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INTERNATIONAL MARINE CLAIMS CONFERENCE

Dublin1 October 2004

Tim Taylor

Barlow Lyde & Gilbert

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Communication

What's the worst that can happen if it breaks down

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Topics

Dual Role of Advisers

The English approach

Follow Leader Clause

Claims and Underwriting

Practical Issues

Split markets

Relations with brokers

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Dual Role of Advisers

The US experience

English approach

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Basic Rules

Instruction for both underwriters and insured to defend claim

What happens if lawyers discover something detrimental to coverage?

Lawyer can and must report to underwriters matters relevant to coverage (Brown v Guardian Royal Exchange [1994])

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Limitations

Joint retainer, the insured waives solicitor/client privilege

Waiver is limited

Duty not to act in bad faith (TSB Bank v Robert Irving & Burns [2000])

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Role of Leading Underwriter

No duty of care to followers when risk first bound

Case law suggests position changes post placing

The “LEEGAS” [1987]

“Underlying the whole relationship between the leading underwriter and the following underwriters, furthermore, is the former’s manifest duty of care”

If leader is negligent theoretically followers could sue for damages

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Agency or Trigger

Conflicting authorities

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Mander v Commercial Union [1998]

Leader not agent when agreeing declarations to an open cover. The lead acts as a “trigger”

“It is agreed with or without previous notice to follow British underwriters in regard to agreements, alterations, extensions, additions, endorsements….”

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Charman v Roadworks [1994]

A slip can evidence the terms of a contract of agency between the leader and followers

What if there is no slip?

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Scope of Leader Clauseon Placing

Very wide in LEEGAS

“Any amendments, additions, deletions, including new and/or acquired and/or managed and/or chartered, notices of assignment, ratings and alternations of any description to be agreed by Leading Underwriter and to be binding on all others hereon”

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BP plc v GE Frankona & Others [2003]

“it is agreed to follow automatically all additions and/or deletions and/or amendments and/or alterations of any description whatsoever therein, Underwriters hereon waiving advice hereunder and also to follow all claim settlements made by the Leading Underwriters of this policy ……..without exception”

Held

“The Leading Underwriters clause was not concerned with declarations to the Open Cover “

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Claims Situation

Practice varies

No general rule that decision of leader binds followers (Paul Tudor Jones v Crowley Colosso [1996])

LMP Protocols

Claims management controlled by leader and “agreement parties”

International Placings?

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International Markets

DTV German Conditions Hull 1978

Leaders have powers

+ to provide bail

+ to make amendments (other than for increases in value) and settle claims which are binding on followers

+ commence proceedings

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Norwegian Plan

Article 9-Powers of claims Leader

“Unless otherwise agreed, the claims leader is entitled to take the steps referred to in §§ 9-3 to 9-9 with binding effect on the co-insurers. In all such cases he shall, as far as possible, take into consideration the interests of all the insurers. If time permits he should, in cases of importance, consult those co-insurers of whose existence he is aware”

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International Hull Clauses

Cl 45 “Where there is co-insurance in respect of this insurance, all subscribing Underwriters agree that the Leading Underwriter(s) designated in the slip or policy may act on their behalves so as to bind them for their respective several proportions in respect of……….”

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the appointment of surveyors, experts, average adjusters and lawyers

the duties and obligations to be undertaken by the Underwriters including, but not limited to, the provision of security

claims procedures, the handling of any claim and the pursuit of recoveries

all payments or settlements to the Assured or to third parties under this insurance other than those agreed on an ‘ex-gratia’ basis.

the Leading Underwriter(s), or any of them, may require any such matters

to be referred to the co-subscribing Underwriters.

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Responsibilities of Leader in Claims Situation Under English Law

Leader can only agree claims within protocol

Ex gratia settlements not (usually) included

Roar Marine v Bimeh Iran Insurance Co [1998]

“It is agreed with or without previous notice to follow leading British Underwriters in regard to agreements, alterations, extensions, additions, endorsements and cancellations and attaching and expiring dates, and also in regard to all decisions, surveys, the providing of bail and settlements in respect of claims and returns, but excluding ex gratia and without prejudice settlements.”

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Can Follower Sue Leader?

If a leader settles a claim (negligently) outside cover

The following market is bound to follow and pay claim but could claim against leader

If there is an agency, probably under normal principal/agency rules

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If no agency, is there a duty of care?

LEEGAS supports view that leader owes duty of care to following market

“Underlying the whole relationship between the leading underwriter and the following underwriters, furthermore, is the former’s manifest duty of care.”

Doubted in Roar

“The law does not have to afford a legal remedy for every conceivable failure to behave properly or professionally “

Not happened yet………….but

Key issue is for leaders to communicate in difficult cases or include a hold harmless clause in the slip

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Dangers

Leaders should be careful not to act outside their authority

Advisers should not give the impression that all followers support a position unless that is clear

More important when international split markets are involved

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Practical Issues

Be alert to the risks

Communicate with other markets

Do not assume that the rules in other markets are the same

Relationship with brokers

Varies in different markets