The Insurance Disputes Law Review: United Kingdom - England & Wales


English insurance law has traditionally been perceived as insurer friendly, and as a result England and Wales has been viewed as an insurer-friendly jurisdiction for insurance disputes. To a large extent this is the product of English legal history, with many of the most significant developments in English insurance law taking place in the context of marine insurance or similar overseas risks. Until as recently as 2015, the leading statute in English insurance law remained the Marine Insurance 1906 (the 1906 Act) (much of which also applied to non-marine insurance). In those risks at that period of history, the informational asymmetry between the insured and the insurer was especially acute. To resolve that asymmetry, English insurance law placed onerous duties of disclosure and compliance with warranties on the insured, with potentially drastic consequences for failure, even if entirely innocent.

However, that historic imbalance has recently been partly redressed by the Insurance Act 2015, the most important development in English insurance law since the Marine Insurance 1906. The Insurance Act recasts the insured's duty of disclosure, the ability of insurers to convert pre-contractual representations into warranties, and sets out a new regime of proportionate remedies for insurers. At the time of writing there have been very few disputes under the new law, and so it remains to be seen precisely how it will be applied. There are also indications that insurers are seeking to contract out of many of the provisions of the Act where possible in commercial policies. The first significant disputes to test the new regime are anticipated in the next couple of years.

The legal framework

i Sources of insurance law and regulation

English insurance law is a mixture of common law (drawn from cases before the courts) and statute. Many of the principles developed during early insurance disputes, including the duty of 'utmost good faith' were codified in the 1906 Act, which continues to influence insurance law in the UK, US and Commonwealth jurisdictions. Although the 1906 Act expressly governs marine insurance, many of its sections and principles are also applicable to non-marine insurance contracts, and it was the most significant statute in English insurance law until the Insurance Act 2015 came into force on 12 August 2016.

Other key statutes regulate risk-specific insurance contracts. For example, the development of life and fire insurance contracts led to the Life Assurance Act 1774 and Fire Insurance Duty Act 1782, key parts of which remain in force today. General consumer legislation, such as the Consumer Rights Act 2015, also applies to consumer insurance contracts.

Firms providing insurance, reinsurance services or insurance intermediation must be authorised to do so under the Financial Services and Markets Act 2000 (FSMA). The Prudential Regulation Authority (PRA) is responsible for the authorisation of such firms. The Financial Conduct Authority (FCA) regulates the conduct of authorised firms, and the FCA's Insurance Conduct of Business Sourcebook (ICOBS) applies to the sale of general and protection insurance products, outlining expected standards for insurers such as the maintenance of suitable customer information, appropriate product disclosure and fair claims handling. Commercial parties are not required to take out insurance with local providers, although any entities wishing to sell insurance products in England and Wales must be FCA-authorised.

We cover the recent developments in the common law in Section III below, but English insurance law has also seen substantial statutory revision (or restatement) in recent years. The four significant recent statutes are:

