[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Mann & Anor v Lexington Insurance Company [2000] EWCA Civ 256 (11 October 2000) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/256.html Cite as: [2000] EWCA Civ 256, [2001] 1 Lloyd's Rep 1

[New search] [Printable RTF version] [Help]

Case No:A3/2000/2604

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT (Mr Justice Timothy Walker)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 11 October 2000

1. What is the proper interpretation of the Sum insured Clause in the Retrocession Agreement pleaded in paragraph 3 of the Points of Claim ("the Retrocession")?
2. Regardless of the motivations of those who perpetrated damage to the relevant Ramayana stores, did the Losses (as defined in paragraph 4 of the Points of Claim and as scheduled to the Amended Reply) necessarily constitute more than one "occurrence" within the meaning of the Retrocession:-
(1) by reason of the different localities at which they occurred; and/or
(2) by reason of the different times at which they occurred?
3. If issue 2 is answered "no", how does it affect the number of occurrences if:
1. the damage to all of the relevant Ramayana stores was instigated by one single group or faction?
2. The damage to different Ramayana stores was instigated by different groups or factions, each acting for its own separate purposes?
3. The damage to particular Ramayana stores was caused by opportunistic acts of individual criminal behaviour, without any purpose other than the intention of the perpetrators to commit theft or other criminal offences?
4. The damage to particular Ramayana stores was partially instigated by one or more factions and partially caused by opportunistic acts of individual criminal behaviour, without any purpose other than the intention of the perpetrators to commit theft or other criminal offences?
10. The trial of the Preliminary Issues came on before Timothy Walker J. He accepted Mr Flaux's submissions. He accepted that the words "per occurrence" produced an "aggregation provision". He was of the view that the losses did not necessarily constitute more than one occurrence (1) by reason of the different localities at which they occurred; and/or (2) by reason of the different times at which they occurred, and thus answered Question 2 "no". He recorded Mr Flaux's concession that if the circumstances were as per 3 (2) and (3) Mr Flaux would not be suggesting that damage to the different stores was one occurrence, but otherwise held that a trial must take place so as to resolve whether there was one riot or several riots.
11. In the view he formed the judge was much influenced by the terms of the deductible "2.50% ... each location any one occurrence" which he described as "the other important clause". He expressed his view as follows:-
"Thus the deductible clause necessarily contemplates that any one occurrence can cover more than one location. If for example ten stores are affected by one occurrence, then there is a deductible on each store for the purposes of recovery. The approach taken in the deductible clause is entirely consistent with the perils insured against, a large number of which are obviously able to affect more than one location. Thus (leaving aside Riot for the moment) Earthquake, Volcanic Eruption, Tsunami, Typhoon, Storm and Flood are all fully capable of doing damage over a wide area. Having drawn these conclusions from the wording of the contract itself, I go to the three Preliminary Issues."
12. The difficulty I have with this reliance on the deductible clause is that although I would accept that if it be right that "occurrence" in the sum assured clause means what the judge thought it meant, then he would be right as to his view on the deductible clause; if he was wrong however the deductible clause still makes sense and indeed the same sense as it makes in the reinsurance contract, that a deductible should be applied to each loss occurring at each location. What can be argued, and is argued by Mr Flaux, is that the use of the word "location" as well as the word "occurrence" in the deductible clause, points to there being a distinction between the two. Thus, Mr Flaux submits, if Mr Swainston's submission were to lead to "occurrence" and "location" meaning precisely the same, that would be a pointer against Mr Swainston's construction. The use of the word "occurrence" without reference to "location" is clearly a point which needs further consideration.
13. There are really two questions. First, was it intended by use of the words "per occurrence" in contrast to the words "each and every loss, each and every location", to produce a situation where losses to more than one store at their different locations, would be subject to the sum insured limit of $5,000,000 where, for example, a typhoon or volcanic eruption damaged more than one store? Second, if so, and since that would have to be on the basis that a typhoon or volcanic eruption damaging properties at different locations could be one occurrence, could the defendants establish that rioting affecting properties at different locations at different times was one riot or occurrence thereby limiting the claim for all properties to $5,000,000?
The authorities
14. The authorities cited went to two points; first the meaning of the word occurrence, and second to the extent to which in construing a retrocession or reinsurance policy regard could be had to the terms of the underlying insurance.
