“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.”
“IN CONSIDERATION of The Insured [i.e. BOC and its subsidiaries and associated companies] paying the Premium to The Insurers it is hereby agreed that The Insurers will, subject to the terms, exceptions, conditions and limitations contained in any of the Schedules herein or endorsed hereon, which shall all be read as one document, indemnify The Insured against Liability arising from any Occurrence during the Period of Indemnity.”
“2. ‘The Arrangements’ means this Master Policy and the subordinate policies issued or to be issued by or on behalf of The Insurers in different territories as evidence of insurance for The Indemnity. 3. ‘Liability’ means legal liability and shall include payments made by or with the consent of The Insurers before legal liability is established. 4. ‘Occurrence’ means any loss injury or damage happening during the Period of Indemnity for which The Insured is or may become liable in contract or tort or by statute or otherwise howsoever. 5. ‘Financial Loss’ means a pecuniary loss cost or expense suffered or incurred by a claimant not resulting from Injury or damage to or loss of tangible property. 6. ‘Injury’ means death or bodily or mental injury or disease. … 9. ‘Products’ means goods sold, repaired, serviced, installed or supplied by The Insured. 10. ‘Professional Indemnity’ means claims arising from professional advice given in return for a fee.”
“1. The Indemnity provided by The Arrangements shall be subject to the following limits: In respect of any claim or number of claims arising out of any one Occurrence …………….£20,000,000 provided that: (i) in respect of: (A) Products or (B) Financial Loss it shall in either case be limited to£20,000,000 in respect of all Occurrences during any one Period of Indemnity not exceeding 12 months. (ii) if more than one party is to be indemnified the total amount of indemnity to all such parties shall not exceed the Indemnity Limits. 2. The Indemnity provided by the Arrangements shall be reduced by: (a) The following amounts for each and every Occurrence (i) The first£750,000 in respect of Financial Loss (ii) The first£750,000 in respect of Professional Indemnity (iii) For any other liability the first£500,000 in respect of the Indemnity provided to [specified subsidiaries and associated companies].” (b) The amount of monies receivable and/or deductible [under other insurances] Provided that these reductions shall not be cumulative. 3. The Insurers will in addition indemnify The Insured against any costs and expenses: (a) recoverable by any claimant from The Insured and/or (b) incurred by The Insured with the consent of The Insurers. … 5. In the event of any claim or claim under The Arrangements, The Insurers may pay to The Insured the relevant Indemnity Limit (deducting therefrom any sum or sums already paid as damages and/or compensation in respect thereof) and The Insurers shall thereafter be under no further liability in respect of such claim or claims except for the payment of costs and expenses under Clause 3 above incurred prior to the date of the payment of such Indemnity Limit.”
“General Third Party Liability including Products, Employers Liability, Motor Liability, Professional Indemnity, Financial Loss, Aviation and Marine Liability, as per original policy indemnifying B.O.C. International plc including all subsidiary and/or associated and/or affiliated companies.”
“£16,000,000 any one loss or series of losses arising out of one occurrence/unlimited in all for General Third Party Liability, Motor, Aviation, Marine, Employers Liability and Professional Indemnity BUT£16,000,000 IN THE AGGREGATE for Products and Financial Loss EXCESS OF£4,000,000 any one loss or series of losses arising out of one occurrence/unlimited in all for General Third Party Liability, Motor, Aviation, Marine, Employers Liability and Professional Indemnity BUT£4,000,00 IN THE AGGREGATE for Products and Financial Loss.”
“To follow original terms, conditions and settlements (as far as applicable to the layer).”
“Copy of original policy seen.”
“Re P.I. [Professional Indemnity] including claims made in the Period in respect of losses occurring prior to inception.”
