The following case summaries have been written by Professor Rob Merkin who is a consultant to the insurance and reinsurance and international arbitration teams.
Links have been provided to copies of the judgments on Bailii wherever possible.
Lavrador v Companhia de Seguros Fidelidade-Mundial SA Case C-409/09
A young boy riding a bicycle on the wrong side of the road was killed in a collision with a motor vehicle. The driver was not to blame in any way. The deceased’s parents commenced a direct action against the insurers, claiming damages. Portuguese tort law, as embodied in the Civil Code, stated that in the event that the injured person had contributed to his injury the court was to apportion liability accordingly, and on the facts damages were refused.
The Portuguese court considered whether the outcome was consistent with the Motor Insurance Directives, as consolidated and referred the question to the European Court of Justice (ECJ). The ECJ reconfirmed the principle that national provisions governing compensation for road accidents could not deprive the Directives of their effectiveness. This would be the case if the victim’s responsibility for damage suffered by him resulted in the automatic exclusion or disproportionate limitation of his right to compensation by means of compulsory insurance against civil liability in respect of the use of motor vehicles for the damage caused by the insured person. On the facts, there was nothing in the Directives which precluded national provisions of civil liability law that allowed the exclusion or limitation of the right of the victim of an accident to claim compensation by reason of his own exclusive or partial contribution to the loss.
For further information: Ambrosio Lavrador and Olival Ferreira Bonifacio (Approximation of laws)  EUECJ C-409/09 (09 June 2011)
John Youngs Insurance Services Ltd v Aviva Insurance Service UK Ltd  EWHC 1515 (TCC)
Youngs entered into an agreement with Aviva under which Youngs provided claims handling and building repair services for Aviva. A series of preliminary issues on the construction of the agreement arose. The court ruled as follows:
- In relation to claims handling services, where Youngs decided whether a claim was valid and what the cause of damage was, Youngs owed a fiduciary duty. However, they did not owe a fiduciary duty in carrying out the survey, assessing the scope of the work, producing estimates and carrying out repairs. It followed that Youngs were not required to produce documents relating to the non-fiduciary aspects of their work.
- However, the contract itself provided for Youngs to keep detailed accounting information and for Aviva to have full access to that information.
- Youngs’ equitable duty to account continued in respect of claims validated up to the date of the termination of the contract, but Youngs’ contractual duty to provide information and documents was limited to unpaid invoices at the date of termination.
- Youngs were entitled to be paid an amount to offset any under-recovery of overheads by reason of the termination of the agreement.
For further information: John Youngs Insurance Services Ltd v Aviva Insurance Service UK Ltd  EWHC 1515 (TCC) (14 June 2011)
Beazley Underwriting Ltd v Travelers Companies Inc  EWHC 1520 (Comm)
On 16 May 1997 Travelers sold the Minet Group of insurance brokers, to Aon, and issued a deed of indemnity to Aon. Under clause 2.1 of the deed, Travelers agreed to indemnify Aon against any loss, liability, claim or cost arising directly or indirectly out of any event or matter occurring on or before 16 May 1997. The indemnity excluded any obligations of any subsidiary of Aon arising out of its own negligent act, breach of duty, error or omission. Clause 4.14 of the deed provided that where there was a continuing series of related events, occurrences or matters which amounted to, or would amount to, an indemnified claim then such events occurrences or matters occurring during the period of 12 months following completion would be deemed to have arisen or occurred prior to completion.
A claim was made against Aon by Standard Life in respect of a professional indemnity policy. The excess in the policy in 1994 permitted aggregation of claims arising from a common cause or source. But, when the insurance was renewed in 1995, the excess was amended so as to read “claim and/or claimant”, and was raised from £2.5 million to £25 million. The policy was renewed by Minet in 1997, and was renewed for the period 1998-2001 by Aon as purchasers of Minet. In Standard Life Assurance v Oak Dedicated  Lloyd’s Rep IR 552 Tomlinson J held that the policy excess applied separately to each claimant making a claim against Standard Life so as to preclude aggregation of separate claims arising from a common cause, so that Standard Life were prevented from making any recovery at all under its insurance. Aon claimed against Travelers under the deed, and Travelers settled Aon’s claim in the sum of US$32.5 million. Travelers sought to recover this sum from its own insurers, who had issued two liability policies for US$20 million. The policy wording applied “in respect of any claim arising out of a wrongful act of any of the Minet Companies and/or liability it may incur under the Deed of Indemnity”. Clause 2.1 stated that “a series of events, occurrences or matters occurring during the 12 months following the date of sale related to any wrongful act occurring prior to the date of sale shall be deemed to have arisen or occurred prior to the date of sale”. Christopher Clarke J held that the insurers were not liable to Travelers.
- Travelers were as a matter of law not liable under the deed of indemnity. The only act of negligence relevant to the loss occurred in respect of the placement of the 1998 renewal and the earlier negligent renewals could not be regarded as a series of related events. The earlier negligent placements had not given rise to any claims. Further, Aon’s liability to Standard Life arose out of its own negligence, and not that of Minet.
- The policy did not respond to the claim by Standard Life against Aon. The cover afforded by the policy was one in respect of liability in relation to claims made against the Minet companies for breach of duty arising out of and in the course of the activities of the Minet Group in respect of wrongful acts committed prior to the date of sale by Minet. It reflected the deed of indemnity.
- In any event, Aon’s negligence occurred more than 12 months after the date of the sale, 16 May 1997, in that Standard Life’s professional indemnity policy was not placed prior to 16 May 1998. The slips scratched prior to that date were subject to satisfactory reinsurance, proposal forms and completion of a millennium (Y2K) questionnaire. The reinsurance subjectivity was not removed before 16 May, and the proposal forms and Y2K subjectivities were in force until the final placing slip without subjectivities which began to be scratched on 11 June 1998. The slips scratched before 16 May 1998 were quotation slips and they were not unconditionally accepted. The inclusion of subjectivities meant that the acceptance was qualified and that there had been no acceptance of the offers. The three subjectivities were not routine or administrative. The subjectivities could not be regarded as giving rise to binding but conditional contracts. The subjects themselves were matters which, of their nature, were required to be satisfied before underwriters accepted the risk. In those circumstances the natural construction of the scratches with accompanying subjects was that the underwriters were not on risk until the subjects were satisfied. Further, the scratches did not create a held covered insurance under which the insurers agreed to hold the assured covered for a finite period pending the satisfaction of the subjectivities.
For further information: Beazley Underwriting Ltd & Ors v The Travelers Companies Incorp.  EWHC 1520 (Comm) (17 June 2011)