15. Rix J, as he then was, in Kuwait Airways Corporation v Kuwait Insurance Co [1996] 1 Lloyds Rep 664 analysed the authorities which considered the meaning of occurrence in the insurance context. I make no apology for citing a substantial part of his reasoning which itself incorporates an important part of the reasoning of Sir Michael Kerr in his arbitration award in Dawson's Field Award (Mar 29 1972). Each case does depend on its own terms and circumstances, thus the assistance given must be taken with that in mind but the passages are instructive.
16. In the Kuwait case Rix J was concerned with a war risks policy in which the relevant limit was subject to the qualification "any one occurrence, any one location", and the question was whether the capture of 15 aircraft at Kuwait airport was one occurrence or 15 occurrences.
17. In Dawson's Field Michael Kerr QC as he then was, was concerned with an excess of loss clause which spoke of ultimate net loss sustained in respect of - "each and every loss ... and/or occurrence and/or series of occurrences arising out of one event."
18. The arbitration was concerned with the hijacking of four aircraft one of which was blown up at Cairo airport and three of which were blown up at Dawson's Field. In his arbitration award, quoted by Rix J at 686, Michael Kerr QC said as follows:-
"I consider that I have to approach the present problem by putting myself in the position of an informed observer at Dawson's Field on 12th September 1970, watching the preparations for the blowing up of the aircraft, the evacuation of the immediate vicinity and the blowing up of the aircraft. During this period he would of course have seen a multiplicity of actions and events including a number of separate explosions which destroyed the aircraft. Would he then say that the destruction of the aircraft was one occurrence or a series of occurrences? The answer must be subjective. No one contended that each explosion was a separate occurrence. In my view there was one occurrence, one event, one happening; the blowing up of three aircraft in close proximity more or less simultaneously, within the time span of a few minutes, and as a result of a single decision to do so without any one being able to approach the aircraft between the first explosion and their destruction. I cannot regard this as a "series of occurrences" . . .
I have already dealt with the Respondents' contention that the proximate cause of the destruction of the aircraft were the hijackings, which I cannot accept. I accept their contention that if the aircraft became total losses by hijacking (which I reject) then the hijackings could not be aggregated for any purpose under the Clauses. Since the aircraft were hijacked by different persons and in widely separated localities it would be impossible to treat the hijackings as a single occurrence. I also reject the contention faintly and more or less formally advanced by the Claimants that the hijackings arose out of one event, viz. The PFLP's overall plan. I agree that a plan cannot by itself constitute an event. But it was then said on behalf of the Respondents that the destruction of the aircraft at Dawson's Field could also not be said to have arisen out of one event, because the only unifying event could have been the decision or order to blow up the aircraft. But in my view this approach is much too narrow, though this view must admittedly be coloured by my view about "occurrence". The destruction of the aircraft arose from the decision or order to detonate the explosive charges in them which was thereupon carried out in the way described above. If three aircraft become total losses because of a decision or order to blow them up together is carried out, why is the carrying out of the destruction or order not one event?"
19. Rix J then continued as follows:-
"It seems to me that these authorities justify the following propositions. An "occurrence" (which is not materially different from an event or happening, unless perchance the contractual context requires some distinction to be made) is not the same as a loss, for one occurrence may embrace a plurality of losses. Nevertheless, the losses' circumstances must be scrutinized to see whether they involve such a degree of unity as to justify their being described as, or as arising out of, one occurrence. The matter must be scrutinized from the point of view of an informed observer placed in the position of the insured. In assessing the degree of unity regard may be had to such factors as cause, locality and time and the intentions of the human agents. An occurrence is not the same thing as a peril, but in considering the viewpoint or focus of the scrutineer one may properly have regard to the context of the perils insured against.
I have already made my findings of fact regarding the circumstances of the aircrafts' loss. In my judgment the aircraft were already lost on Aug. 2, and not merely when flown away."
20. At 689 Rix J continued:-
"The position is, therefore, that the aircraft were all lost on Aug. 2. There is unity of time. There is also unity of location, as Mr Webb in my judgment rightly concedes. There is unity of cause, for, whichever of the insured perils is the appropriate one, it operates alike in respect of all aircraft. There is unity of intent. Moreover, since the contract in question is one of war risks, the context is one in which it must be fair, if appropriate, to describe the relevant occurrence in broader as distinct from narrow terms. How then does one describe an occurrence in and by reason of which KAC became dispossessed of all 15 aircraft standing at the airport at the time of invasion and capture of the airport, in circumstances where the Iraqis intended to exercise dominion over those aircraft and to fly them out of Kuwait to Iraq as soon as they could logistically do so? In my judgment the occurrence is the successful invasion of Kuwait, incorporating the capture of the airport and with it KAC's aircraft on the ground; at its narrowest it is the capture of the KAC fleet at Kuwait airport. On either view, it seems to me, those matters are appropriately described as one occurrence."