“The primary insurers shall in the event of an occurrence or series of occurrences consequent upon one original cause which may be the subject of a claim under the policy and where the potential cost may exceed£4m , or in the event of the potential cost of such an occurrence or series of occurrences reac[h]ing£4m give notice to re-insurers as soon as practically possible and furnish all available information respecting such occurrence or occurrences if required. In either such event the course to be adopted by the primary insurers shall be determined by agreement between the primary insurers and re-insurers and the primary insurers shall not without the consent of re-insurers litigate with regard to such loss but such consent shall not be unreasonably withheld. In the event of a difference of opinion between the primary insurers and re-insurers in respect of an opportunity whereby settlement of a loss can be obtained by the acceptance of a standing judgment or transaction agreed by the claimant re-insurers retain the right to pay to the primary insurers the amount the equivalent to their liability under this policy according to such standing judgment or transaction and shall thereafter be under no further liability under this policy in respect of the loss.”
“Furthermore the implication contended for would give rise to an open-ended promise of indemnity, when the contract of indemnity contained in the policy is expressly limited to$3,500,000 ; I do not think that it is possible to accept an implication which is inconsistent with that express term of the policy.”
“To follow original terms, conditions and settlements (as far as applicable to the layer).”
“Being a Reinsurance of and warranted same … terms and conditions as and to follow the settlements of the Insurance Company of Africa …”
“It is a condition precedent to liability under this Insurance that all claims be notified immediately to the Underwriters subscribing to this Policy and the Reassured hereby undertake in arriving at the settlement of any claim, that they will co-operate with the Reassured Underwriters and that no settlement shall be made without the approval of the Underwriters subscribing to this Policy.”
“There is, I consider, an inconsistency between (1) a follow settlements clause, the underlying philosophy of which is that reinsurers trust insurers to make settlements of claims, and (2) an undertaking in a claims co-operation clause, the underlying philosophy of which is that settlements shall not be made without the approval of reinsurers. Furthermore, it is to be observed that an undertaking by insurers not to make settlements without the approval of reinsurers can only be of relevance in so far as it has an impact upon settlements by insurers which would otherwise be binding on reinsurers. In my judgment the undertaking by the insurers not to make a settlement without the approval of reinsurers must have been intended to circumscribe the power of insurers to make settlements binding upon reinsurers, so that reinsurers would only be bound to follow a settlement when it had received their approval. In other words, the follow settlements clause must be construed in its context in the policy, containing as it does a claims co-operation clause in this form, as only requiring reinsurers to follow settlements which are authorized by the policy, i.e., those which have received their approval, though presumably reinsurers can, if they wish, waive that requirement. This effectively emasculates the follow settlements clause; but it is nevertheless, in my judgment, what the parties to a policy in this form have agreed.”
“There is then, on the language of the two clauses, a plain inconsistency between them. The follow settlements clause requires the reinsurers to accept the honest settlements of the insurer arrived at in a businesslike way. The claims co-operation clause (or, more accurately, the second part of it) requires that the insurers shall not make settlements without the approval of the reinsurers. It is a possible view that the two provisions are so much in conflict that both should be disregarded. But I think that reading the two clauses together the proper course is to treat the follow settlements clause as applicable only to such settlements as are approved by the reinsurers. That does least violence to the language. I agree that from the point of view of the insurers that really removes the value of the follow settlements clause but I do not find it possible to give that clause an effect which disregards the clear wording of the claims co-operation clause.”
