“22 …. a Primary Policy of US$5m excess a US$5m retention, followed by five excess layers providing cover up to US$85m . The Excess Policies comprised the 1st Excess Policy of US$5m excess US$10m ; the 2nd Excess Policy of US$5m excess US$15m ; the 3rd Excess Policy of US$25m excess US$20m ; the 4th Excess Policy of US$10m excess US$45m and the 5th Excess Policy of US$30m excess US$55m . Losses over US$85m were uninsured”
“SECTION 1 - PHYSICAL DAMAGE & EQUIPMENT RECOVERY The Insurers will indemnify the Assured to the extent provided by this policy if Equipment is lost, destroyed or damaged whilst being moved delivered or repositioned or whilst located in Depots or otherwise in store anywhere in the World during the Period of Insurance … SECTION 1 – PHYSICAL DAMAGE & EQUIPMENT RECOVERY (continued) EXTENSIONS APPLICABLE TO ON- HIRE EQUIPMENT In respect of On-hire Equipment the Insurers will indemnify the Assured to the extent provided by this policy for: SECTION 1 – PHYSICAL DAMAGE & EQUIPMENT RECOVERY (continued) EXTENSIONS APPLICABLE TO ON- HIRE EQUIPMENT 1. LOST EQUIPMENT AND REPAIR AND ASSOCIATED COSTS costs incurred in retrieving and/or repairing Equipment abandoned by the Lessee and outstanding repair costs and/or service charges incurred by the Lessee relating to Equipment incurred or arising from the failure of any Lessee to fulfil their obligations to the Assured for such Equipment and not recovered within 183 days of the Date of Occurrence. 2. SURVEY, DAMAGE REPAIR AND RE-MARKING COSTS repair and re-marking costs including survey and/or inspection charges incurred by the Assured in assessing the extent of damage insured under 1. above … 3. OUTSTANDING REPAIR COSTS AND SERVICE CHARGES repair and/or service charges relating to the Equipment raised by the Assured to the Lessee after the Date of Occurrence which the Assured are unable to collect … 4. RECOVERY, HANDLING AND DROP-OFF COSTS 1. costs and expenses reasonably incurred to recover Equipment to a Specified Location or other premises for repair and/or storage and/or releasing as appropriate and 2. Equipment handling charges incurred by the Assured or the Lessee which the Assured are unable to collect … caused by or arising from the failure of any Lessee to fulfil their obligations to the Assured with respect to such Equipment… SECTION 2 - LOSS OF EARNINGS The Insurers will indemnify the Assured for uncollected rental and other charges as specified in the lease or conditional sale agreement which: a) relate specifically to leased Equipment which has not been returned to a Specified Location prior to any Lessee’s contractual default, bankruptcy (de factor or de jure), insolvency … during the Period of Insurance and b) are not received as a direct result of such Lessee’s contractual default, bankruptcy (de factor or de jure) … or incurred by the Assured following the Assured serving a Notice of Default upon the Lessee … … Provided that … 3) the maximum liability of the Insurers under this Section shall be the lesser of 183 days equivalent charges per unit of Equipment subsequent to the Date of Occurrence or any other Limit specified herein. GENERAL CONDITIONS … POLICY LIMITS Irrespective of the number of parties claiming under this Policy the total amount payable by the Insurers in respect of all claims arising out of any one Occurrence shall not exceed any applicable Limit of Liability or maximum amount payable specified in the policy or in the whole the Total Sum Insured. MARINE INSURANCE ACT 1906 Although not every section of this Policy may relate to a marine adventure, all the terms, conditions and warranties of theMarine Insurance Act 1906 shall apply to the insurance under this policy … GENERAL DEFINITIONS … ANNUAL AGGREGATE LIMIT The maximum amount the Insurers will pay for any claim or series of claims occurring or with Dates of Occurrence during any one annual Period of Insurance… ANNUAL AGGREGATE LIMIT – SINGLE LESSEE(S) The maximum amount the Insurers will pay for all claims attributable to any individual Lessee or group of Lessees owned or controlled by a single entity during any one annual Period of Insurance. ASSURED’S RETENTION The amount of any loss or series of losses arising out of any one Event the Assured will retain before making a claim under this Policy. CLAIM The aggregate of all losses and damages including all costs