell of Robertson and Co SA International Loss Adjusters for 20% AIG share and Al Ahleia to proceed on the following basis:
- AIC issue their Discharge receipt to cater for partial/on account payment settlement for the subject claim representing AIG share 20% and Kuwaiti Co-Insurers shares bearing mind AIC shall still be responsible for the remaining balance of claim settlement. This can be processed immediately since AIG confirmed their action to transfer their share US$3,832,634.60 million upon receipt of KOC signature on DR.
- AIC to transfer the fund collected to KOC Account as soon as possible.
- AIC to follow up with its Broker of Record AON Ltd. to obtain approval of the remaining balance of Reinsures.
- AIC to issue final Discharge Receipt of the remaining balance of the settlement.
- AIC to follow up collection of the funds from the concerned Reinsurers.
Kindly treat this on a "TOP URGENT" basis and keep us posted on the progress of claim approval and fund transfer to KOC account.
Needless to say KPC/KOC are looking forward to a swift conclusion to the settlement of this long outstanding claim."
"WE/THE INSURED ACKNOWLEDGE AND AGREE
1 That this Form of Discharge relates solely to AIG's Reinsurance Share of Our claim against the Insurers under the CAR Policy for any and all losses that We have suffered either directly or indirectly arising out of the Loss Incident..
2 To accept payment of the sum of US$3,832,634.60 (the "Settlement Sum") in full and final settlement of that proportion of any and all claims that We may have arising either directly or indirectly out of the Loss Incident against the Insurers under the CAR Policy that are reinsured by AIG's Reinsurance Share.
3 That the Settlement Sum has been calculated as representing AIG's Reinsurance Share of an adjusted loss on a 100% (one hundred per cent) basis of US$19,213,173 net of the applicable deductible under the CAR Policy of US$50,000.
4 That this Settlement and Discharge is otherwise entirely without prejudice to Our rights against the Insurers and/or the Other Reinsurers for the remaining 80% (eighty per cent) of Our claim relating to the Loss Incident.
5 That payment by AIG of the Settlement Sum to AON (who shall be responsible for arranging the collection of such payment) as Our agent AND as the agent of the Insurers by 4pm GMT on [insert date] shall be in full and final settlement of any and all liability which the Insurers and AIG may have arising either directly or indirectly out of the Loss Incident under the terms of the CAR Policy and/or the Reinsurance Policy respectively in relation to AIG's Reinsurance Share AND in full and final discharge of any claim which We or any other interested party may have against the Insurers and/or AIG arising either directly or indirectly out of the Loss Incident under the CAR Policy and/or the Reinsurance Policy respectively relating to AIG's reinsurance Share.
6 That upon payment by AIG of the Settlement Sum to AON (as provided for under paragraph 4 above) We shall hold harmless and indemnify AIG in respect of any and all claims that may be pursued against them by any entity including without prejudice to the generality of this indemnity the Insurers or the Other reinsurers or their respective assignees or any other interested party from time to time who has an interest directly or indirectly arising out of the Loss Incident.
7 The terms of this Form of discharge shall be governed by and construed in accordance with English Law and any disputes arising hereunder shall be subject to the exclusive jurisdiction of the High Court of Justice of England and Wales."
"70. On 2 December 2009, Mr Esmail of KPC called me concerning the arrangements for implementing the agreement reached direct between AIG and KPC for partial settlement of the claim. Later in the day Mr Esmail sent me an email referring to that conversation.
71. In the course of my conversation with Mr Esmail, it was noted that KOC and Chartis had agreed between them, on the settlement of the Chartis proportion. Further Mr Esmail said that he wanted the other reinsurers to agree to this figure and for AIC to arrange for payment of the Chartis proportion and the local insurers retained proportion. However, I did not agree or suggest that the other reinsurers would agree the figure, nor did I agree on behalf of Chartis that it would pay its proportions, or that the Cedants would make payment in respect of their retentions. The steps summarised by Mr Esmail in his email were in effect demands by KPC as to how it wanted the claim to be processed. I have not experienced a situation before when Reinsurers had not agreed on the same course of action, and it was my expectation that the agreement of the Reinsurers, other than Chartis, that would be forthcoming once they had had an opportunity to consider the basis on which Robertson & Co. had assessed the value of the claim set out in its report. However, plainly I had to wait for them so to do."
"KOC/KPC has agreed on the final settlement @ US$19,213,173/-. Less deductible US$50,000/- = US$19,163,173/- (100%)
AIG will transfer their 20% share of US$3,832,634/60 upon receipt KOC signature on discharge receipt.