“Further or alternatively, it is denied that in settling the claims on the terms set out in the TTSA, the Newark Insurers (as defined in the TTSA) took proper and businesslike steps in making the settlement: (i) Before entering into the TTSA, the Newark Insurers took legal advice from Charles W. Miller III. As appears from his reports and witness statement, Mr Miller did not obtain or see copies of the Global Excess Policies yet nevertheless advised that they should be taken into account in relation to the proposed settlement. In particular, Mr Miller failed to verify (i) the policy limits of the Global Excess Policies; and/or (ii) the attachment points for the Global Excess Policies. (ii) Further or alternatively, as appears from his reports and witness statement, Mr Miller did not obtain or see any primary policies issued to BOC US after1 October 1988 . In the premises, Mr Miller failed to verify (i) the assertion by BOC US that any such primary policies contained pollution exclusions; and/or (ii) that any such pollution exclusions excluded the Asbestos Claims and/or Welding Product Claims, despite Mr Miller recognising in his report dated16 August 2000 that this cutoff in respect of the primary policies substantially limited the policy limits used for any allocation. (iii) Further or alternatively, as appears from his reports and witness statement, Mr Miller did not obtain or see any excess policies issued to BOC US after1 October 1985 . In the premises, Mr Miller failed to verify (i) the assertion by BOC US that any such excess policies contained pollution exclusions; and/or (ii) that any such pollution exclusions excluded the Asbestos Claims and/or Welding Product Claims, despite Mr Miller recognising in his report dated16 August 2000 that this cutoff in respect of the primary policies substantially limited the policy limits used for any allocation. (iv) Further or alternatively, the TTSA was entered into when the Newark Insurers had filed their brief submitting that the Global Excess Policies should be disregarded for the purposes of allocation, but no opposition briefs had been filed and therefore no reply briefs had been filed either. There was no urgency or need to settle the claims before such opposition briefs had been filed and the merits thereof considered. In the premises, the settlement of the claims pursuant to the TTSA was premature, improvident and did not take into account the full ambit of any arguments as to the extent of the Newark Insurers’ legal liability. (v) Further or alternatively, in the absence of case law as to the allocation of losses amongst ‘triggered’ policies, the position asserted by BOC US as to allocation and, specifically, the inclusion of the limits of the Global Excess Policies for the purposes of allocation, was not reasonable or principled and resulted in an inequitable and disproportionate allocation of losses to the years in which the Global Excess Policies were included. The Newark Insurers and/or Mr Miller failed to recognise that BOC US’s position as to allocation was unlikely to be correct and accordingly advised that the claims were settled at an unreasonably high level which did not reflect the Newark Insurers’ actual legal liability to BOC US.”
“we perceive that this solution is consistent with the contract language, as Commercial Union’s second-level excess policy will not be pierced unless and until the primary and first-level excess policies in effect for a given year have been expended.”
“BOC USA and most of the other carriers in this litigation have taken the position that, for purposes of allocation of the Bodily Injury Claims, costs should be allocated utilizing the policy limits not only of all primary and excess policies issued to BOC USA which are at issue in this litigation, but also the policy limits of all of the Global Policies issued to BOC plc, its parent. [Footnote: It should be noted that the policy limits of the coverage available to BOC USA for the years 1981 to 1985 when the Global Policies are not included are at levels similar to those levels of the policy limits purchased in earlier years. More specifically, BOC USA had total policy limits of$52 million for 1978 to 1979,$52 million for 1979 to 1980, and$52 million for 1980 to 1981.] However, inclusion of the Global Policies in any allocation calculation substantially increases the allocation to the 1981 to 1985 years of coverage, since the Global Policies were, apparently, first purchased by BOC USA in 1981. More specifically, by inclusion of the limits of all of the Global Policies, in addition to the policy limits of the coverage issued to BOC USA itself (which are at issue in the litigation), the total policy Limits in effect for 1981 to 1985 increase as follows: [there followed a table showing the limits of the Global Excess Policies]. … Thus, inclusion of the Global Policies coverage