Lloyd's Maritime and Commercial Law Quarterly
INSURER’S LIABILITY EXTENDED
Banque Keyser Ullman S.A. v. Skandia (U.K.) Insurance Ltd.
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The Facts
Between December 1979 and March 1981, the plaintiff banks made a series of loans to four borrowing entities controlled by a Mr Jaime Ballestero. The loans were all secured in two main ways: first, by pledges of collections of coloured gem stones and, secondly, by contingency/guarantee insurance underwritten by English-based insurance companies, guaranteeing repayment of the loans to the extent that the gems pledged did not when sold cover the outstanding indebtedness. In each case, Ballestero presented the gems to the banks complete with certified valuations by the Gemmologisch Instituut Antwerpen (the GIA valuations).
However, the principal security for the banks was the credit insurance. In every transaction, this was arranged by one Roy Lee, then the Cardiff manager for a reputable Lloyd’s broker, Ernest A. Notcutt & Co. Ltd. Lee was also put forward to the banks by Ballestero. In late 1979, Lee contacted one Cyril Dungate, a contingency/guarantee underwriter at Hodge General & Mercantile, and over the next 18 months Dungate acted as lead underwriter on all the transactions the subject of
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