Lloyd's Maritime and Commercial Law Quarterly
SUBROGATION AND INSURANCE LAW: PROPRIETARY CLAIMS AND EXCESS CLAUSES
Charles Mitchell *
The facts
In March 1992, an association of 987 Lloyd’s Names who had belonged to the Outhwaite syndicate settled their claims (“the Outhwaite actions”) against R.H.M. Outhwaite Underwriting Agencies Ltd. and members’ agents at Lloyd’s for allegedly negligent underwriting: the managing agent of the syndicate had written policies on the Names’ behalf in respect of asbestosis claims without adequate reinsurance cover. Under the terms of settlement, £116 million was paid by or on behalf of the defendants in the Outhwaite actions to Messrs Richards Butler, who were acting as the plaintiffs’ solicitors. Of this £116 million, £80 million was attributable to past paid and notified cash calls in respect of losses of the Outhwaite syndicate, particularly in respect of the year 1982; the balance was attributable to matters outside the scope of the present case.
Proceedings in Lord Napier and Ettrick v. Hunter
1 were originally instituted to determine whether or not the settlement moneys paid to Richards Butler were subject to the trusts of Lloyd’s Premium Trust Deeds which had been entered into by each of the plaintiffs in the Outhwaite actions. Saville, J., decided upon this question at first instance,2 and there was no appeal from the part of his judgment which dealt with this original issue. However, during the course of the proceedings before Saville, J., further questions relating to the settlement moneys arose. A total of 246 of the Names, members of the plaintiff association in the Outhwaite actions, had taken out Stop Loss policies with other syndicates at Lloyd’s for the trading year 1982, and the Stop Loss insurers had duly paid the amounts due from them under the Stop Loss policies. The Stop Loss insurers now wished to claim their insureds’ portions of the settlement moneys, as moneys recovered in respect of insured loss. It was common ground between the Stop Loss insurers and the insured Names that the Stop Loss insurers were prima facie entitled to do this. However, they disputed the basis on which the Stop Loss insurers’ recovery should be allowed, and the method by which the amount of their recovery should be assessed. Saville, J., therefore ordered that the Stop Loss insurers be joined as defendants to the original action,3 and it was from that part of his judgment concerning the dispute between the Stop Loss insurers and the insured Names that the Stop Loss insurers
* Faculty of Laws, University College London.
1. [1993] 2 W.L.R. 42. Lord Napier and Ettrick represented the plaintiffs in the Outhwaite actions.
2. Baron Napier and Ettrick v. R. F. Kershaw Ltd., unrep., 14 May 1992.
3. Baron Napier and Ettrick v. R. F. Kershaw Ltd. [1993] 1 Lloyd’s Rep. 10.
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