for BOC plc increases the policy limits for the 1981 to 1985 time frame from$220 million to more than$1.47 billion - nearly seven times as great. Given, that BOC USA’s total policy limits per year prior to 1981 never exceeded$52 million per year, inclusion of the policy limits of the Global Policies has a tremendous impact on the percentage of allocation to the years 1981 through 1985. Without the Global Policies, the total coverage limits which BOC USA alleges to be available to provide coverage for the Bodily Injury Claims from 1917 through 1988 total$952.79 million . The coverage provided to BOC USA during the years 1981 to 1985, which totals$200 million , constitutes a proximately 23% of the total insurance coverage of BOC USA, which BOC USA claims provides coverage for the Bodily Injiny Claims ($220 million out of$952.79 million total). However, when the coverage limits of all of the Global Policies are included in the total coverage limits available to BOC USA for the Bodily Injury Claims, the total coverage limits that BOC USA alleges should be used for allocation calculations increases to$2,054,102,500 because of the inclusion of the limits of all of the various Global Policies whose policy limits allegedly exceed$1 billion . By inclusion of the Global Policies for 1981 to 1985, the percentage of coverage limits provided during the years 1981 to 1985 increases dramatically. When the policy limits of all of the Global Policies are included in allocation calculations, the policy limits for coverage from 1981 through 1985 constitutes nearly 72% of all policy limits ($1,470,350,000 out of$2,054,102,500 ). Thus, the mere inclusion of the Global Policies in allocation calculations, using BOC USA’s own calculations, increases the percentage of the overall policy limits provided during the years 1981 to 1985 (and, accordingly, the allocation to those years of coverage), from approximately 23% to nearly 72%, more than a threefold increase in allocation.”
“Reinsurers will recall that both BOC and Newark have, on the basis of the possible inclusion or otherwise of the global excess policies, prepared various allocation calculations. Reinsurers will have seen a copy of the Newark’s Illustrative Alternative Allocation Calculation, sent to you under cover of my letter of26 May 1999 (a further copy was supplied to you under cover of my fax dated 23 August). That calculation, which was based on the premise of the global excess policies not being included in an allocation, had the Newark’s share of the losses at approximately 25%. Should the global excess policies be included in an allocation, the Newark’s UK lawyers’ view is that the proportion of the losses the New Jersey Court will find applicable to the Newark is likely to be as high as 72%. My fax to you of 23 August also included a copy of the Carter-Wallace Appeal decision. At the meeting at your London offices on 25 August you will recall that Mr Miller advised those present that it would be an uphill struggle to convince the Court in New Jersey that the inclusion of the global excess policies in an allocation would be inequitable. In the context of the Liberty Mutual proposal, Mr Miller has advised that even if the Newark were able to convince an allocation master (the judicial officer deciding the allocation issue in New Jersey) that a 72% share of the losses would be an inequitable allocation, it is very unlikely that the allocation master would reduce the Newark’s allocation to 45%. In short, the settlement proposal advanced by Liberty Mutual would see the Newark contributing less to the bodily injury costs than the Newark are advised is the likely outcome of a determination by the New Jersey Court. … At a subsequent meeting of insurers’ lawyers, those representing Liberty Mutual advised they had revisited their calculations which has resulted in the Newark contribution increasing from 45% to 55%. This figure of course remains well below the 72% we are advised is likely to be attributed to Newark by the Allocation Master. A further settlement meeting of the insurers’ lawyers is being arranged and is likely to be held during the first week of January 2000. We are told that the ‘window of opportunity’ for the settlement negotiations is likely to close at that time as the brief to the Court opposing the Newark’s brief on the allocation issue is to be filed by 17 January (and that date had already been put back to accommodate the settlement negotiations). The judge in charge of this case is now apparently keen to push the litigation forward and a decision on the allocation issue could be made relatively quickly. You will appreciate that together with our co-insurers Eagle Star/Zurich we must give very serious consideration to the Liberty Mutual’s settlement approach in view of the advice received from the Newark’s lawyers. Our combined view is that faced with this advice there is no option but to seek to settle the allocation issue along the lines put forward by Liberty Mutual. Such a settlement would, of course, also be of benefit to our reinsurers on the basis that, as we contend is the case, these sums are payable under the reinsurance policies. Whether a settlement at a 55% contribution by the Newark is achievable remains to be seen. …”