Now KPC is requesting to pay the AIG share plus Kuwait Co Insurers retained shares which shown as below:
Claim amount : $19,213,173/-
Less Policy Deductible :$____50,000/-
Total claim amount (100%)___________:$19,163,173/-
20% AIG Share :$3,832,634.60
Balance AON 69.5% FAC. Share :$13,318,405.24
Local Share (3%) :$ 574,895.19
AIC Share (7.5%)_________________ :$1,437,237.98
Total part payment to be made from AIC now:
Local :$ 574,895.19
The above is submitted for your approval to issue Discharge Receipt to above mentioned part payment."
At the bottom right of the memo, there is also to be found manuscript writing in Arabic which, it is common ground, is in Mr Al-Duhaim's hand and, in translation, reads: "No objection according to agreement with Suleiman Esmail of KPC" followed by the date 6 December 2009.
"As far as Reinsurers can tell, no account has been taken of the applicability of LEG2 in the Settlement Agreement between KPC and AIG, and Reinsurers can see no basis on which the value levels agreed correctly reflect these coverage issues.
It would certainly assist any further consideration of the situation if you could respond confirming either that no account of LEG2 was taken in agreeing the settlement or, if it was, then what value was attributed to the applicability of LEG2 in arriving at the settlement amount and how?
It would also assist Reinsurers to understand how it is intended that the settlement would be implemented. In this regard Reinsurers obviously have in mind the claims control provisions in the relevant reinsurance and for good orders sake have to make it clear that they have not provided their consent or approval to this settlement. I would appreciate your comments and clarification in that respect, so that Reinsurers can understand the position more completely ..."
"We would not expect them to move from their position on LEG2 until such time as they agree to settle or else this would compromise any future legal position they may need to take. We take the fact that they have asked for details of the Mouchel fees as a positive sign that they are prepared to consider the AIG offer once they have full information available.
We have responded to them with details of those fees and also this letter by advising that the global settlement reached between KPC and AIG took all aspects into account. I had sent reinsurers a copy of Mr. Esmail's Email dated 2 December and advised them that AIC were going to settle the claim in full to keep the pressure on, which is why they have made comment on this and mentioned the claim control clause. I deliberately remained silent on this in my reply to Beazley.
I am scheduling a further meeting with Swiss Re in an attempt to move this forward as quickly as possible."
"We refer to the above claim and are pleased to advise that 'AIG' have agreed to settle their 20% share of the total claim net amount of US$19,163,173/-. Accordingly AIG have requested to sign the attached "Form of Discharge" for AIG's 20% share which kindly return to us after signing with name, title, date on Page 2 of the attached form. On receipt of the above, we will be able to collect AIG share.
We also attach herewith discharge receipt for US$2,012,133.16 being the retained share of local coinsurers which also return to us after signing the same."
Neither the covering letter nor the AIC discharge receipt was stated to be without prejudice. However, importantly, the AIC discharge receipt stated in material part as follows:
"I/We, the undersigned [KOC] do hereby acknowledge the receipt from [AIC] the sum of USD2,012,133.16 in full compensation for the loss/damage under the [Insurance Policy] arising directly or indirectly from the subsidence at Tank No 84 which occurred at my/our AHMADI on or about Mar 15 2007.
In consideration of the above, I/We fully and finally discharge all liability and liquidate all claims against [AIC] arising under the [Insurance Policy] and admit that I/We am/are fully indemnified for all claims and have no further rights and claims against them in respect of the above mentioned loss/damage
This is a partial Payment
The remaining amount of the claim will be paid on receipt of remaining Reinsurers shares
"Since we are settling this claim as a partial payment (AIG share 20% plus Kuwaiti coinsurers shares i.e. US$3,832,634 + US$2,012,133.17 = US$5,844,767.77) therefore please confirm that the remaining balance of the Reinsurers will be paid in due course so that same is stipulated in AIC Discharge Receipt as required by KPC/KOC.
Also advise if any other reinsurers have agreed to settle this claim?
We await your quick response."
"As mentioned in our email dated 23.12.2009, please confirm that the remaining balance of the Reinsurers will be paid in due course so that same is stipulated in AIC Discharge Receipt as required by KPC/KOC. Also please advise if any other Reinsurers have agreed to settle this claim?"