  1. the Enterprise Act 2016, which for the first time provides policyholders with a potential right to claim damages in the event of a late payment of a claim by an insurer. Prior to the Enterprise Act 2016 policyholders could not recover any additional losses they suffered as a result of undue delay in payment of a claim by an insurer;
  2. the Third Party (Rights against Insurers) Act 2010 (updating the 1930 legislation with the same name) updated and strengthened the regime whereby a third party with a claim against an insolvent insured can, following the insolvency, pursue that claim directly against the insolvent insured's insurers. The insurer continues to have any defences available to the insured in the third party's claim, and any defences that the insurers may itself have under the terms of the relevant policy;
  3. the Consumer Insurance (Disclosure and Representations) Act 2012 (or CIDRA), which applies only to consumer insurance contracts, limits the consumer's duty of disclosure, establishing that an insurer must ask appropriate questions to which the consumer must answer honestly and carefully; and
  4. the Insurance Act 2015 (the Insurance Act) applies to both consumer and business insurance contracts entered into from 12 August 2016. The most significant developments to English insurance law now codified in the Insurance Act are:
    • The Insurance Act alters the policyholder's duty of disclosure in non-consumer insurance. Prior to the Insurance Act, the insured was under an onerous duty to disclose all known material facts about the risk to be insured. A failure to disclose any material fact would entitle the insurer to avoid the policy (and so avoid paying any claims), if the insurer could show that, if that fact had been disclosed, it would not have written the policy on the terms it in fact did (or not written it all). The ability to avoid arose whether the non-disclosure was fraudulent, negligent or indeed innocent. As a result, insurance disputes in England were often characterised by searches for, and arguments over, alleged non-disclosures. The Insurance Act replaces that duty with a new duty on the insured to make a fair presentation of the risk to be insured. The insured must now disclose all material circumstances that it knows or ought to know, or to provide sufficient information to place a prudent insurer on notice to make further inquiries. Thus the burden is shifted in part onto the insurer. For policies entered into after 12 August 2016, it will be enough for an insured to disclose sufficient information to place a prudent insurer on notice to make further inquiries. If the prudent insurer's enquiries would have revealed a material circumstance that was not disclosed, but the actual insurer made no such enquiries, the insurer may no longer be able to avoid the policy for non-disclosure. Further, if the insurer can establish a breach of the duty to make a fair presentation of the risk that induced it to write the policy, it will no longer be automatically be entitled to avoid the policy. To do so the insurer will now need to show either that the breach was deliberate or reckless, or that if a fair presentation had been made it would not have insured the risk at all. If the breach is not deliberate or reckless, and the insurer can only show that it would have insured the risk on different terms (e.g., for a higher premium), the insurer's remedy is to treat the policy as though it were written on those different terms.
    • The Insurance Act includes new provisions relevant to breach of warranties in insurance policies. Whereas a breach of warranty previously discharged an insurer from liability under a policy from the date of breach, the Insurance Act introduces proportionate remedies, abolishing any rule of law that maintains a breach of an express or implied warranty results in automatic discharge of the insurer's liability. For example, if the breach is neither deliberate nor reckless and the insurer would still have entered the contract, the insurer is only able to reduce cover on a proportionate basis; if breach is neither deliberate nor reckless but the insurer would not have contracted, the insurer is able to avoid the contract but must return the premiums to the insured. Any policy terms purporting to convert pre-contractual representations made by the insured into a warranty (known as 'basis of contract' clauses) will no longer have effect.
    • The Insurance Act clarifies the remedies available to an insurer in the event an insured makes a fraudulent claim. If a fraudulent claim is made, the insurer is not liable for any part of that claim, and can terminate the policy from the date of the fraud. However the insurer cannot avoid the policy altogether, and remains liable for genuine pre-fraud claims.

i Insurable interest

English law has historically maintained that for an insurance contract to be valid the insured must have an insurable interest in the subject matter of the policy. An insurable interest is a legal or equitable interest in the subject matter of the insurance, or some interest short of a legal or equitable interest that means the insured would suffer disadvantage or be deprived of an advantage should the risk manifest.

The historic centrality of insurable interest to the concept of insurance in English law means that certain types of derivative contracts, such as credit default swaps which in many ways economically mirror an insurance arrangement, are not considered (or regulated) as insurance contracts in English law.

Following recent legislative reform there is uncertainty as to whether an insurable interest is a common law requirement or an indirect statutory requirement. Prior to the Gambling Act 2005, there was a clear statutory basis for insurable interest. The 1906 Act codified the general rule of law (for marine insurance) into a statutory requirement; the Life Assurance Act 1774 rendered life and contingent insurance contracts void without an insurable interest; and the Gaming Act 1845 created an indirect requirement for an insurable interest in all other contracts of insurance.

The Gambling Act 2005, which was intended to regulate new types of gambling activities, removed the 1845 Act's indirect requirement for insurable interest. As the Act did not intend to affect insurance, the impact of the 2005 Act on insurable interest may be limited. However, uncertainty now exists as to the exact legal basis of insurable interest, and proposals by the Law Commission of England and Wales to include a statutory definition of insurable interest in the Insurance Act 2015 were rejected. Nevertheless, the English and Welsh and Scottish Law Commissions are currently consulting on a draft Insurable Interest Bill to introduce a statutory definition of insurable interest.

i Fora and dispute resolution mechanisms

Insurance disputes with a value greater than £100,000 will generally be heard at first instance in the High Court. The Commercial Court, a specialist court within the Business and Property division of the High Court, has specialist judges with insurance experience and will be the most common forum for large insurance disputes. If a claim is greater than £50 million and raises issues of general importance to financial markets, it may be heard on the 'Financial List', a specialist cross-jurisdictional list established to handle claims related to the financial markets. At first instance the dispute will be heard by a single judge.

