Summary:
The conditions for access and exercise of the insurance and reinsurance distribution activity are regulated by a new legal regime, approved by Law 7/2019 of 16 January, which transposes into the Portuguese law the Insurance Distribution Directive – Directive (EU) 2016/97 (IDD).
Although the said Law has introduced significant changes to the previous regime, the essence of the preceding legal framework is preserved, namely its structure and the underlying principles. The new law seeks to ensure regulatory stability in all matters and provisions that are not based in the European Union regime.
This month, the Insurance Law Department of Belzuz Abogados S.L.P. – Sucursal em Portugal addresses the new legal framework of insurance and reinsurance distribution, approved by Law 7/2019, of 16 January.
Law 7/2019 transposes into the Portuguese jurisdiction Directive (EU) 2016/97 of the European Parliament and of the Council, dated 20 January 2016, on the insurance distribution (Insurance Distribution Directive or IDD). The IDD’s major purpose is the harmonisation of national provisions for each Member State concerning insurance and reinsurance distribution.
Among the changes introduced by the new law, we must underline the following:
Main changes introduced by Law 7/2019
- Application scope
Law 7/2019 regulates the conditions for access and exercise of the insurance and reinsurance distribution activity elsewhere in the European Union by individuals, or companies with registered offices in Portugal, as well as the conduct of insurance and reinsurance distribution business in Portuguese territory by insurance or reinsurance distributors registered in other Member States of the European Union.
- Activities covered by the new regime
The activities to which the new regime is applicable are mostly the same as the ones regulated in the previous legal regime governing insurance and reinsurance intermediaries.
Notwithstanding the above, the law now regulates those activities when carried out directly by insurance or reinsurance companies in order to ensure the same level of protection for the policyholder, regardless of the distribution channel. There is not however full extension of the scope of application as, for instance, it is not applicable to insurance or reinsurance companies the registry regime and the cross border activities regime, which will still be regulated by the insurance and reinsurance legal framework.
On the other hand, the internet websites that compare the contractual conditions or insurance policy are now expressly subject to the insurance distribution regime.
- Insurance distributors categories:
The category of tied insurance intermediary disappears, as it largely coincides with the ancillary insurance intermediary category, determined in the new law.
The modification of the categories of insurance distributors is executed without prejudice to the acquired rights of tied insurance intermediaries that were registered up to the date of effect of the new law. Actually, entities that were registered in the category of tied insurance intermediary are automatically registered as insurance agent or ancillary insurance intermediary.
Credit institutions and investment companies registered as tied insurance intermediaries are, as of the date of effect of Law 7/2019, automatically registered as insurance agents.
Insurance distributors are, therefore, divided in three categories:
- Insurance Intermediary, which in its turn is subdivided into: (i) Insurance Agent and (ii) Insurance Broker;
- Ancillary Insurance Intermediary; and
- Insurance Company.
- Organizational and professional requirements:
Insurance and reinsurance distributors as well as employees of insurance and reinsurance companies carrying out direct insurance distribution must possess appropriate knowledge and ability in order to complete their tasks and perform their duties adequately. For example, they are obliged to comply with the requirement of appropriate qualification for the characteristics of the distribution activity that they want to pursue, reputation and incompatibilities.
Further, insurance agents, insurance brokers and ancillary insurance intermediaries will be obliged to comply with the technical, commercial, administrative and accounting formalities, and use the financial and economic structure, fitted to the size and nature of its activity, as decided by the Portuguese Insurance and Pension Funds Supervisory Authority (hereinafter “ASF”).
- Continuing professional training and development requirements
Insurance distributors must now ensure that the members of their corporate bodies responsible for the activity of distribution, as well as the persons directly involved in the activity of insurance distribution, maintain an adequate level of performance by fulfilling the obligations of continuing professional training and development.
The fulfilment of the obligations regarding continuing professional training and development determines that the distributors must undertake vocational training that complies with the legal requirements indicated even if these have to be regulated by ASF.
- Information requirements and activity rules of conduct
One of the main changes introduced by the new law are the information obligations, in particular the new rules regarding the elaboration and presentation of a standardised insurance product information document about the non-life insurance products.