"- the domestic insurers [the defendants], in respect only of their retained liability and the part of the risk reinsured with Chartis, have proposed payment on terms acceptable to the insurers and Chartis. That settlement is neither an admission of liability, a settlement or a compromise of that part of the claim that will remain unpaid following any agreed payment; ..."
In our view, therefore, we are seeking to effect settlement of our retained liability and that part reinsured by Chartis. That settlement will be without prejudice to the respective rights and liabilities of the insured and the insurer (as reinsured by parties other than Chartis) in respect of the balance of the claim."
The Kuwaiti proceedings
"With regard to the claims control clause issue, whilst this is of course a matter for the cedant and the reinsurers, as promised, we write to confirm that our clients have not concluded any settlement with the cedant, whether as regards the cedant's line or Chartis' line. In their letter of 29 April 2010, the cedant states that it will follow the reinsurers in all respects, and this is the current position "
The issues: discussion
i) In appointing Robertson as loss adjuster (who adjusted the claim up from US$6m to US$19m, without regard for LEG 2) without reference to Beazley or any of the claimants and in failing to allow Beazley or the other claimants to control adjustments and settlements in connection with the Tank 84 loss;
ii) In failing to allow Beazley or any of the Claimants to control the negotiations with KPC/KOC and instead in conducting those negotiations behind the backs of reinsurers other than AIG, despite Beazley being joint lead on the risk (of which fact for this very purpose it specifically reminded Aon on 27 July 2009) and despite the claims agreement parties under the Reinsurance Contract being Beazley, Transatlantic Re and Millennium;
iii) In admitting liability (on numerous occasions) for KPC/KOC's Tank 84 Claim without the prior approval of Beazley, Transatlantic Re and Millennium;
iv) In settling and/or compromising the claim without the prior approval of Beazley, Transatlantic Re and Millennium.
"I do not think that this is a case where it is necessary to resort to any principle of last resort in cases of real ambiguity, such as construction against the person putting forward the sub-clause for incorporation into the contract. In my judgment, only one of the two possible interpretations makes any commerial sense, and this should be adopted. I would add that there is anyway some room for doubt what, if any weight, could, even as a point of last resort, attach to the fact that Gan, as reinsurers, put forward this particular Claims Co-operation Clause. This Clause appears to have been required by Gan in lieu of a "Claims Control Clause" referred to in the broker's slip. It might be of interest to compare the two, to see if the Claims Co-operation Clause was, in a material respect, more stringent than a claims control clause though I appreciate that that observation assumes that the characteristics of the latter type of clause can be identified with some specificity. A second point that might have some materiality is that clauses such as the Claims Co-operation Clause are standard clauses, used in a range of reinsurances, where one might expect them to receive a uniform construction, whoever proposed them: cf Pioneer Shipping Ltd. v. B.T.P. Tioxide Ltd. (The "Nema")  A.C. 724, 737F-H, per Lord Diplock; and Miramar Maritime Corp. v. Holborn Oil Trading Ltd.  A.C. 676, 682C-F, per Lord Diplock. However that may be, I consider, as I have said, that there is no need or basis to invoke the principle of construction against the profferor in this case."
"A reinsurer of a reinsured's liability to a third party is prima facie liable to the extent of his subscription once it is ascertained that the reinsured is liable to that third party. A condition precedent to the liability of the reinsurer operates as an exemption to that prima facie liability. It is a well-established and salutary principle that a party who relies on a clause exempting him from liability can only do so if the words of the clause are clear on a fair construction of the clause, see Elderslie Steamship Co Ltd v Borthwick  AC 93, Gordon Alison & Co v Wallsend Slipway and Engineering Co Ltd (1927) 27 Lloyds Rep 285, Photo Production Ltd v Securicor Transport Ltd  AC 827, 850D851A per Lord Diplock and other cases cited in Chitty, Contracts, 29th ed para. 14-005. In my view the terms of the Claims Control Clause on which the Syndicates rely do not sufficiently clearly exempt them from liability."
Consistent with this passage, it is my conclusion that the CCC does operate as an exemption clause and that the claimants can only rely upon it if the words are clear on a fair construction of the clause.
CCC breach of sub-paragraph (b)?
"15 Sub-Paragraph (b) First sentence: Option or allocation of role?