Appeals from the High Court are heard in the Court of Appeal, usually by a panel of three Lord Justices of Appeal. To appeal to the Court of Appeal the appellant will need to obtain the court's permission, and to obtain this will need to show that, where the appeal is a first appeal (i.e., the decision being appealed is not itself an appeal from a lower court), the appeal would have a real prospect of success or there is some other compelling reason for it to be heard. Where the appeal to the Court of Appeal is a second appeal (i.e., the decision being appealed is itself an appeal from a lower court) the appellant will need to show that the appeal would have a real prospect of success and either it raises an important point of principle or practice, or there is some other compelling reason for it to be heard.

Appeals from decisions of the Court of Appeal are heard in the UK Supreme Court (the UK's highest court), usually by a panel of five Justices of the Supreme Court. Again, the appellant will need to obtain permission to appeal, which will only be granted if it can be shown that the appeal raises an arguable point of law of general public importance which ought to be considered by the Supreme Court.

Claims with a value less than £100,000 will be heard in the relevant county court (which is usually the local county court of the defendant). The Financial Ombudsman Service (FOS) can also independently review and settle non-contentious complaints between an insured and insurer. The FOS is primarily designed to deal with complaints by individual consumers, but complaints can also be brought by, or on behalf of, small businesses who, as customers, use financial services. To qualify, the business making the complaint must have an annual turnover of less than £6.5 million, and fewer than fifty employees or a balance sheet total of less than £5 million. Decisions of the FOS are binding on insurers, and can only be challenged by judicial review.

The English courts encourage alternative dispute resolution (such as mediation) both before and during arbitral or litigation proceedings. An unreasonable failure to engage in alternative dispute resolution may lead to the refusing party being required by the court to pay more of the other party's legal and other costs of pursuing the claim (or receiving less of their own costs if successful). Mediation is the most widely used form of alternative dispute resolution in insurance disputes, but other alternatives include expert determination, adjudication, and early neutral evaluation.

It is common for English law governed insurance contracts to contain a London-seated arbitration clause. The QMUL 2018 International Arbitration Survey identified London as the most popular choice of seat for arbitration and the London Court of International Arbitration as the most popular institution after the International Chamber of Commerce's International Court of Arbitration. London also remains a popular choice of seat for arbitrations arising out of Bermuda Form excess liability insurance policies. Bermuda Form policies often achieve a trans-Atlantic balance between the perceived insurer-friendly laws of England, and the perceived insured-friendly laws of New York, by providing for the policy to be governed by New York law but for disputes to be resolved in London seated-arbitrations (and thus in in accordance with English procedural law).

Under the Arbitration Act 1996, an arbitral award issued by a London-seated tribunal can only be challenged in the English courts on the basis:

  1. that the arbitral tribunal did not have substantive jurisdiction (Section 67);
  2. of a serious irregularity affecting the tribunal, the proceedings, or the award, and which has caused or will cause substantial injustice (Section 68). The types of serious irregularity are set out in Section 68(2) and range from the tribunal exceeding its powers to the failure of the tribunal to deal with the issues that were put to it; and
  3. of a question of law (Section 69). To challenge an award on this basis requires leave to appeal from the court (which is not required for a challenge under Sections 67 or 68), which will only be given if the decision of the tribunal on the question of law is obviously wrong, or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt.

While it is common for London-seated arbitral agreements to exclude appeals on the grounds of a question of law, it is not possible to exclude appeals regarding substantive jurisdiction or serious irregularity.

Recent cases

There have been a number of significant cases in the English courts , including three recent decisions of the Supreme Court on matters as diverse as the interpretation of the scope of cover of a standard form motor vehicle policy to the rights of third parties to access documents held by the Court. We summarise below the key recent cases in the order of the life of an insurance policy and claim, with recent cases extending or clarifying English law in areas including the interpretation of policy terms, notification, the parties to and jurisdiction over a claim, and the quantum of an insured's loss. In addition, there have been two significant judgments in the field of claims under employers' liability insurance arising out of asbestos-related diseases, where English law has evolved a bespoke set of principles to deal with the unusual causation problems which those claims raise. We also cover a case in the Scottish Court of Session, which is the first case in the United Kingdom to consider aspects of the new duty of fair presentation of the risk in the Insurance Act.