and expenses suffered by the Assured resulting from each Occurrence insured hereunder. DATE OF FINAL CLAIM The date exactly twelve (12) months after the Date of Occurrence or as otherwise may be agreed between the Insurers and the Assured. DATE OF OCCURRENCE The date of an event which may give rise to a claim recoverable hereunder… DATE OF PRELIMINARY CLAIM A date not later than six (6) calendar months after the Date of Occurrence when the Assured having submitted written claims to the Lessee … remains unable to recover Equipment and/or amounts due from the Lessee in respect of the period from the Date of Occurrence… OCCURRENCE Any one occurrence or all occurrences of a series consequent on or attributable to one source or original cause… TOTAL SUM INSURED The maximum sum payable in the aggregate for all claims arising out of any one Occurrence…. CLAIMS CONDITIONS … RECOVERIES Following the payment of a claim under this policy and in the absence of an indemnity from any other Policy specified herein any sums recovered from any other source whatsoever as or towards payment of the amount indemnified shall be shared between the Insurers and the Assured as follows: i) all sums shall be allocated to the Insurers until the amount paid under this policy (including costs) has been recovered and ii) all further sums shall inure to the benefit of the Assured. When sums are received as recoveries in respect of amounts indemnified both under this policy and the other policy(ies) specified herein and the recovered sums cannot be clearly assigned to losses indemnified by any specific policy then the recovered sums shall be allocated to the Insurers and such other insurers in the same proportions as each has borne of the total loss. Once all the insurers’ claims payments (including costs) have been [recovered] any further sums recovered shall [inure] to the benefit of the Assured. This Condition shall not apply when recovered sums have been assigned to losses sustained and indemnified by a specific policy …”
“The problem must, in my opinion, be solved by assuming that the name insured the first£25,000 of any loss and also insured the excess over£125,000 as well as insuring the£100,000 payable under his policy with the stop loss insurers. There would then be three insurance policies as follows: (1) a policy for the payment of the first£25,000 of any loss; (2) a policy for payment of the next£100,000 of any loss; (3) a policy for payment of any loss in excess of£125,000 . When the name suffered a loss of£160,000 the name received£25,000 under the first policy,£100,000 under the second policy and£35,000 under the third policy. The damages payable by Outhwaite were£130,000 . The third insurer is entitled to be the first to be subrogated because he only agreed to pay if the first two insurances did not cover the total loss; accordingly the third insurer must be paid£35,000 . The second insurer is entitled to be the second to be subrogated because he only agreed to pay if the first insurance cover proved insufficient; accordingly the second insurer must be paid£95,000 . The sum of£35,000 payable by way of subrogation to the third insurer and the sum of£95,000 payable by way of subrogation to the second insurer exhausts the damages of£130,000 received by the name from Outhwaite. There is nothing left to recoup to the second insurer the balance of£5,000 out of the£100,000 he paid under his policy. There is nothing left by way of subrogation for the first insurer in respect of the first£25,000 which he agreed to bear. Under the stop loss insurance the name agreed to bear the first£25,000 loss and any loss in excess of£125,000 . In my opinion the name is not entitled to be in a better position than he would have been if he had taken out the three insurances I have mentioned. The name in fact acts as his own insurer for the first£25,000 loss and acts as his own insurer for any loss in excess of£125,000 . So the name must pay£95,000 to the stop loss insurers just as he would have been liable to pay£95,000 to the second insurer if he had taken out three policies. In the result, out of the loss of£160,000 , the name will have borne the first£25,000 because he agreed with the stop loss insurers that he would bear that loss. The stop loss insurers having paid£100,000 under the policy will receive back£95,000 by way of subrogation.”