The main concern regarding this matter relates to the prevention of conflicts of interest of the insurance distributor, in particular the matters related to his remuneration.
The law aims to ensure that insurance distributors are not paid, nor do they pay or evaluate their employees’ performance, in a way that conflicts with their duty to act in the best interest of their clients, in relation to the recommendation of a specific insurance product. In this regard, the new legal framework now expressly provides an information obligation on the part of the insurance distributor to the client about the remuneration, whether or not the Client expressly asks.
Regarding the rules of conduct applicable to this activity we must underline the existence of a specific chapter about insurance-based investment products, which establishes preconditions for the selling of the products, including assessing the suitability and appropriateness of the insurance product, as well as the additional requirements about the matters of the conflict of interests and remuneration.
- Cross-selling
When an insurance product is offered together with an ancillary product or service which is not insurance, the insurance distributor must inform the customer whether it is possible to buy the different components separately and of the different conditions applicable in the case of separate purchase. This rule does not prevent the distribution of multi-risk insurance policies.
- Assessment of the suitability of the product to the insured
The new legal regime reinforces the principle that the insurance distributor has a special duty of assessment of the suitability of the product to the insured.
The level of demand, common to all insurance distribution, obliges the insurance distributor to transmit to the customer objective information regarding the insurance products, allowing him to make an informed decision.
In addition, the insurance distributor must provide to the customer a personalised recommendation, explaining why a particular product best meets the customer’s insurance demands and needs.
Also the supervision and governance requirements for the insurance products are emphasised. The main purpose of setting up those requirements is to guarantee that throughout the process of conception and contractualization of insurances the suitability of the insurance conditions regarding the characteristics, needs and profile of the policyholder or of the insured is verified.
Article 153 of the legal regime for access and exercise of the insurance and reinsurance activity is reviewed to give more detail on what should be the policies of product design. On the other hand, it clarifies the non-application of the requirements of supervision and governance of insurance products to the coverage of large exposures.
- Distribution of insurance-based Investment Products
Investments that include insurance contracts are frequently made available to consumers as an alternative to or substitutes for financial instruments; therefore the new legal regime approximates the rules of commercialization of insurance products to the rules of commercialization of financial instruments.
Additional requirements were created for the distribution of those investment products, including those regarding to conflict of interests, information duties, remuneration and assessment of the suitability and appropriateness of the insurance product.
- Publicity
Another change implemented by the new insurance distribution law concerns the protection of the consumer through the publicity of insurance products distribution.
Under the new regime, and regardless of the means chosen, the presentation and publicity of the information must be in a form that is fair, clear, not misleading and clearly identifiable.
- Cross-border activity
Although the new regime does not include structural changes in the registration process for access to the activity of insurance distribution, this law enacts new rules for the exercise of cross-border activities, and gives more powers of intervention to the competent authority of the host Member State.
- Transitional regimes
Law 7/2019 provides some transitional regimes. The following entities have until 23 February 2019 to adjust to the requirements of appropriate qualification regarding the distribution of insurance and reinsurance activity: (a) registered insurance or reinsurance intermediaries (natural persons); (b) registered members of corporate bodies of insurance or reinsurance intermediaries that are responsible for the activity of insurance intermediation and (c) natural persons directly working in an insurance or reinsurance undertaking.
Insurance companies also have until 23 February 2019 to ensure that the members of the board of administration (responsible for the insurance distribution activity) and their employees directly working in an insurance or reinsurance undertaking have appropriate qualification for carrying out such activity.
- ASF Regulations
The Portuguese Insurance and Pension Funds Supervisory Authority (ASF) is entitled to prescribe the necessary regulatory rules for, namely:
- the requirements that the insurance courses must fulfil in order to be recognized by the ASF, for purposes of the concept of appropriate qualification;
- the minimum content of the contract between the insurance agent and the insurance company or between the ancillary insurance intermediary and the insurance company;
- the requirements with which the insurance agent, insurance broker, ancillary insurance intermediary or the reinsurance intermediary must comply in matters of technical, commercial, administrative and accountant organization as well as financial and economic structure fitted to their size and to the nature of their activity;
- the minimum standard of the compulsory civil liability insurance that the insurance agent, insurance broker, ancillary insurance intermediary and the reinsurance intermediary must carry;
- the documents to be submitted within the process in order to prove compliance with the conditions of registry;
- the general rules that the insurance intermediaries and the ancillary insurance intermediaries must comply with in respect of defining a treatment policy for the policyholders, insured persons, beneficiaries and injured third parties.