i Fair presentation of the risk

The Insurance Act replaced the insured's duty to disclose all known material facts about the risk to be insured with a new duty to make a fair presentation of that risk. The scope of this new duty has yet to be considered by the higher English Courts. However the Insurance Act applies to the entirety of the United Kingdom, and in Young v. Royal and Sun Alliance Plc the Scottish Court of Session (Outer House) considered the effect of a question on a proposal form on the insured's duty to disclose facts related to but not sought by the question in the context of the new duty to make a fair presentation of the risk. The Court of Session concluded that the Insurance Act had not altered the common law position that an insurer will only waive compliance by the insured with its duty to disclose where:

  1. the insured disclosed information that would prompt a reasonably careful insurer to make further inquiries and the insurer failed to do so; or
  2. the insurer asked a limiting question from which a prospective insured might reasonably infer that the insurer had no interest in knowing, and had waived, information falling outside the scope of that question.

In Young, the Court of Session rejected the argument that a question in a proposal form seeking information on the insolvency history of the proposed insured company amounted to a waiver of the requirement on the proposed insured to disclose the insolvency history of other companies of which its principals had also been involved.

ii Interpretation of policy terms

The terms of an English law governed insurance policy are to be interpreted in accordance with the ordinary principles of the English law of contractual interpretation, which requires the words used in the contract to be given the meaning they would convey to a reasonable person with all of the background knowledge available to the parties. Those principles were most recently restated in Wood v. Capita, which emphasised that contractual interpretation is a unitary exercise, in which the Court must engage in an iterative process of balancing the indications given by the factual background and a close examination of the relevant language.

Two recent cases illustrate the flexibility that the English law of contractual interpretation still gives the English Courts to resolve cases where a policy term that cannot sensibly be given its literal meaning. In R&S Pilling t/a Phoenix Engineering v. UK Insurance Ltd, the Supreme Court was prepared to read an entire additional phrase into the coverage clause in a motor vehicle insurance policy so that it met the compulsory requirements of the Road Traffic Act 1988. The Supreme Court restated the principle in Chartbrook Ltd v. Persimmon Homes Ltd that a court may construe a different meaning to a commercial contract where it is clear that the parties could not reasonably have intended the meaning of the existing language. However, the Court reiterated that such a corrective construction will be a rare event and requires both the mistake and the intended meaning to be clear.

In Susan Plevin v. DAS Legal Expenses Insurance Company Limited and Miller Gardner Limited (in administration), in the context of an after-the-event legal expenses insurance policy, the High Court held that where standard form policy terms and a policyholder-specific schedule contained contradictory terms, the more individualised term in the schedule should prevail over the standard form policy wording. In doing so the High Court considered that, where policy terms are truly contradictory, rather than ambiguous, and contained in different policy documents, the contra proferentem principle of construction did not assist the Court in resolving the inconsistency. However, the Court acknowledged that, where contradictory terms are contained in the same policy document, the principle may be applicable.

iii Notification of circumstances

In Euro Pools v. RSA, the Court of Appeal provided guidance on the approach to a claim where the Court must determine under which policy a claim falls for cover following multiple notifications of circumstances. Euro Pools had two professional indemnity policies with RSA covering two consecutive years, and made notifications under both policy years in respect of certain faults with its installation of boom systems in swimming pools. Euro Pools subsequently claimed for the costs of mitigation works carried out on the boom systems under the later policy. RSA maintained that the mitigation works all fell for cover under the earlier policy, whose limits had been exhausted by other claims. In finding that the claims were notified to the first policy year, the Court summarised and synthesised the existing legal principles applicable to the determination of whether there has been a valid notification of a circumstance, and whether a particular claim is within the scope of that notification, as follows:

  1. provisions deeming claims arising from notified circumstances are to be construed and applied with a view to their commercial purpose, namely to provide an extension of cover from all claims in the future that flow from the notified circumstance;
  2. a provision which refers to circumstances that 'may' give rise to claims sets a deliberately undemanding test, that only requires a possibility of claims in the future, not a likelihood;
  3. a notification need not be limited to particular events; insureds can give 'can of worms' or 'hornet's nests' notifications. The ambit of such notifications and the claims that are covered by them will depend on the particular facts and terms of the notification in each case;
  4. while an insured must be aware of the circumstance which it purports to notify, it does not need to know the cause of problem that has arisen, or the potential consequences thereof;
  5. for a claim to arise out of a properly notified circumstance there must be some causal link between the notified circumstance and the claim, rather than a purely coincidental connection;
  6. in determining whether a particular communication is a notification, and its scope as such, the Court applies conventional principles of interpretation; and
  7. whether a particular matter or event meets the threshold for notification as a circumstance in the relevant policy is not only a matter of the insured's subjective knowledge, but involves the objective estimation of the likelihood of a claim given that subjective knowledge.

