Jurisdiction in cross-border insurance disputes (UK)
In this judgment, the English High Court decided two anti-suit injunctions to stop similar proceedings in two jurisdictions, one pursued by a London insurance broker and the other by London-market reinsurers, regarding claims maintained to prevent victims of an aviation accident from pursuing claims against them in Florida, USA.
The court reached different conclusions for each: the proceeding against the broker in London were continued, because the claims against it were in substance derived from a contract containing an exclusive English jurisdiction clause; The injunction brought by the reinsurers failed because England was not the most appropriate forum for the claim against them in Florida which was not vexatious or oppressive.
A Bolivian airline’s aircraft crashed near Medellín, Colombia, while transporting a Brazilian football team, killing 71 persons. Investigations concluded that the aircraft ran out of fuel due to failures in flight planning and operational management by the airline. The airline held aviation liability insurance from a Bolivian insurer, fully reinsured in the London market, with a combined limit of USD 25 million. Both policies excluded cover for flights to Colombia. The insurer declined coverage after the accident. The reinsurers and the insurer subsequently concluded a deed of release, governed by English law and subject to the exclusive jurisdiction of the English courts, under which the reinsurers funded a USD 25 million humanitarian assistance fund without admission of liability.
Survivors and the personal representatives of the deceased obtained a default judgment against the airline in Florida and sought to join the broker and the reinsurers to the proceedings. The claim against the broker was for negligent procurement of inadequate insurance. The claim against the reinsurers was for bad-faith failure to defend the airline, with damages claimed in excess of USD 800 million. Both the broker and the reinsurers obtained, without notice, anti-suit injunctions from the English court. The broker’s terms of business with the airline contained an exclusive English jurisdiction clause requiring disputes to be resolved in England.
The court found that the victims’ claim against the broker was in substance a claim to take the benefit of the broker’s obligations to the airline. The victims had no direct dealings with the broker; their sole basis for a claim was the broker’s alleged failure to perform its contractual and delictual duties to the airline. The court characterised this as a “quasi-contractual” claim, applying the same decision-making framework as in a wholly contractual context. In doing so, the court relied on the “derived rights” doctrine. Where a third party seeks to enforce obligations arising from a contract, English law generally requires that party to accept the conditions attached to these contractual obligations, including an agreement on where disputes must be heard.
The court further held that even if the broker’s underlying duty was framed in delict, the contractual terms, including the jurisdiction clause, conditioned and restricted any such delictual duty. This was because the alleged legal duty arose from the broker’s undertaking to perform obligations that were the subject of the contract with the airline. The court considered whether delay in seeking the injunction amounted to a strong reason to refuse relief. It found that, while the broker had not acted promptly in seeking relief, having waited approximately five months after becoming aware of its potential joinder to the Florida proceedings, the delay was excusable and when weighed against the desirability of enforcing the jurisdiction clause, did not justify refusing the injunction.
The reinsurers had no contractual jurisdiction clause binding the victims and relied solely on the argument that the Florida proceedings were vexatious and oppressive. To succeed, they were required to show that England was the most appropriate forum and that justice required restraining the Florida proceedings.
The court found that England was not the most appropriate forum. The claim against the reinsurers was for bad-faith failure to defend, which was a cause of action arising under Florida law. The relevant issues were: the existence of coverage, the obligation to defend the airline, the reasonableness of the settlement, and whether the claim could have been resolved within policy limits. Of these four issues, only the first (the existence of coverage) had any connection to England through the English-law reinsurance arrangements and deed of release. The remaining three were entirely centred on the Florida proceedings.
Although the court stated that it would have dismissed the claim on its merits, it emphasised that this was not its task. Expert evidence from both sides confirmed that the claim was not frivolous under Florida law and that the Florida court would afford the reinsurers a fair hearing. The court held that comity required it to refrain from interfering with the adjudication of a claim by the court under whose law the claim arose. The reinsurers’ delay of several months in seeking relief was a further material factor against the grant of injunctive relief.
For South African insurers and reinsurers, exclusive jurisdiction clauses governed by South African law are generally enforceable, but they only bind the parties to that agreement. In this judgment, the broker’s jurisdiction clause was upheld because the victims’ claims arose from the broker’s contractual obligations to the airline. The reinsurers had no equivalent clause binding the victims and were accordingly directed to proceedings in Florida.
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