“Welcome update & on balance of info. contained herein would agree that it would appear sensible for RSA/ESZ to consider settlement approach at 55% iro Newark. Notwithstanding R/I’s maintain stance that we reserve our rights with regard to coverage etc. …”
“Assume that a group of workers occupied an office building for nine years under the following circumstances. For the first three years, the building owners had no liability insurance, assuming any risk of loss. During each of the middle three years, the owners were insured under a CGL policy with the Trustworthy Insurance Company for$5,000,000 per occurrence. For the remaining three years of the period, the owners were again uninsured. Assume, too, that during the first three years the building occupants were exposed to asbestos fibers in the ceilings and insulation but that all asbestos products were removed at the end of the third year. During the first three years, no occupants of the building manifested any symptoms of disease. During the fourth, fifth, and sixth years, there was ‘exposure in residence,’ that is, some building occupants began to develop breathing problems, but no disease was diagnosable. In the final three years, some of the building’s occupants were diagnosed with asbestos-related diseases. In the tenth year the owners received claims from thirty people who had worked in the building during the entire nine years asserting that they were suffering from asbestos-related disease as a result of their work environment. The owners, when presented with the claims, no longer had insurance. They sought coverage, however, for all the claims from the Trustworthy Insurance Company, which had insured the owners for three of the nine years – years when the building contained no asbestos. Must Trustworthy respond to the claims? If so, to what extent? … If we were to accept the constant levels of the policy limits as evidence of constant risks assumed over the nine-year span from exposure to manifestation (in the case of disease manifested in the ninth year), the carriers on the risk in years four, five, and six would each pay one-ninth of the loss, or collectively thirty-three percent. If the facts of coverage had been otherwise – let us say policies had been in effect for years one through three in the amount of two million per year and in years four through six at three million per year – we might assess the risk assumed in years seven through nine at four million per year. Carriers during the first three years would bear roughly twenty-two percent (6/27ths); carriers covering the middle three years would bear thirty-three percent (9/27ths); and the building owners would bear forty-four percent of the risk (12/27ths). Of course, policy limits and exclusions must be taken into account. We recognize that such even mathematical proportions will not occur, and so we must repose a substantial measure of discretion in a master who must develop the formula that fairly reflects the risks assumed or transferred. We realize that many complexities encumber the solution that we suggest involving, as it does, proration by time and degree of risk assumed – for example, determining how primary and excess coverage is to be taken into account or the order in which policies are triggered. … The parties did not focus on those issues. Still, we do not believe that the issues are unmanageable. Constructing the model for analysis of the self-insurance portion of the risk assumed by O-I is difficult but not impossible. We recognize the difficulties of apportioning costs with any scientific certainty. However, the legal system ‘frequently resolves issues involving considerable uncertainty.’ …”
“[O]ur resolution of the issue [that is, the issue of allocation] was guided by our concern for the efficient use of resources to address the problem of environmental disease and by the demands of simple justice. We also observed that ‘[b]ecause insurance companies can spread costs throughout an industry and thus achieve cost efficiency, the law should, at a minimum, not provide disincentives to parties to acquire insurance when available to cover the risks.’ We determined that ‘any allocation should be in proportion to the degree of the risks transferred or retained during the years of exposure,’ and concluded that the better formula’ was to ‘allocate[] the losses among the carriers on the basis of the extent of the risk assumed, i.e., proration on the basis of policy limits, multiplied by years of coverage.’”