iv The parties and jurisdiction

The English courts have recently considered a number of cases where the parties to the case were themselves at issue.

In Cameron v. Liverpool Victoria Insurance Co Ltd the Supreme Court determined that a victim of a road traffic accident could not issue proceedings against an unknown defendant in order to access a motor insurance policy. The vehicle in question was insured under a policy issued to a fictitious person, which covered neither the registered keeper of the vehicle, nor the driver, who was never identified. Consequently, the victim had sought to issue proceedings against 'the person unknown driving vehicle registration number Y598 SPS'. The Supreme Court held that the requirements in the English civil procedure rules for service of a claim reflected a fundamental principle of natural justice that a person cannot be made subject to the jurisdiction of the court without having sufficient notice of the proceedings to enable them to be heard. The Supreme Court identified limited (exceptional) circumstances to this principle, but held that an unidentifiable negligent driver was not one of them, as victims had alternative rights of recovery against the Motor Insurance Bureau.

The decisions in Zagora Management Ltd v. Zurich Insurance Plc and Aspen Underwriting Ltd v. Credit Europe Bank NV both concerned third parties to the relevant policies. In Zagora Management, the judge held that a party was not entitled to claim under a buildings policy simply because it had a freehold interest in the insured development. The High Court held that a contract of insurance is only a contract between the insurer and the named insured(s), and that for a policy to extend to unnamed persons an express provision would be required making the intended extension clear.

In Aspen Underwriting, a marine insurer sued a Dutch-domiciled assignee of and loss payee under the issued marine insurance policy for misrepresentation in relation to a settlement of a claim under the policy between the insurer and the insured assignor. The Court of Appeal held that the insurer could not rely on the English court jurisdiction clauses in either the policy or the settlement agreement to found jurisdiction in England, as the Dutch assignee was not a party to nor seeking to assert third party rights under either contract. However, the Court of Appeal held that the English courts nevertheless had jurisdiction. While the Court held that the dispute was a 'matter relating to insurance' within the meaning of Chapter II of Section 3 of the Recast Brussels Regulation that would otherwise require the insurer to sue the assignee in the Netherlands, it also held that, as professional ship financier, the assignee was not within a class of persons that merited the protection of those special rules so as to preclude the English Court taking jurisdiction. Instead, the Court of Appeal also characterised the misrepresentation claim as a matter relating to tort, delict, or quasi-delict under Article 7(2) of the Recast Brussels Regulation, and as the settlement agreement was signed in England, held that the English courts had jurisdiction under that Article.

v Quantum of loss

In Sartex Quilts and Textiles Ltd v. Endurance Corporate Capital Ltd the High Court clarified the principles applicable to the relevance of the insured's intentions as to the insured property in considering the appropriate measure of indemnity under a property loss or damage policy. The High Court held that the court should look to all the circumstances, including the insured's intentions not only at the date of loss but up the date of trial. An insured cannot recover more than the actual loss arising from the insured peril, and thus the court is concerned to identify what available measure (reinstatement or market value) fairly and fully indemnifies the insured for his loss. The primary focus will be on its intentions for the property at the time of the loss. However subsequent events, even those unforeseeable at the time of the loss, may show that the measure identified would overcompensate the insured, making an alternative measure more appropriate.

The Court also clarified the decision in Western Trading Ltd v. Great Lakes Reinsurance (UK) Plc, explaining that it does not indicate that an indemnity on a reinstatement basis cannot be given if the remedial works are not in fact carried out. The Great Lakes judgment simply envisages that the appropriate measure of indemnity will depend on all the circumstances of the case (of which an absence of remedial works will be one circumstance).

