HILL AND CHARMAN V MERCANTILE AND GENERAL REINSURANCE COMPANY PLC BERRY AND OTHERS V MERCANTILE AND GENERAL REINSURANCE COMPANY PLC

(1995) 4 Re LR 1

Court of Appeal

Before Lord Justice Nourse, Lord Justice Hirst and Lord Justice Waite

Follow the settlements - Aviation war risks - London Market excess of loss spiral - Ambit of FS clause - Iraq’s invasion and occupation of Kuwait - Aircraft belonging to Kuwait Airways Corporation (KAC) flown out of Kuwait - Aircraft later destroyed - KAC insured under war risk policies - Total insurance value of aircraft about $700m - Maximum sum insured in respect of ground risk in relation to any one occurrence $300m - Kuwait Insurance Company, in collaboration with their reinsurers, paid to KAC $300m - KAC accepted payment, but without prejudice to their full claim, which was to be litigated - Whether Follow Settlements Clause required LMX reinsurer to follow settlement save in very exceptional circumstances - Whether reinsurer free to mount defences based on issues of law and/or fact notwithstanding settlements further down chain of reinsurers.