- the general rules that the insurance intermediaries must respect regarding the conception and approval policy of the insurance products;
- the general rules that the insurance distributors must respect regarding the insurance products distribution policies.
- Legislative changes
The new law introduces modifications to the legal framework governing access to and exercise of insurance and reinsurance activity, as well as to the procedural rules regarding the specific crimes for the insurance activity and pension funds, as well as the administrative offences decided by ASF.
- Effective date
Law 7/2019 contains a rule which confers retroactive effectiveness to the application of the new legal framework, establishing that it took effect on 1 October 2018.
The new legal framework of the activity of insurance and reinsurance distribution presupposes a proper analysis by all agents and, therefore, the Insurance Department of Belzuz Abogados S.L.P. – Sucursal em Portugal will continue to review the developments in this matter and, shortly, will provide detailed information regarding the new legal regime.
Belzuz Abogados, S.L.P. – Sucursal em Portugal
Department of Insurance Law
Ricardo Meireles Vieira:
- Director of Belzuz Abogados – Sucursal em Portugal (Oporto). He joined the firm in 2016.
- Law Degree by Universidad Católica Portuguesa (2007).
- Postgraduate in Labour and Social Security Law by Universidad Católica Portuguesa (2009).
- Postgraduate in Contract and Enterprise Law, Universidad do Minho (2011-2012).
- Admitted to the Bar Association in 2009.
- He has wide experience in the procedural aspects of civil law, insurance, motor liability, banking and labour law.
- Specialised in: Procedural Law, Banking, Insurance and Labour Law.
- Portuguese –– English –– Spanish.
Teresa Lopes Ferreira:
- Director of the Procedural and Arbitration Department of Belzuz Abogados – Sucursal em Portugal. She joined the firm in 2006.
- Law Degree and Master in European Law by Universidad de Lisboa (1985).
- Course executive procedure, Bar Association.
- Course commercial arbitration, Chamber of Commerce and Industry Portugal- Spain.
- She has wide experience in representing insurance companies and enterprises in judicial proceedings as well as in arbitration (including claims related to construction).
- Admitted to the Bar Association in 1990.
- Specialised in: Procedural Law and Insurance.
- Portuguese –– English –– Spanish.
Insuralex chooses Cliffe Dekker Hofmeyr (CDH) as its exclusive member in South Africa
Cliffe Dekker Hofmeyr (CDH), a top ranked law firm and a provider of legal services in the area of insurance law and related litigation, announced today that it has become the exclusive member firm in South Africa for Insuralex Global Insurance Lawyers Group, the world’s leading insurance and reinsurance law firm network.
As part of Insuralex, clients and Insuralex´s insurance law firms will have access to CDH’s recognised insurance and reinsurance coverage and litigation practices in South Africa.
Insuralex is a worldwide association of independent insurance and reinsurance lawyers exclusively focused on the insurance and risk management communities. Insuralex is ranked in Global Chambers as a leading law firm network.
Martín G. Argañaraz, President of Insuralex, commented, “After several years of providing legal advice from Europe, Asia, Latin America, the United States and Asia/Pacific regions the time has came to take another important step by expanding the network into Africa through a first-class South African insurance law firm”.
Tim Fletcher National Practice Head: Dispute Resolution, said: “Cliffe Dekker Hofmeyr is delighted to be part of Insuralex. We look forward in particular to working with our new colleagues across the world and to growing the network into Africa”.
About CDH
We are able to provide experienced legal support and an authentic knowledge-based and cost-effective legal service for clients looking to do business in key markets across Africa. Our Africa practice brings together the resources and expertise of leading business law firms across the continent that have direct experience acting for governments, state agencies and multinational organisations. This combined experience across the continent produces an extensive African capability.
We also partner with other professional disciplines such as audit, business consulting or corporate finance disciplines to provide a seamless and integrated solution for projects that have a multi-disciplinary dimension.