In a second judgment in the Zagora Management case referred to above, the High Court reiterated that interest will be awarded under the Senior Courts Act 1981 on a successful insurance claim only from the date on which a reasonable period of time has elapsed to allow for investigation of the claim by the insurer, rather than from the date on which the insured's cause of action under the policy accrued. This dispute pre-dated the coming into force of the Enterprise Act 2016, and so questions as to the insured's right to also claim damages for late payment were not considered.

vi Asbestos litigation

English law has developed bespoke principles to deal with the insurance of claims by employees who were exposed to asbestos by their employers and contracted mesothelioma as a result. In particular the 'trigger' principle provides that employers' liability insurers are liable to fully indemnify their insureds for claims for asbestos exposure (and thus fully compensate employees) provided there was some exposure during the relevant policy year, and even if the dates of the exposure encompassed multiple other policy years. The employee does not have to demonstrate a causal link between the exposure in a particular year and the mesothelioma in order to sue the insurer covering that year; the employee merely has to demonstrate an exposure to asbestos. In Equitas Insurance Ltd v. Municipal Mutual Insurance Ltd, the Court of Appeal considered whether this bespoke principle should extend to the reinsurance of employers' liability risks, such that an insurer writing multiple years of employers' liability insurance can elect to present a reinsurance claim to a single year, or whether the insurer is obliged to allocate the reinsured losses pro rata across the relevant years. The Court of Appeal held that the trigger principle was created for policy reasons – to ensure that victims were fully compensated without having to make multiple claims and prove causation – and those policy reasons did not extend to the reinsurance market, such that the law could return to more orthodox principles. The result of those principles was that the insurer cannot elect to claim under a single year's reinsurance, but must to allocate the reinsured losses pro rata across the relevant years.

In Cape Intermediate Holdings Ltd v. Dring, the Supreme Court provided guidance on third parties' rights of access to court documents. The Asbestos Victims Support Groups Forum applied under Rule 5.4C of the English Civil Procedure Rules for the disclosure of court documents, including bundles of evidence, in two sets of proceedings brought by employers' liability insurers against an asbestos manufacturer. The Supreme Court held that there was no automatic right of access for non-parties to copies of documents held by the Court unless provided for by the particular Court's rules. However, the Court had an inherent jurisdiction to permit third parties to obtain copies of documents placed before the Court if the Court considers that to do so is consistent with of the constitutional principle of open justice. In considering that question, the Court will take into account the reasons for the third party seeking the documents and the risk of harm that the disclosure may cause to the maintenance of effective judicial process or the legitimate interests of others. The Court may also take into account the practicality and proportionality of satisfying the request.

The international arena

The rules that will be applied by the English courts to determine where insurance disputes between international parties are heard depend on where the insurer and the insured are domiciled. If both are domiciled in EU member states, jurisdiction is determined in accordance with the European Parliament and Council Regulation 1215/2012 (the Recast Brussels Regulation). If one party is domiciled in an EU member state and another in an EEA member state, then jurisdiction is determined in accordance with the Lugano Convention. Finally, in cases where the defendant is domiciled outside of the EEA, the jurisdiction of the English courts is determined by Part 6 of the Civil Procedure Rules (the CPR). Domicile is determined as at the date of issue of the proceedings.

The Recast Brussels Regulation contains specific, insured-friendly rules (in Articles 10 to 16) on the determination of jurisdiction over insurance disputes (though these rules do not also apply to reinsurance disputes or contribution claims). Those rules provide that:

  1. the insured has the option of suing in the jurisdiction where they are domiciled (Article 11(1)(b)) or in the jurisdiction where the insurer is domiciled (Article 10); but
  2. insurers are restricted to suing an insured in its country of domicile (Article 14). However Article 14.2 clarifies that this rule does not affect the insurer's ability to bring a counterclaim if sued by the insured in a country other than that of its domicile.

There are also specific rules for insurance of real property and liability insurance (Article 12), which allow the insured also to sue in the place where the harmful event to the property occurred or the harmful act resulting in liability occurred. Articles 15 and 16 of the Recast Brussels Regulation restrict the ability of insurers to remove the benefit of the rules in Articles 10 to 14 by including exclusive jurisdiction clauses in policies. However, those restrictions do not apply to large commercial risks, which encompass most risks insured by any company with a balance sheet total of at least €6.2 million, a net turnover of at least €12.8 million, and an average 250 or more employees. For any company that equals or exceeds these metrics an exclusive jurisdiction clause in an insurance policy will still be effective to determine where any disputes are heard.

