In December last year, the English Court of Appeal handed down judgment in the case of Astrazeneca Insurance Company Limited v (1) XL Insurance (Bermuda) Ltd and (2) ACE Bermuda Insurance Ltd.
The appellant insurer appealed against a determination of two preliminary issues in its claim for an indemnity from the respondent reinsurers under a Bermuda Form liability insurance policy which had been amended so that it was governed by English law and not New York law (the latter being the usual choice of law in a Bermuda Form contract). The appellant’s appeal was dismissed on the grounds that “the judge gave the right answer on both issues”. It was held unanimously that:
- Under English law, an insurance liability policy was, in the absence of wording to the contrary, a policy which indemnified the insured in respect of actual liability, not arguable liability. Whilst the insurer argued that the policy should be governed by New York law (as is usual for Bermuda Form insurance), it was held that the express choice of English law meant that the policy had to be construed using English law. None of the clauses in the policy indicated “any departure from the usual English law position”.
- Under English law, there was no right to recover defence costs. Defence costs could only be recovered under the policy if the insured established that it was or would have been liable for damages in respect of the claim in question. The insured could not recover if it successfully defended the claim.
Christopher Clarke LJ agreed with the judge’s determination at first instance throughout his leading judgment. He rejected each of the appellant’s further submissions.
Our commentary on the original High Court judgment was published in the March 2013 International Product Liability Review.