21. Axa v Field [1996] 2 Lloyds Rep 233 was also cited on the occurrence aspect for the sentence in Lord Mustill's speech at 239:-
"In ordinary speech, an event is something which happens at a particular time, at a particular place , and in a particular way." But it is on the relevance to construction of the underlying insurance to the reinsurance where to my mind that authority is of most assistance. At 238 Lord Mustill said:-
"On appeal, the reasoning of Mr Justice Phillips was upheld: [1996] 1 Lloyd's Rep. 26. Prominent among the reasons given were three themes whose importance extends beyond this particular dispute; and since I venture to differ from each, I will turn to them straight away. The first is an assumption that where a direct insurer takes out reinsurance, and where both policies contain provisions enabling the amount of losses to be added together, the parties are likely to have intended their effect to be much the same. This assumption may very well be correct where the reinsurance is of the proportionate kind, under which the reinsurer is sharing the risk assumed by the direct insurer. In such an event it is indeed likely that the treatment of multiple losses, and hence the outcome of the parallel contracts, was meant to be the same. But where a reinsurer writes an excess of loss treaty for a layer of the whole account (or the whole of a stipulated account) of the reinsured I see no reason to assume that aggregation clauses in one are intended to have the same effect as aggregation clauses in the other. The insurances are not in any real sense back-to-back."
22. It was that passage which Tuckey LJ had in mind when he quoted the following passage from the speech of Lord Griffiths in Vesta v Butcher [1989] AC 852 at 895 and added a comment of his own at paragraph 12 of his judgment in Groupama Navigation et Transports and others v Catatumbo CA Seguros (CAT 20^th July 2000):-
"In the course of his speech Lord Griffiths said at page 895:
"In the ordinary course of business reinsurance is referred to as `back-to-back' with the insurance, which means that the reinsurer agrees that if the insurer is liable under the policy the reinsurer will accept liability to pay whatever percentage of the claim he has agreed to reinsure. A reinsurer could, of course, make a special contract with an insurer and agree only to reinsure some of the risks covered by the policy of insurance, leaving the insurer to bear the full cost of the other risks. Such a contract would I believe be wholly exceptional, a departure from the normal understanding of the back-to-back nature of reinsurance and would require to be spelt out in clear terms. I doubt if there is any market for such a reinsurance."
This statement cannot apply to all reinsurance but has not been doubted where the reinsurance is proportionate such as the reinsurance in this case and in Vesta where the reinsurer shares a proportion of the underlying risk written by the insurer. (See Lord Mustill in Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026, [1996] 3 All ER 517 at 1033H-1034B)."
23. Later at paragraph 17 he said:-
"I did not understand Mr Donaldson to quarrel with the presumption that in a proportionate reinsurance of the kind with which this case is concerned, there is a presumption that, in the absence of clear words to the contrary, the scope and nature of the cover afforded is the same as the cover afforded by the insurance.. That at least I think is the effect of Vesta and it makes obvious commercial sense. As the cases show, the same does not necessarily apply to provisions relating to ancillary or procedural matters such as claims control, law and jurisdiction and arbitration. So no significance can be attached to the fact that such provisions are not the same in the two contracts."
24. Mance LJ reached the same conclusion as Tuckey LJ, and said this at paragraph 33:-
"The conclusion to which I have come applies because the warranties in the insurance and reinsurance were in terms effectively identical. It is only the differing proper laws of the two contracts which opens the argument that, whatever the warranty's effect in the original insurance, the express warranty in the reinsurance has a different, overriding effect. Had the two contracts contained warranties expressed in different and irreconcilable terms, different considerations could have arisen. Likewise, if the reinsurance had contained a warranty which had in terms no counterpart in the insurance. It would then be clear that the two contracts were not and could not to that extent be treated as back-to-back. There would be no possibility of reconciling them. . . . ."
Submissions
25. Mr Flaux referred to the term of the retrocession which incorporated the terms of the original policy subject to qualification as follows:-
"this reinsurance is subject to the same terms and conditions as the original Policy except as otherwise provided herein and reinsurers will follow the settlements (excluding ex gratia) of the Original policy as far as applicable."