Insurers have shown their confidence in us by retaining us to represent them in arbitrated or litigated disputes. Our clients include the top five life offices, a number of large short-term insurers, brokers and various financial services providers in South Africa and abroad.
Our insurance services include:
Disputes over insurance and reinsurance cover.
Claims handling, monitoring and coordination.
Complex insurance-related litigation.
Directors and Officers (D&O) insurance, fiduciary, professional liability, and fidelity cover.
Product and general liability cover.
Environmental liability cover.
Claims related to insurance and reinsurance intermediaries.
Class action proceedings.
Cover and contribution litigation.
D&O and professional liability cover and defence.
Products liability defence.
Environmental claims.
Suits between health insurers and providers.
Disability or regulatory issues arising out of personnel policies.
https://www.cliffedekkerhofmeyr.com/en/sectors/insurance-law.html
Popovici Nițu Stoica & Asociații, a leading independent law firm and a provider of legal services in the area of insurance law and related litigation, announced today that it has become the exclusive member firm in Romania for Insuralex Global Insurance Lawyers Group, the world’s leading insurance and reinsurance law firm network.
As part of Insuralex, clients and member firms will have access to Popovici Nițu Stoica & Asociații´s nationally recognized insurance and reinsurance coverage and litigation practices.
Insuralex is a worldwide association of independent insurance and reinsurance lawyers exclusively focused on the insurance and risk management communities. Insuralex is ranked in Global Chambers as a leading law firm network. Its member firms are located throughout North America, Europe, Latin America and the Asia/Pacific regions.
Martín G. Argañaraz, President of Insuralex, commented, “After several years of providing legal advice from important European countries the time has come to take the next step and be even closer to our clients to optimize the quality of our legal services. Vlad and his team at POPOVICI NIŢU STOICA & ASOCIAŢII offer the Romanian insurance market a unique knowledge of the local jurisdiction that our international Insuralex clients greatly value”.
“Popovici Nițu Stoica & Asociații is honoured to join the Insuralex network,” said Vlad Neacșu, Head of Insurance with the firm. “Our insurance practice covers the whole spectrum of insurance law matters, from regulatory and compliance, to contract coverage and standardization of insurance terms and conditions, setting up of complex insurance distribution arrangements, running off and transfer of insurance portfolios, mergers and acquisitions in the insurance area, as well as insurance litigation including alternative dispute resolution procedures. We look forward to cooperating with the members of this prestigious international network of insurance and reinsurance lawyers.”
About Popovici Nițu Stoica & Asociații
Popovici Nițu Stoica & Asociații is a leading Romanian independent law firm. Established in 1995, as one of the first incorporated partnerships in Romania, the firm brings together strong local resources, with exceptional credentials, outstanding records and distinguished careers in law, business and academia. The Bucharest office today groups 80 qualified lawyers and tax advisors.
The Firm is constantly ranked as a top tier counsel by the most prestigious international publications on the legal market in various areas such as Banking & Finance, Capital Markets, Corporate & Commercial, Dispute Resolution (including Insurance Litigation), Competition, Energy & Natural Resources, IT & Telecom, Mergers & Acquisitions, Real Estate, Public Procurement and Project Finance.
Insuralex has been again ranked Band 1 by Chambers and Partners in 2019. The prestigious British publication Chambers and Partners identifies and ranks the most outstanding law firms and lawyers in over 180 jurisdictions. Insuralex´s team of lawyers have recognised, in-depth understanding of the insurance industry in more than 50 jurisdictions. Since it was founded in 2002, Insuralex has grown significantly to over 50 individual practices operating within the group across Europe, North America, Latin America, Asia, Australia and the Middle East.
Insuralex members work for a diverse range of clients including insurance and reinsurance companies, Lloyd’s syndicates, insurance and reinsurance brokers as well as captives and self-insured companies.
According to Chambers and Partners:
“Insuralex is a global-wide network of independent insurance and reinsurance firms, collaborating through referrals and knowledge sharing on the latest developments. Its members have long-standing and leading expertise in the field, often with experience in many high-profile national and cross-border insurance cases. The group publishes extensively and arranges regional meetings and conferences, while also providing innovative resources for clients, including a mobile app”.
We invite you to learn more about Insuralex´s Members and about what Chambers says about Insuralex Insurance Law practice here.