“Nevertheless, we expressly declined to address how the solution we crafted would affect excess insurers: ‘We realize that many complexities encumber the solution that we suggest involving, as it does, proration by time and degree of risk assumed—for example, determining how primary and excess coverage is to be taken into account or the order in which policies are triggered. The parties did not focus on those issues.’ At issue in this appeal is how excess insurance is to be considered when allocating responsibility under a continuous trigger of liability.” ‘We realize that many complexities encumber the solution that we suggest involving, as it does, proration by time and degree of risk assumed—for example, determining how primary and excess coverage is to be taken into account or the order in which policies are triggered. The parties did not focus on those issues.’ Having considered the allocation methods proposed by the parties, the Court explained its conclusion on the issue: “We therefore reject each alternative advanced by the parties to this appeal. Instead, we are confident that another allocation method more faithful to the principles articulated in Owens-Illinois is available to resolve this issue. In Chemical Leaman Tank Lines, Inc. v. Aetna Casualty & Surety Co., 978 F.Supp. 589 (D.N.J.1997), Judge Brotman relied on Owens-Illinois in allocating coverage between various levels of excess insurance. Not unlike this appeal, Chemical Leaman involved a plaintiff that sought coverage for costs incurred as a result of environmental contamination. The insurers argued that each layer of insurance must be exhausted across all of the triggered policy years before the next layer would be allocated, a contention that Commercial Union echoes here. Using the example we provided in Owens-Illinois, the court observed that ‘[t]he Owens-Illinois method intentionally assigns a greater portion of indemnity costs to years in which greater amounts of insurance were purchased, based on the view that this measure of allocation is more consistent with the economic realities of risk retention and risk transfer.’ The court therefore rejected the theory of horizontal exhaustion by layer, and ‘direct[ed] apportionment of damages among policy years without reference to the layering of policies in the triggered years.’ However, the court did note that within any given year, each layer of excess coverage must be depleted before the next level is pierced. … We believe Judge Brotman’s well-reasoned opinion in Chemical Leaman represents a natural extension of Owens-Illinois, one that is entirely consistent with our belief that ‘any allocation should be in proportion to the degree of the risks transferred or retained during the years of exposure.’ Owens-Illinois, supra, 138 N.J. at 475, 650 A.2d 974. In Owens-Illinois we identified several public interest factors relevant to the appropriate method of allocating insurance coverage, including the efficient use of available resources, the interests of simple justice, and the need for an ‘efficient response’ to the logistical challenge posed by environmental insurance litigation. We are confident that the ChemicalLeaman solution best serves those interests. Firstly, this approach makes efficient use of available resources because it neither minimizes nor maximizes the liability of either primary or excess insurance, thereby promoting cost efficiency by spreading costs. That method also promotes ‘simple justice,’ by respecting the distinction between primary and excess insurance while not permitting excess insurers unfairly to avoid coverage in long-term, continuous-trigger cases. Additionally, adoption of that allocation method will introduce a degree of certainty and predictability into the complex world of environmental insurance litigation in continuous-trigger cases. Moreover, we perceive that that solution is consistent with the contract language, as Commercial Union’s second-level excess policy will not be pierced unless and until the primary and first-level excess policies in effect for a given year have been expended. Our jurisprudence in this area has not been marked by rigid mathematical formulas, and we do not advocate any such inflexibility now. Rather, our focus remains on ‘[a] fair method of allocation . . . that is related to both the time on the risk and the degree of risk assumed.’ Nevertheless, we anticipate that the principles of Owens-Illinois, as clarified by our decision today, represent the presumptive rule for resolving the allocation issue among primary and excess insurers in continuous trigger liability cases unless exceptional circumstances dictate application of a different standard. See Comment, AllocatingProgressive Injury LiabilityAmong Successive Insurance Policies, 64 U. Chi. L.Rev. 257, 259 (1997) (noting that ‘[t]he magnitude of the losses in [progressive injury] cases further illustrates the need for courts to choose one method, and apply it consistently, when allocating liability for progressive injuries’).”
“Hence, any allocation should be in proportion to the degree of the risks transferred or retained during the years of exposure.”