The position under the Lugano Convention is materially the same as that under the Recast Brussels Regulation. The UK is also currently party to the Hague Convention on Choice of Court Agreements 2005 (the Hague Convention) in its capacity as an EU Member State. The Hague Convention requires contracting state courts (including all EU Member State courts) to respect exclusive jurisdiction clauses in favour of other contracting state courts and to enforce related judgments.

Where the defendant (which in insurance disputes is usually, though not always, the insurer) is domiciled outside of the EEA, Part 6 of the CPR provides that the English court will have jurisdiction over a dispute if the claimant has the right to serve the claim form on the defendant, and the English court is satisfied that it is appropriate for the case to be heard in England. A claimant will have the right to serve the claim form on a non-EEA defendant without the court's permission if the defendant is present in England (even if only temporarily and habitually resident overseas), or have nominated a solicitor or process agent in England who is authorised to receive service. Often in insurance policies with an English jurisdiction clause the broker will be nominated as the process agent for service for all of the insurers, and so service issues are relatively uncommon in insurance disputes.

However, if the defendant cannot be served in the jurisdiction, then the permission of the English court is needed to serve proceedings on the defendant where it is domiciled out of the jurisdiction. To obtain permission the claimant needs to satisfy the court that: (1) it has a good arguable case that one of jurisdictional 'gateways' in CPR Practice Direction 6B apply; (2) there is a serious issue to be tried; and (3) England is the forum where the case should properly be tried. The jurisdictional 'gateways' of most relevance to insurance disputes are the gateway for a claim for an injunction (which is the relevant gateway for commencing proceedings for an anti-suit injunction if one party is threatening or commences proceedings in breach of the policy's jurisdiction or arbitration clause), and the gateway for a claim made in respect of a contract that is governed by English law or contains a jurisdiction clause in favour of the English courts. In practice, where an insurance policy contains an English court jurisdiction clause, the English courts are highly likely to assert jurisdiction. Conversely, if an insurance policy contains a jurisdiction clause in favour of another jurisdiction the English courts are likely to respect that choice and decline jurisdiction.

The English courts will also respect the parties' choice of arbitration as their chosen dispute resolution mechanism and decline jurisdiction where there is a validly incorporated arbitration clause in a policy. It is not uncommon for an insurance policy to contain both an English court jurisdiction clause and a London-seated arbitration clause. Although those clauses are on their face inconsistent, the settled approach of the English courts is to interpret the clauses as providing for disputes to be resolved by arbitration, subject only to the supervisory jurisdiction of the English court.

For all insurance policies entered into after 17 December 2009, the English courts will determine the applicable law in accordance with European Parliament and Council Regulation 593/2008 (the Rome I Regulation).

At the time of writing there remains uncertainty over the nature of the United Kingdom's exit from the European Union and its future relationship with the remaining 27 Member States. The position following the United Kingdom's exit with respect to jurisdiction and governing law will depend on the manner of the exit. Under the terms of the withdrawal agreement signed on the 24 January 2020, the Recast Brussels Regulation continue to apply until the end of the transition period on 31 December 2020. If there is a no-deal exit, then the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 provides that the Recast Brussels Regulation and the Lugano Convention will continue to apply to cases commenced prior to exit day, but revokes the application to any cases commenced after exit day. It is noted that the United Kingdom and other signatory states expressed their support for the United Kingdom's accession to the Lugano Convention 2007 in January 2020. For cases commenced after exit day, the jurisdictional rules in Part 6 of the CPR and the common law that currently apply to defendants domiciled outside of the EEA will also apply to defendants domiciled within the EEA. The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019 implements the Rome I Regulation into English law on the UK's exit date in the event of a no-deal exit. On 28 December 2018 the UK deposited its instrument of accession to the Hague Convention, which will take effect on the date the UK exits the EU, ensuring continuity of the application of the Hague Convention by the UK courts.