Gross, Orad, Schlimoff & Co. (GOS), a leading law firm providing insurance law services as insurance and reinsurance regulations, claims and arbitration, announced today that it has become the exclusive member firm in Israel for Insuralex Global Insurance Lawyers Group, the world’s leading insurance and reinsurance law firm network.
As part of Insuralex, clients and member firms will have access to Gross, Orad, Schlimoff & Co´s nationally recognized insurance and reinsurance coverage, defense, and litigation practices. In turn, Gross, Orad, Schlimoff & Co can provide its clients with preferred access to more than 50 dedicated insurance and reinsurance law firms around the world.
Insuralex is a worldwide association of independent insurance and reinsurance lawyers exclusively focused on the insurance and risk management communities. Insuralex is ranked in Global Chambers as a leading law firm network. Its member firms are located throughout North America, Europe, Latin America and the Asia/Pacific regions.
Martín G. Argañaraz, President of Insuralex, commented, “We are pleased to welcome this outstanding firm to our network. With the addition of Gross, Orad, Schlimoff & Co, Insuralex strengthens its presence in Israel and reinforces its commitment to providing our clients and member firms with the most capable counsel in country and around the world.”
Gross, Orad, Schlimoff & Co is honored to join the Insuralex network,” said Omer Shalev, the Managing Partner of the firm. “Attorneys in our nationally-recognized insurance coverage practice represent insurers in coverage litigation across the country. Our team of exceptionally talented attorneys in the general liability area focus on D&O and E&O, Banking and Financial Institutions, Product Liability, Cyber, Property Insurance, Jewellers Block and Sendings, Aviation and Marine Insurance, Medical Malpractice and Clinical Trials, Regulatory Matters, Audits and Risk Surveys and Insurance Transactions. We look forward to lending our capabilities to this excellent international network of insurance and reinsurance lawyers.”
About Gross, Orad, Schlimoff & Co
Gross, Orad, Schlimoff & Co. is an international law firm. They have one of the top insurance and reinsurance law practices in Israel. The firm was established by Harry Orad, who has vast experience and strong reputation in insurance matters and Sigal Schlimoff, who specialized in complex insurance and reinsurance law and also serves as Lloyd’s representative in Israel.
Gross, Orad, Schlimoff & Co. also have strong capabilities in aviation law, dispute resolution, commercial and corporate law, with emphasis on multinational companies operating in Israel mainly in aviation and tourism, life science and pharmaceutical companies.
About Insuralex
Insuralex is a network created by independent law firms that specialise in Insurance and Reinsurance coverage, defence, litigation and all other related legal services.
Insuralex is ranked in Global Chambers as a leading law firm network. Its members are all recognized by their peers in their own jurisdictions as expert in the fields of insurance, reinsurance and defence litigation.
Insuralex has more than 50 members in North America, Europe, Latin America and the Asia/Pacific regions.
This new Insuralex (Global Insurance Lawyers Group) project is designed to provide even better service for Insuralex´s members and clients, with completely revamped images, insurance related renewed articles and contents.
This new website is beneficial for its insurance industry users by its simplicity of use and excellent usability provided by responsive layout technology in order to adapt to different devices (telephone, laptop, desk computer, tablet…) thus facilitating the search for insurance law services. It includes easy-to-share articles via social media. (LinkedIn, twitter, etc.)
It includes a calendar where insurance events, seminars and global and regional meetings can be easily followed.
Additionally, now it is possible research more than 50 insurance law firms (contact information, areas of activity, updated list of members, etc.) through an intuitive search engine.
Finally, it is important to highlight that Meeting SEO technologies, the new Insuralex website presents SSL security certificate, ensuring that the activity of the users won’t be traced or stolen, also protecting against the corruption of files during the transfers. The SSL certificate also prevents attacks and increases user confidence.
2018 has seen the (re)insurance industry continue to tackle the difficulties and uncertainties arising out of Brexit. Insuralex Insurance Lawyers.