Mr Flaux accepted that the words "any claims under this Policy" must mean claims for which Eagle Star were potentially liable to their insured but submitted that the first sentence of sub-paragraph (b) with its use of the word "shall" must either constitute an obligation on reinsurers to take control of negotiations or settlements or an option entitling them to do so if they chose. In the court below he had argued that it was an obligation but, before us, he recognised that that was an impossible construction. He relied on what he called the only possible alternative, that it gave a choice to reinsurers to take control if they wished to do so. The only time when this option arose was on the happening of the event in sub-paragraph (a) viz the notification to reinsurers of a claim or occurrence likely to involve them. If the option was not exercised at that time, it could not be exercised at a later date. There would be a reasonable time within which reinsurers could inform Eagle Star that the option was to be exercised but that had never happened in this case and they were therefore bound to follow Eagle Star's settlement. It would be too uncertain to construe the clause as meaning that reinsurers could take control at any time they liked; there was moreover no implied obligation on Eagle Star to give notice that they were about to negotiate or about to settle a claim. Any such implication would itself be uncertain since it would be difficult to decide whether any particular step taken whether by Eagle Star or by Varian was a negotiation. The clause would be unworkable, if reinsurers' construction were accepted.
16. Attractively as the argument was presented, I cannot accept it. The clear intent of the clause is that the reinsurers are to be entitled (not themselves to negotiate or settle but) to control any negotiation or settlement that takes place between Eagle Star and Varian. All that this requires is for Eagle Star to inform reinsurers when negotiations begin so that reinsurers can say (if they choose) what form the negotiations should take and what offers should be made. Likewise if Eagle Star propose to settle the case, reinsurers have to be informed and have to consent. Of course many reinsurers may be content to leave their reinsured to do the negotiation and settlement of claims but the reinsurers on this particular policy have stipulated for a decisive role. There is no true uncertainty, since it is not difficult to know when a negotiation of a claim begins; it is even easier to know when a settlement can be made. To construe the sub-paragraph as conferring an option would lead to at least equal uncertainty as that complained of by Eagle Star, because there may not be enough information for a decision to be made about controlling negotiations or settlements at the time when notice of claim is given. Sometimes notices of claim are informal and do not disclose very much often because the reinsured does not himself at that stage know a great deal. The examples of notification given in paragraph 7 of the Agreed Statement of Facts are typical and would not be informative for the purpose of making a once and for all decision as to controlling negotiations or settlement at those particular times.
17. For these reasons I prefer Mr Edelman's submission viz. that the function of sub-paragraph (b) is to allocate a controlling role to reinsurers. It will be for the reinsured to say if and when negotiations are about to take place to enable the reinsurers to decide whether to exercise control at that stage. The position will be similar if it becomes apparent that a settlement can be made. This does not mean that there is any obligation on the reinsured to inform reinsurers of any negotiations or settlement; it just means that if reinsurers do not control negotiations or settlement, then (subject to waiver or estoppel) reinsurers will not be liable."
i) First, quite apart from Mr Bukhari's evidence with regard to his limited authority, it seems to me inherently unlikely that Mr Bukhari would himself have engaged in any negotiations in the course of this telephone call seemingly out of the blue from Mr Esmail. The amounts concerned were very substantial and it seems to me highly likely that anything which Mr Esmail said in that context would have to have been passed up the line to Mr Al-Duhaim.
ii) Second, although I accept that the email dated 2 December 2009 is somewhat jumbled and not absolutely clear in part, it is, in my view, consistent (or at least more consistent) with Mr Bukhari's evidence. In particular:a) At the beginning, it refers to what KOC has agreed with Mr Capewell of Robertson but Mr Calver QC (now) accepts that the latter was acting for AIG only and I do not read anything in the email to suggest that Mr Bukhari engaged in any negotiations with regard to that element of the claim.b) With regard to the balance of the claim, although the opening words say that "as discussed", AIC " to proceed on the following basis " , it seems to me that Mr Esmail was simply setting out what were, in effect, his demands or expectations as to what should happen both with regard to the issuance of the discharge receipt in respect of AIG's share and the Kuwaiti co-insurers' shares. Despite Mr Calver QC's strong submissions to the contrary, I do not read the first bullet of the email (which was the highpoint of Mr Calver QC's case) as evidencing any "negotiations" relating to these matters still less that Mr Bukhari agreed to the course indicated.c) The third bullet point makes plain that AIC was to follow up with Aon " to obtain approval of the remaining balance of Reinsurers (sic ...)".d) The penultimate sentence also would seem important in that is requests Mr Bukhari to " keep us posted on the progress of the claim approval ".
iii) Third, the memo prepared by Mr Gharaibeh also confirms the above: the opening words "KOC/KPC has agreed on the final claim " can only be a reference to what KOC/KPC considered had been agreed through Robertson with AIG (which is no longer relied upon by Mr Calver QC); the third sentence uses the present tense i.e. "Now KPC is requesting "; and the last sentence makes plain that the memo is being submitted for the purpose of obtaining Mr Al-Duhaim's approval.