“There is no ‘presumptive rule’ for allocating claims under the continuous trigger theory” (joint statement; see also report, paragraph 78). His position was, however, more nuanced than that statement, taken by itself, might suggest. He acknowledged that the court in Carter-Wallace had said that the principles in Owens-Illinois, as clarified by its own judgment, “represent the presumptive rule for resolving the allocation issue among primary and excess insurers in continuous trigger liability cases”
“However, I understand David Reston did. The detailed evaluation of the Global Excess Policies, which included verifying their attachments points and limits, was done by David. My focus was on assessing how the attachment points and limits, which David had verified, impacted the allocation calculations applying New Jersey law.”
“The basic principle, is, however, that interest will be awarded from the date of loss. Furthermore, the mere fact that it is impossible for the defendant to quantify the sum due until judgment has been given will not generally preclude such an award. Thus, in Admiralty, in collision cases where the ship is totally lost, interest has been held to run from the date of the loss (see e.g. The Berwickshire [1950] P. 204 and Owners of Liesbosch Dredger v. Owners of S.S. Edison [1933] A.C. 449, 468), and in the case of a salvage award, from the date of the rendering of the salvage services: see The Aldora [1975] Q.B. 748. There must have been many cases in the commercial court in which, although the quantum of damages was in doubt until the date of judgment, interest was awarded from the date of loss. Similarly, the mere fact that it is doubtful whether the plaintiff's claim will succeed, and it is reasonable to contest his claim, will not generally require any departure from the general principle; nor generally will any doubt, however justified, as to the principles of law which will be applied.”
“6. I therefore turn to apply these principles to the present claim. The first question is to determine when the sum became due under the policy. As a matter of technical and legal analysis, I accept an insurer is in breach in failing to pay the assured the sum due under the policy at the date of the loss. I agree with the view of Mr. Justice Mance in InsuranceCorporation of the Channel Islands v. McHugh [1997] L.R.L.R 94 at p. 137, where he said that insurance contracts are treated in law as contracts to hold the insured harmless against liability or the loss insured against; therefore insurers are in the absence of contrary provision in breach of contract as soon as the insured liability or loss occurs. 7. However, although the date of the loss is when the sum became due under the policy, it does not follow that the Court awards interest in every case from the date of the loss. For example in The Popi M, [1984] 2 Lloyd’s Rep. 555 the assured put forward a claim on a basis substantially different to that which proved successful at trial. The trial Judge (Mr. Justice Bingham) awarded interest from a period about four years and four months after the loss. The Court of Appeal awarded interest commencing two years after the date of the loss; Sir John Donaldson, M.R. (with whom Lord Justice O’Connor agreed) considered that the case was unusual and underwriters therefore needed time to make up their minds. Lord Justice May, though not differing from the other Judges in the result, expressed the view that although in most cases insurers would need to investigate claims, prima facie interest ought to be awarded from the date of the loss. Another example is McLean Enterprises Ltd. v. Ecclesiastical Insurance Office plc [1986] 2 Lloyd’s Rep. 216, where interest was awarded by the trial Judge (Mr. Justice Staughton) from a date some five weeks after the loss. In KuwaitAirways Corporation (to which I have referred) the loss occurred shortly after the invasion of Kuwait by Iraq on Aug. 2, 1990, but interest was only awarded from Dec. 5, 1990; the Judge found that it was not clear that until Nov. 12, 1990 that a claim in respect of loss of spares was being pursued and insurers needed a little time to appreciate that fact and consider the claim. 8. The decisions to which I have referred are but examples common in the experience of the Commercial Court in relation to insurance claims in unusual cases or those that are not straightforward. In such cases, the Court usually exercises its discretion on the basis it is proper to allow insurers some time to consider the claim. The time varies accordingly to the nature of the loss, the way the claim is presented and the circumstances that require investigation. In many cases the time may be quite short. The Court will always have regard to the particular circumstances specific to that claim. 9. In this particular case, the fact of the fire was known immediately to underwriters; loss adjusters were on the scene almost immediately (see par. 31 of the judgment). However it was not obvious what, if any, damage La Danse Grecque [a painting by Degas] had suffered. Discussions also took place with underwriters about the terms of the policy; on Jan. 17, 1992 the claimants’ brokers and underwriters agreed the partial loss clause (see par. 69 of the judgment). Furthermore at some stage prior to the trial, the parties agreed that the damaged value should be ‘after restoration but assessed as at immediately after the fire’ (see par. 93 of the judgment). As I held at pars. 94 and 95 of the judgment, I considered that it was not possible immediately after the fire to express a view on the extent of the damage and the risk of deterioration; that would only be possible after restoration was complete. 10. In my view therefore, in this highly unusual case, it would be right to award interest only from a date at which restoration was complete and underwriters had had time to consider the matter.”