Carter Perry Bailey LLP, London, is the UK Insuralex member
REGULATION
– The past year has seen the (re)insurance industry continue to tackle the difficulties and uncertainties arising out of Brexit. The European Union (Withdrawal) Bill 2018 received Royal Assent on 26 June 2018 and many businesses have been restructuring whilst trying to predict the impact of any deal. The PRA has been actively seeking information from its regulated firms as to their post-Brexit plans. In case there is no deal, the Government has published guidance on the steps that it, along with the regulators, will take to protect EEA firms operating within the UK.
– The Insurance Distribution Directive replaced the Insurance Mediation Directive earlier this year. It is a minimum harmonising directive aimed at enhancing consumer protection when purchasing insurance. It clarifies which information should be given to consumers prior to entering into an insurance contract and imposes certain conduct of business and transparency rules on distributors. The rules, which include rules for cross-border business, apply to the sale of all insurance products from 1 October 2018.
NOTIFICATION
Euro Pools plc (in administration) v Royal and Sun
Alliance Insurance plc [2018] EWHC 46 (Comm)
Euro Pools was insured under two claims-made policies (the
first policy covering the period of 30 June 2006 – 29 June
2007; the second covering 30 June 2007 – 29 June 2008)
which contained a mitigation works clause. When it became
aware of problems with stainless-steel tanks in February
2007, Euro Pools informed RSA and installed inflatable bags
to remedy the fault. In May 2008, Euro Pools identified
issues with the bags and told RSA it would change the boom
system to a hydraulic system. Euro Pools argued the
relevant loss was the failure of the bags, which had been
notified under the second policy; RSA contended that the
notification was the one in February 2007 and fell under the
first policy, limiting the amount the claimant could recover
since the losses exceeded both policies’ limits. The Judge
concluded that there was “no causal link between the
failures in the tanks and the decision to abandon an air drive
system and move to hydraulics” and, in any event, Euro
Pools “was not aware in February 2007 of problems with the
air drive system such that it could not notify the
circumstances which led to a claim for the expenses of the
move to a hydraulic system”. Euro Pools had therefore
validly notified the claim under the second policy and the
claim for mitigation works was within the policy period.
ALLOCATION
Equitas v MMI Limited [2018] EWCA Civ 991
This is an ongoing appeal as to whether reinsureds can
choose under which reinsurance year to claim their
mesothelioma losses (also known as ‘spiking’). Judge-
Arbitrator Flaux J held that MMI could ‘spike’ each
reinsurance claim to any applicable year of cover. The Court
of Appeal granted permission to Equitas to appeal pursuant reinsurance had been placed in the relevant PWS pool and
that Continental had reinsured a 20% share. Further, it was
found that from 1983 Continental had agreed to front the
whole pool, assuming 100% of the risk placed with the pool
(but would then have recourse against other reinsurers).
The claimants argued that fronting was a basic feature of
PWS’ pool management strategy and that Continental’s
fronting role was well-known in the market. Continental
failed to produce evidence to the contrary. The Court then
was asked to decide an issue under s.29 Limitation Act 1980
which provided that where any right of action has accrued
to recover any debt or other pecuniary claim, and the
person liable or accountable for the claim acknowledges the
claim or makes any payment in respect of the claim, the said
right of action shall be treated as having accrued on and not
before the date of that acknowledgement or payment. The
Court held that there is no particular format for an
acknowledgement; a general acknowledgement would
suffice if quantum could be ascertained by extrinsic
evidence.
ARBITRATION
Allianz v Tonic Star [2018] EWCA Civ 434
In the first instance hearing of this case in 2017, Allianz
wished to appoint a well-known QC, with over 10 years’
insurance and reinsurance experience, as arbitrator.
Tonicstar objected. Mr Justice Teare followed the precedent
set by Mr Justice Morrison in the 2002 case of Company X v
Company Y (unreported) in which Mr Justice Morrison had
held that any arbitrator needed to have been employed in
the (re)insurance industry, such that a lawyer would not
qualify. In Allianz v Tonicstar, Mr Justice Teare considered
himself bound by that precedent such that he had no option
but to hold that the proposed QC did not qualify. The matter
went to the Court of Appeal which overruled Company X v
Company Y and allowed the appeal. It held that although the
clause was drafted by the “trade body” this did not mean
that only members of the trade could be appointed. The fact
that, in default of agreement, arbitrators were to be
appointed by the Chairman of the London Underwriting
Association, did not mean that the Chairman could not
appoint a lawyer. Giving the tribunal the ability to dispense
with the strict rules of evidence was not found to be a
significant consideration, especially as compared to the
more important fact that the contract was subject to English
law. In short, the clear and unambiguous clause did not
expressly confine the appointment to trade arbitrators and a
lawyer would qualify.