26. He submitted that the sum insured term "per occurrence but in the annual aggregate separately for Flood and Earthquake" was so different from the equivalent in the reinsurance and the original policy that it clearly "otherwise provided". He submitted that the words in the retrocession "per occurrence" must have been chosen deliberately so as to produce a difference.
27. He further submitted that many of the perils eg fire, explosion, aircraft damage, riot (obviously), strike, earthquake, volcanic eruption, typhoon, storm and flood were perils that might well affect more than one location in the course of one occurrence, and thus that there was every reason to infer that the change of wording was directed to a plurality of losses arising out of one occurrence.
28. Thus the submission was that an occurrence could on the wording cover more than one location and that his clients should be entitled to establish that the losses were caused by one orchestrated riot which would under the policy (he submitted) would be one occurrence.
29. Mr Swainston's argument was that prima facie where reinsurers and retrocessionaires took a proportion of the risk, one would need clear words to produce an aggregation of the claims or losses when what was prima facie the retrocessionaire's share was claimed under the retrocession. Prima facie the reinsurer received a share of the premium in return for accepting a share of the risk, and likewise the retrocessionaire took a share of the premium for accepting his share of the risk. Aggregation would be unusual where the reinsurance was proportionate, and clear words would be needed if aggregation was to be achieved. The only clear words were those that expressly aggregated losses flowing from Flood and Earthquake.
30. In the same way as he would suggest that under the deductible the correct interpretation was one which simply contemplated that in relation to each location, a deductible would applied in relation to each occurrence, he submitted that in the sum insured clause "the occurrence" related to each location, and was not intended to be an aggregating provision.
31. He submitted that it is to give no effect to the express aggregation of Flood and Earthquake to suggest that because those perils and fire, volcanic eruption, typhoon and storm, could all cause damage over a wide area, the intention must be inferred that the word "occurrence" was intended in effect to aggregate losses caused by any of those perils.
32. His submission was that "per occurrence" in the sum insured clause contemplated an event which was loss occurring and that when viewed from the insured's perspective, was a separate event. He submitted that even in an earthquake or flood situation where the flood or earthquake struck the different shops at the different locations, albeit there might be some unity of time, there would in fact be separate occurrences, and aggregation would only take place as a result of the express words.
33. In any event he submitted that even if the last submission were wrong, the allegations of the defendants of rioting orchestrated to take place at different locations and at different times only had one unifying factor which was the orchestration, and on any view that could not produce one occurrence which limited the recovery under the sum insured clause.
Discussion
34. I admit that at one time I was impressed by Mr Flaux's argument that the use of the word "occurrence" without reference to "location" had produced a situation in which it was possible that one Flood or Earthquake or Typhoon causing losses to stores at different locations might be one occurrence for the purposes of the retrocession thereby limiting the recovery to $5,000,000 for all locations. Equally it seemed to me that even then he had an uphill battle to bring the pleaded facts of rioting causing damage at different locations and at different times unified only by a common orchestration, within the concept of one occurrence.
35. On reflection however it seems to me that in fact Mr Flaux `s arguments are misconceived on both points.
36. Obviously the word occurrence has a meaning in the insurance context, but it, (and a sum insured provision as a whole), must take its meaning finally from the surrounding terms of the policy including the object being sought to be achieved by the retrocession. It is relevant that under the retrocession a share of the underlying premium was being accepted for a share of the underlying risk. Under the reinsurance the perils included "Fire, .... Riot, Strike, Earthquake, Volcanic Eruption, Typhoon, Storm, Flood". Although any of those might, in what in loose terms could be called "one occurrence", cause damage to stores at the individual locations, the reinsurance was up to a certain figure "each and every loss, each and every location" and the deductible was "2.50% each location any one occurrence".
37. Mr Flaux must be right that a bargain was struck between the reinsurer and the retrocessionaire which did allow the retrocessionaire to aggregate certain losses. But if Mr Flaux is right in his arguments, then what the reinsurer accepted was that losses should be aggregated not only so far as "Flood and Earthquake" was concerned (by use of the express words), but also in relation to all the other perils above referred to. The reinsurer was thus accepting on Mr Flaux's argument that although he would have no right to aggregate at all, but had to pay in relation to each occurrence so far as each location was concerned, if the damage was caused by any of the perils which could cause damage at more than one location , the retrocessionaire would be entitled to aggregate.
38. Mr Flaux would submit that that would depend on whether it was a one occurrence case, but true as that may be, his argument really came to saying that if damage was caused by one of the perils which could cause damage at different locations, that peril would be an occurrence within the terms of the policy.