“The basic facts were that on2 August 1990 Iraq had invaded Kuwait, and had taken control of the airport where fifteen Kuwait Airways (KAC) planes were situated. Rix J held that KAC’s loss was complete on2 August 1990 . Eight of the fifteen aircraft were subsequently recovered by KAC. The insurers had paid KAC US$300m ; the scheduled (insured) value of the fifteen aircraft was US$692m , and the scheduled value of the eight recovered aircraft was US$395m . The issue to be decided was whether the recoveries should be applied on the top down basis, or shared proportionately between the parties in the proportion 300/692 to insurers, and 392/692 to KAC.”
“KAC's submission is straightforward. The policy limit of US$300m was an aggregate limit. Insurers in fact paid on an aggregate basis. The analogy, following Lord Templeman, is insurance from the ground up to$300m and self−insurance for US$392m excess of US$300m (the agreed value of all the aircraft covered being US$692m ). Thus the top down principle itself requires that recoveries be applied first to the "layer" US$392m excess of$300m because the notional insurer (in fact KAC) is "entitled to be the first to be subrogated because he only agreed to pay if (the US$300m ) did not cover the total loss." KIC's submission is that each aircraft loss was a separate loss, exemplified by the fact that each had its own agreed value in the policy, the premium was based on that value and indeed of the 15 aircraft concerned three were the property of the government of Kuwait of which one was included in the eight aircraft eventually recovered. Hence, it is submitted, the payment made of US$300m was in effect a payment of 300/692 of the agreed value of each aircraft.”
“In my judgment KAC is plainly right on this issue. I do not think there can be any justification for "disaggregating" recoveries where there is an aggregate limit to the indemnity. Moreover the aggregate limit (in the case of one occurrence) applied regardless of the number of aircraft lost or of whether they were the property of KAC or the government. Whether or not there were a number of losses or only one loss (there was certainly only one occurrence) is in my judgment nothing to the point. Once the top down principle applies, I think it provides the answer as KAC submitted. Moreover that conclusion accords with commercial good sense. Had KAC lost only the 7 aircraft which were in fact destroyed, insurers would unarguably have had to pay up to the limit of the indemnity without any recovery. It would be remarkable if the policy was to be so construed that because KAC lost those 7 aircraft but also 8 (or any other number of) others which were later recovered intact insurers became entitled to a credit of a proportion of the value of the aircraft recovered. For the same reason I do not think the basic principle that an assured is entitled to a full indemnity for his loss but no more has any impact on this Question, save that if KAC was not to recover the aggregate limit I do not think it could be said to have received a full indemnity for its losses (or loss). The effect of insurers' submission is that the aggregate limit of£300m only applies in limited circumstances (where there are no recoveries) but otherwise is an unpredictable figure depending on recoveries and their value. That is not what I think the policy says and means. It is also arguably inconsistent with the established principle that the cause of action for breach of a contract of indemnity accrues at the time of loss.”
“Where the assured is insured for an amount less than the insurable value or, in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance.”
“…was firmly based (in both the House of Lords and the Court of Appeal) on the fact that the excess cover was being provided in respect of aggregate losses. Precisely how the aggregate loss was formulated or ascertained is in this context of less importance. The cover was being provided against a particular layer of loss, and it was the nature of the cover which determined the application of the top down approach. There was no suggestion in Napier that how recoveries were to be applied under the general law of subrogation should turn on whether or the not the provisions adopted in the relevant policy permitted (in some or all cases) the possibility of identifying and connecting particular losses, payments and recoveries, or whether in particular cases some or all of the losses, payments and recoveries could in fact (on the available evidence) be so identified and connected.”
“…the cover provided was aggregate cover, and to be fully indemnified for its loss, the insured was entitled to receive the aggregate limit. As Langley J said, it would be remarkable if the policy were to be construed such that the insurers’ position would be materially different if they paid for the loss of just seven aircraft, or the loss of fifteen, and then recovered eight. In each case the insured had suffered a loss of seven aircraft in respect of which it was entitled to be indemnified.”