Halliburton Company v Chubb Bermuda
Insurance Limited [2018] EWCA Civ 817
The underlying case involved a Bermuda Form insurance
policy. Before being appointed arbitrator in the
‘Halliburton/Chubb arbitration’, ‘M’ disclosed that he had
previously been appointed in other arbitrations involving
Chubb. Following the ‘Halliburton/Chubb arbitration’ to s.69 Arbitration Act 1996, which allows appeals from
arbitration awards only on a point of law, only in very
limited circumstances and only with leave from the Court.
The Court of Appeal granted leave to appeal on the
following issues: (a) Implied allocation – Flaux J had held that
a reinsurer could be liable for the whole loss even when it
had only been on risk for part of the period. The Court of
Appeal has accepted that there is a “seriously arguable case
for treating the insurance and reinsurance positions
differently”. (b) Good faith – Flaux J had considered a
reinsured’s duty of good faith to be only a duty not to act
dishonestly. If this is held to be correct, it will mean that a
reinsured has a choice as to how its losses are allocated to
reinsurers. (c) Recoupment and contribution – Flaux J had
concluded that contributions from other reinsurers should
be apportioned on an ‘independent liability’ basis, i.e. the
independent amount each reinsurer would have been liable
to pay regardless of the existence of other reinsurers. These
issues will be decided at a full Court of Appeal hearing, the
judgment in respect of which is eagerly awaited.
LIMITATION
RSA Insurance plc v Assicurazoni Generali SpA
The High Court has ruled that insurers who are liable to pay
asbestos claims under the Compensation Act 2006 (“CA”)
are only entitled to claim a contribution from other insurers
within two years from settlement. The claimant in the
underlying action had contracted mesothelioma and sought
compensation from his employer, RSA’s insured. Despite
having insured the employer for only 6 months of the
claimant’s 10 year employment, RSA were liable for the
entire claim by virtue of s.3, CA. RSA sought to recover from
the other two insurers on risk during the Claimant’s
employment, Aviva and Generali. The Court held that
liability arising out of an insurance contract is a ‘Damages
Indemnity Liability’ and therefore such a claim would be a
damages claim under the Civil Liability (Contribution) Act
1978, with a limitation of 2 years. Insurers will need quickly
to identify other insurers on risk to avoid being time-barred.
PROOF OF COVER / LIMITATION
R&Q (Malta) Limited and Others v Continental
Insurance Company [2017] EWHC 3666 (Comm)
The claimants, R&Q (Malta) Limited, Aviva Assurances UK
Branch and Societa Reale Mutua di Assicurazioni, contended
that they had entered into four reinsurance contracts with
Continental in respect of underlying policies for an
Australian building company. The insured Australian
company became the subject of a mesothelioma claim due
to its products containing asbestos. The claimants paid
several of the claims and sought to recover from
Continental. However, the original reinsurance cover notes,
slips and policies could not be produced by the claimants;
Continental denied it was a party to the reinsurance. The
Court accepted the claimants’ evidence that despite
extensive efforts, the documentation could not be found.
The Court was then prepared to look beyond the missing
contractual documents, to other evidence establishing that
there was a contract. In this respect, the Court was
persuaded by the broker’s, PWS, evidence that the appointment, M accepted two further appointments in
arbitral proceedings in which the subject matter overlapped
with the ‘Halliburton/Chubb arbitration’. This, however, was
not disclosed. When Halliburton discovered this, it applied
to have M removed as arbitrator of the ‘Halliburton/Chubb
arbitration’ under s24(1)(a) Arbitration Act 1996. The Court
held that, whilst inside information and knowledge could be
a legitimate concern in overlapping arbitrations, it was not
in itself an inference of apparent bias. Arbitrators are
“assumed to be trustworthy and to understand that they
should approach every case with an open mind.” To
conclude that an open mind and objective judgment would
not be brought by the tribunal required “something of
substance”. However, disclosure should have been made to
Halliburton of the circumstances which might have given
rise to justifiable doubts about M’s impartiality. Such
disclosure depends on what the arbitrator knew at the time
of his appointment, and should not be viewed in hindsight.