39. I cannot accept that it was intended that the retrocessionaire should be entitled to aggregate other than for Flood and Earthquake for which he expressly provided. In my view it can be seen from the underlying reinsurance that "each and every loss, each and every location" had its equivalent in the deductible "each location any one occurrence". The deductible in the reinsurance thus could not conceivably have contemplated that one occurrence can cover more than one location because in that policy it did not. The deductible then appeared in the same terms in the retrocession. In my view it did not change its meaning at this stage. Indeed it seems to me that far from the words of the deductible pointing to the construction which the judge preferred, I believe it points the other way. It seems to me that the "occurrence" which the sum insured is referring to is the same occurrence to which the deductible is pointing both in the reinsurance and then the retrocession. It is thus an occurrence at a particular location. That is not to say the "occurrence" means the same as "location". It does not. But the occurrence has to occur at the particular locations, and cause loss and damage at the same to be an occurrence within the contemplation of this policy. If the retrocessionaire was to achieve the result for which Mr Flaux contends he would , where he is taking a share of the risk for a share of the premium as he is here, have had to use much clearer words.
40. The very fact that the stores which were the subject of this insurance were at locations some distance apart would indicate to me that it was not intended that the use of the word "occurrence" would have the far reaching consequences suggested by Mr Flaux.
41. That factor points to the need for clear words as already indicated, but it also leads into the second aspect. Even assuming that the word "occurrence" is not limited to an occurrence at a particular location, what follows ?
42. In my view it would still not be right to construe the retrocession as meaning that provided a peril which has damaged more than one property has happened, the limit of $5,000,000 applies to all the damage to all the properties suffering under that peril. That is in essence what Mr Flaux's argument comes to. Even if the construction I have placed on the sum insured clause is too restrictive from the retrocessionaire's point of view, it does not follow that it was the intention of the parties that a wide construction of "occurrence" was intended. The factors which I have prayed in aid on the strict construction aspect, also point to "occurrence" not being given a wide interpretation. The question which would have to be answered is whether the damage suffered by properties was one occurrence or resulted from one occurrence, and that would not be so simply because they were suffered as a result of one peril even if there was some unity of time.
43. During the course of argument different examples were given of what might or might not be one occurrence. For example, damage caused by a typhoon to two semi-detached properties, was something Mr Swainston was inclined to accept might be one occurrence or resulting from one occurrence. But that example is far away from the facts as pleaded by the defendants in this case, and indeed far from the facts of this case altogether. This case is about stores at different locations. If three or four were damaged by the same typhoon at their different locations at the same moment in time, then if
the argument so far addressed on the terms of the policy were wrong, the argument for saying "one occurrence" clearly becomes stronger. Mr Swainston would argue however that there is still a lack of unity of place, and that each store as it is damaged would constitute a separate occurrence. There is force in that submission, and it may be that even in the instance of a typhoon the same result is reached as I have reached by a process of construction by simply applying the reasoning in the Kuwait Case or Dawsons Field to what is an "occurrence".
44. But in any event in the instant case it is not one typhoon which has caused damage at one moment in time. What has caused the losses are the acts of rioters over a wide area, at different locations, and over two days. It seems to me that Mr Flaux had to accept that he could not point to any unity in time nor any unity as to place. All he could point to as a unifying factor was the fact (as his clients would seek to prove), that the riots were centrally orchestrated by the Government, and that there were agents provocateurs present at each of the locations where damage was suffered. He submitted that if his clients could establish that unifying factor, they would be able to establish there was "one riot", and thus one occurrence.
45. In my view, even if there might be a circumstance in which an occurrence could cover damage to more than one property, it seems to me difficult to conceive of a situation in which if the properties were some distance apart, and if there was lack of unity of time, there could still be one occurrence by virtue of some factor as "orchestration". The reasoning of Michael Kerr QC and Rix J seems to me applicable to a general consideration of the meaning of the word occurrence in the insurance context, and I find no support in their reasoning for Mr Flaux's submission. Indeed his submission seems to me to be contrary to the last paragraph of Michael Kerr QC's award quoted by Rix J with approval at 686.
46. My answer to the preliminary issues would thus be:
1. see above.
2. Yes.
3. Not applicable.

47. I would be in favour of allowing the appeal.
48. Lord Justice Kay: I agree.
49. Lord Justice Laws: I also agree.
Order: Appeal Allowed. A minute to be lodged with the court.
(Order does not form part of approved judgment)