“As a matter of principle, this does not seem an appropriate way in which recoveries in relation to an excess of loss (or equivalent) policy such as the present should be dealt with. Nor does it seem consistent with the approach adopted in Napier and Kuwait Airways. I agree with the learned editors of Arnould (at paragraph 31–46) that the top down approach applies in respect of stop loss and excess of loss policies because “it is in the nature of such policies … that any recovery which may enure to the benefit of insurers by subrogation must be applied top down … because the very cover provided is against a particular layer of loss”
“I also agree with Mr Smith’s “reality check”: the position both before and after the payment of a claim should be the same, and the effective limit of aggregate cover should not depend on the happenstance of when any particular recovery is made, or whether it can be adequately connected (by one or more of the methods proposed by the Claimants) to a particular loss indemnified by an insurer, or retained by the insured. The top down approach achieves this; the Claimants’ suggested approach does not.”
“…It is the nature of [stop loss] policies (like excess of loss policies) that any recovery which may enure to the benefit of insurers by subrogation must be applied from the top down (irrespective of the number of layers in the insurance programme), because the very cover provided is against a particular layer of loss (above the excess point and below the limit). Thus, each successive policy attaches only if the overall loss (usually expressed as the ultimate net loss or net ascertained loss; in the case of the stop loss policies, expressed as the net underwriting loss) has exceeded the excess point specified in the policy. Any recovery reduced, pro tanto, the overall loss. The effect of a reduction in the overall loss therefore manifests itself first on the top layer, and then down through successive layers until the effect of the recovery is exhausted…”
“104…. there are detailed spreadsheets maintained by Textainer, and available to the [Insurers], which provide extensive details of each loss. The spreadsheets were not however in evidence before me, and no attempt has been made by the [Insurers] to identify which particular loss (or group of losses) occurred when. Instead the [Insurers] pointed to the fact that the Hanjin Settlement was in respect of all operating lease losses, and they sought to rely upon a pragmatic assumption that losses in respect of finance leases would have occurred at the same time as, or at least in proportion to, losses in respect of operating leases, with the result that I should proceed on the basis that all losses (under both types of lease) were suffered evenly between the Date of Occurrence and9 March 2018 (the last date on the Loss Schedule). 105. The assumption proposed is one which could make a very material difference to who would benefit (on the [Insurers’] case) from the recoveries made. For example, if a large number of finance lease losses were suffered early on, and before an equivalent number (or amount) of operating lease losses, the recoveries in respect of the operating lease losses might not be attributed at all to the uninsured retention, or to the Primary or 1st Excess Policy. Similarly, if the bulk or all of the early losses were in respect of operating leases, a substantially greater recovery (on the [Insurers’] case) might be due in respect of Textainer’s retention, or the Primary or 1st Excess Policy, than currently proposed by the [Insurers]. 106. On the material before me I do not consider that I have enough information to make the assumption proposed. The Hanjin Receivers and Bankruptcy Trustee (and potentially third parties) may have different interests in finance and operating leases respectively, and I do not know, on the evidence provided, whether it can be said with any confidence that finance lease losses in this case tracked the profile of operating lease losses. As the profile of operating lease losses has not in any event been analysed in evidence, it is not known whether or to what extent significant numbers of such losses in fact occurred at the same time (or at the same time as finance lease losses), and as a result, whether or not it can be determined which policy paid what amount in respect of which type of loss. 107. I agree with Textainer that it was for the [Insurers] to establish the factual premise on which their claim is based, and in my view they have not done so in this respect. This is not a case where the relevant details and evidence are not available to them. On the contrary, they are available, but have not been relied upon for these purposes. Had I agreed in principle with their approach to the distribution of recoveries, I would accordingly have held that it had not been made good on the facts of the present case.”
“… if the precise dates and ordering of the losses cannot be determined, it may be necessary to infer from the evidence when they have occurred. Although there is no presumption that losses have occurred in regular and consistent fashion, in practice, an inference to that effect may be drawn, so that if losses have occurred over a period of years, it may be appropriate to allocate them on a time on risk basis. Thus in MunicipalMutual Insurance Ltd v Sea Insurance Co Ltd [1998] Lloyd’s Rep IR 421 the assured faced pilferage claims over a three year period, and these were allocated by the reinsured on the assumption that the losses had occurred equally across the period of coverage, so that they could be allocated on that basis to insurance and reinsurance years of cover. That approach was upheld by the Court of Appeal.”