In the circumstances, the Court found that the non-
disclosure did not give rise to justifiable doubts as to M’s
impartiality. Halliburton’s appeal was accordingly dismissed.
SANCTIONS
Mamancochet Mining Limited v Aegis Managing
Agency Ltd & Others [2018] EWHC 2643 (Comm)
The claimant was assignee of the benefit of a cargo
insurance policy. Insurers included US owned or controlled
entities (USFCEs). A claim arose when cargo was stolen. At
that time and at the time the policy attached, there were no
applicable sanctions. However, following USA’s withdrawal
from the Joint Comprehensive Plan of Action, its re-imposed
sanctions against Iran would apply to the Insurers that were
USCFEs. The policy included the Joint Cargo Committee
Sanctions Clause, which provides that Insurers are deemed
not to provide cover and shall not be liable to pay a claim to
the extent that doing so would “expose that (re)insurer to
any sanction, prohibition or restriction” under UN, EU or UK
trade or economic sanctions, laws, or regulations. Insurers
argued the clause applied on the basis that there was a risk
that a national authority might conclude the payment under
the policy was prohibited. The Court held that Insurers had
to go further and show that payment would actually be
prohibited conduct and would expose them to sanctions,
which would not be the case as the re-imposed sanctions
were to become effective on 5 November 2018. The Court
therefore ordered Insurers to pay the claims by that date.
Importantly, the Court also held that the Clause does not
extinguish Insurers’ liability to pay the claim, but suspends it
while the sanctions apply. If meanwhile time bar might arise,
the Court suggested proceedings be commenced and a stay
sought. Finally, as the Clause is suspensory, the Court found
that the EU Blocking Regulation (on which Insurers also
sought to rely) was inapplicable in this case.
Stephen Carter
Managing Partner
T: 0203 697 1902
M: 07887 645 262
Bernadette Bailey
Partner
T: 0203 697 1903
M: 07887 645 263
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Brigard Urrutia, Insuralex Colombian announcement:
By means of Directive 020 dated October 3rd, 2018, the Finance Superintendence of Colombia (SFC) authorized the foreign reinsurers registered before the Registry of Foreign Reinsurers and Reinsurance Brokers – REACOEX – to act in the Colombian market through underwriting agencies.
For this purpose, foreign reinsurers must submit to the SFC certain information of the authorized underwriting agencies and keep it updated, under penalty of their registry cancellation in the REACOEX.
Furthermore, underwriting agencies that are authorized in their country of origin to act as reinsurance brokers, shall apply for registration in the REACOEX as a foreign reinsurance broker.
Link: https://bu.com.co/en/noticias/finance-superintendence-authorized-reinsurance-underwriting-agencies
Osterling Abogados, Peruvian Insuralex member, is delighted to announce that Gabriel Loli (36) has become a partner with its Corporate Area, effective October 1st. This promotion ups to 11 the count of partners of the firm established in 1980.
Since he joined the firm in 2007, Mr. Loli has made significant contributions to the development and growth of the (re)insurance practice, which he currently co-heads. His deep understanding of the contractual and regulatory aspects that regulate the local market has allowed him to participate in claim reviewing, interpretation of different types of policies, discussion on coverage and risks relating civil liability, property, and construction for over USD300MM to date. He also develops the public law, arbitration, and construction practice in the firm, being a subject matter expert.
Enrique Ferrando, main partner and Chair of the Corporate Area, pointed out that “Gabriel’s appointment enhances the renowned leadership that we hold in the (re)insurance Peruvian practice since the last 25 years, as well as it will also make easy deploying a number of innovative proposals, which are focused on our clients’ needs, developing likewise synergies with other practice areas within the firm, all of which will result in a greater added value in our service offering”.
Gabriel Loli is a lawyer from Universidad Privada Antenor Orrego (Trujillo – Peru) and has spent all his professional career at Osterling Abogados. Alongside with his practice, he actively contributes to the vocational training of next-generation lawyers, through our Trainees’ Committee.