CCC breach of sub-paragraph (c)?
i) The claimants' primary case was that there was here a settlement by AIC on behalf of all the defendants of the entirety of KOC's claim of US$19,163,173; or at least AIC admitted liability on behalf of all the defendants for that full claim of KOC.
ii) KOC and AIG agreed a settlement of the claim in the sum of circa $19m. AIC then approved that settlement in full by adopting it and admitting liability to KOC for such sum in December 2009, in particular by agreeing to issue a discharge receipt for the balance of the sum after it had made "part payment" of this sum. It was a "part payment" precisely because AIC had admitted liability for the full sum, albeit that it anticipated getting the money in from the reinsurers. This agreement was reached and/or admission was made in the course of the telephone call between Mr Bukhari and Mr Esmail on 2 December and was further contained in or evidenced by the email from Mr Esmail of that date and various further documents which Mr Calver QC relied upon.
iii) In particular, AIC repeatedly admitted liability for the claim to KPC on and after 2 December 2009. It did so (a) by agreeing to pay to KPC under its insurance policy a sum which reflected AIG's 20% share of the reinsurance; (b) by agreeing to pay to KPC under its insurance policy its 10.5% retained share. It also did so by agreeing to issue a discharge receipt for the balance of the $19m settlement sum; and (c) by agreeing to pay that sum over to KPC without more upon recovery from its reinsurers.
iv) Alternatively, there was on any view a settlement or compromise by AIC of at least part of KOC's claim i.e. AIG's share (20%) and/or the defendants' share (10.5%). There was also an admission by AIC that KPC had a valid claim under the Reinsurance, whereas Reinsurers were maintaining that LEG2 eliminated the claim. That was an admission of liability.
v) On any view, in December 2009 AIC had bound itself to dispose of this part of KOC's claim. Mr Bukhari agreed with that. There does not have to be a formal settlement agreement drawn up. Nor is it correct to assert (as the defendants do) that the discharge receipt would only have brought about a settlement once payment of the cedants' retained share had been made and that payment was never made. Payment was simply a consequence of the settlement agreement which Mr Bukhari accepted had already been reached. The discharge receipts were merely the mechanics of payment under the settlement, which had already been reached.
vi) The foregoing conduct was a breach of clause (c) of the CCC because AIC did not seek the prior approval of Beazley, Trans Re or Millennium to this settlement or before admitting liability it did not even tell Millennium what was happening.
vii) Nothing that AIC agreed with KOC was expressed to be agreed without prejudice. Mr Bukhari did not suggest that that was so. In any event without prejudice settlements certainly do fall within the scope of clause (c). Clause (c) is widely worded: it prohibits any form of settlement and/or compromise. That can cover all types of settlements and compromises.
"What" settlement/compromise or admission of liability?
i) Without prejudice settlements certainly do fall within the scope of clause (c). Clause (c) is widely worded: it prohibits any form of settlement and/or compromise. That can cover all types of settlements and compromises.
ii) The settlement may be an oral settlement; or it may be a settlement recorded in writing but not contained in a formal settlement agreement. It may include without prejudice settlements or ex gratia settlements (an ex gratia settlement being one that is made where there is a payment of money by the insurer to the assured where there was no liability under the policy to indemnify the assured). It does not exclude such settlements from its scope.
iii) If what is meant by a without prejudice settlement in this context is a settlement agreement where the liability of the insurers is not admitted, then it also makes sense that such settlements should be caught by the first part of sub-paragraph (c) because it gives meaning to the rest of the clause concerning the separate requirement to obtain approval for admissions of liability.
iv) A without prejudice settlement (in the sense of not admitting liability for the claim under the policy) without reinsurers' approval is caught by the clause; additionally, an admission of liability without reinsurers' approval is caught by the next part of the clause.
v) The intention of the clause is that there should be no steps taken to dispose of the claim without reinsurers' prior approval. This was particularly important where the underlying policy was governed by a different legal system Kuwait and so the effect of a without prejudice settlement as a matter of Kuwaiti law would be far from certain.
"Admission of liability"
Settlement/Compromise/Admission on 2 December 2009
6 December 2009
16 December 2009
14/18 January 2010