In addition to where the dispute will be heard, and under what law, one further issue of importance for the arbitration of international insurance disputes is which arbitrators will hear the dispute. This is a matter of choice for the parties, with a mechanism usually provided either by the arbitration clause or a set of institutional rules to determine a sole or third arbitrator in the event of disagreement. In Halliburton v. Chubb the Court of Appeal recently considered whether an arbitrator may accept appointment in multiple arbitrations in relation to the same subject matter but with only one common party, or whether doing so gave rise to an appearance of bias. Both Halliburton Company and Transocean Holdings LLC commenced separate arbitration proceedings against Chubb Bermuda Insurance Limited to recover losses arising out of the explosion on the Deepwater Horizon oil rig in the Gulf of Mexico. The same arbitrator was appointed to both tribunals, but the appointment in the Transocean arbitration was not disclosed to Halliburton. Under the Arbitration Act 1996, an arbitrator can be removed by the Court for a lack of independence if it gives rise to justifiable doubts of impartiality. The test for whether justifiable doubts of impartiality are present is the same as the test for apparent bias in a Judge in the English courts, namely whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility of bias. The Court of Appeal held that the fact that the arbitrator would likely have knowledge from their other appointment of which one party would be unaware was of legitimate concern, but did not alone justify an inference of apparent bias from the mere fact of multiple overlapping appointments. However, non-disclosure of the parallel appointment was also a factor to be taken into account in considering apparent bias. The circumstances of and explanation for the non-disclosure will determine whether the non-disclosure justifies an inference of apparent bias. On the facts of this case, no inference of apparent bias was justified. The Court of Appeal's decision is currently under appeal to the Supreme Court. The hearing was held in November 2019 and judgment is awaited.

Trends and outlook

It would be difficult not to mention covid-19 in this year's edition. The challenges deriving from the pandemic have manifested themselves also in the context of insurance. England and Wales is one of the first jurisdictions that is examining, at speed, the issues of recovery of losses for business interruption as a result of the covid-19 pandemic. While business interruption cover is typically bought by policyholders as an extension to property damage policies and primarily responds in cases of property damage, non-damage extensions to cover also exist in the market that provide cover for losses cause by disease or the response of public authorities to disease, or both. There has been a deluge of claims against such policies as a result of covid-19 and the national lockdown in the UK, and considerable uncertainty as to whether such policies respond. This has been addressed in the English High Court in the first ever case using a special financial markets test case process in the CPR. The case has been brought by the regulator, the Financial Conduct Authority, on behalf of policyholders and with the consent and cooperation of eight insurers seeking to promote greater clarity on the issues arising in certain policies thought to be representative of the types of wordings available in the market. The issues were brought to full trial in under two months. The decision at first instance was delivered in mid September 2020 and found that there was some cover for policyholders under some policies. At the time of writing it remains to be seen whether the outcome will be appealed.

Leaving aside that very topical subject, we should also mention that, while the Insurance Act 2015 has come into force, it remains to be seen precisely how the provisions of that Act will be applied. The Act potentially represents a major rebalancing of rights and obligations between insureds and insurers (in favour of insureds), but early indications are that insurers are seeking to contract out of many of the provisions of the Act where possible in commercial policies.

There also remains a good deal of uncertainty as to how damages for late payment of insurance claims will be approached by the courts, and the first case where an insured claims such damages is awaited with interest. This issue may well be examined most particularly in the context of the non-damage of business interruption insurance cases which may be expected in the light of the covid-19 pandemic.

Warranty and indemnity insurance and cyber insurance are two of the fastest developing policy markets in England, and the terms of both types of policy are becoming increasingly standardised. There have only been a limited number of significant disputes in relation to these types of policies, although we anticipate that to change in the next few years, especially as cyberattacks becoming an increasingly common experience for businesses.

The coming into force of the General Data Protection Regulation has also generated interest in the extent to which the risks of failing to comply with the Regulation are insurable. The position is likely to be that insurance will not be available for any fines imposed under the Regulation or under the related Data Protection Act 2018 (either because English law prohibits the insurance of fines, or because policies will specifically exclude them). However, insurance may be available for the costs of participating in an investigation by the Information Commissioner's Office and defending any subsequent proceedings. Insurance disputes arising out of data protection breaches may also be developing area in the coming years. Disputes relating to a failure to appreciate the effect of artificial intelligence also look likely to be a developing area.

The use of 'after the event' insurance to cover costs risks in English litigation has also increased significantly in recent years, both as a result of reduction in availability of legal aid at one end of the scale, and the increased importance of litigation funding in English disputes at the other end.

In addition to these areas of potential development, climate change remains an area where claims must surely begin to rise. There are no claims in this area as yet but all eyes are on that space.


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