“In cases where the delay and the degree of fault are so substantial that the predominant cause of the plaintiff being out of his money can be seen to be his own failure to prosecute the claim, rather that the defendant’s maintenance of his defence, it is not difficult to see that the policy should be that a successful plaintiff should not be compensated for loss of use of the money. However, in order for it to be said that the plaintiff’s fault has displaced the defendant’s fault as the predominant cause of the plaintiff being kept out of his money, the delay in question would have to be very substantial and not merely relatively short periods of weeks or months during which in commercial litigation lulls in activity inevitably occur and the plaintiff’s fault would have to be very substantial, as where an action has inexcusably been allowed to go to sleep for years.”
“33. The claimant submits that the Court will not disallow interest for a period unless there has been both very substantial delay and also very substantial fault on the part of the claimant. Mr. Kenny relied on statements to that effect made by Mr Justice Colman in Derby Resources A.G. v. Blue Corinth Marine Co. Ltd. (No. 2) (The Athenian Harmony). I respectfully agree with the approach of Mr Justice Colman in that case. In my view the Court should not disallow interest unless it can be shown that the ‘predominant cause’ of the claimant being kept out of money that the Court has held he is entitled to is the claimant’s own failure to prosecute the claim, as opposed to the defendant’s maintenance of its defence.”
“94. … [I]f your Lordships agree, the House should now hold that, in principle, it is always open to a claimant to plead and prove his actual interest losses caused by late payment of a debt. These losses will be recoverable, subject to the principles governing all claims for damages for breach of contract, such as remoteness, failure to mitigate and so forth. 95. In the nature of things, the proof required to establish a claimed interest loss will depend on the nature of the loss and the circumstances of the case. The loss may be the cost of borrowing money. That cost may include an element of compound interest. Or the loss may be loss of an opportunity to invest the promised money. Here again, where the circumstances require, the investment loss may need to include a compound element if it is to be a fair measure of what the plaintiff lost by the late payment. Or the loss flowing from the late payment may take some other form. Whatever form the loss takes the court will, here as elsewhere, draw from the approved or admitted facts such inferences as are appropriate. That is a matter for the trial judge. There are no special rules for the proof of facts in this area of the law. 96. But an unparticularised and unproved claim simply for ‘damages’ will not suffice. General damages are not recoverable. The common law does not assume that delay in payment of a debt would of itself cause damage. Loss must be proved.”
“17. I also agree with Lord Nicholls that the loss on the late payment of a debt may include an element of compound interest. But the claimant must claim and prove his actual interest losses if he wishes to recover compound interest, as is the case where the claim is for a sum which includes interest charges. The claimant would have to show, if his claim is for ancillary interest, that his actual losses were more than he would recover by way of interest under the statute. In practice, especially where the period over which interest is sought is short or where the claimant does not have to borrow money to replace the debt, simple interest undersection 35A of the Supreme Court Act 1981 is likely to be the more convenient remedy.”
“31. It is clear from the judgments of the House of Lords in Sempra Metals that to claim compound interest as damages for a breach of contract which has deprived the plaintiff of money it is necessary to plead and prove that the plaintiff has suffered the relevant loss. For example, the plaintiff may plead and prove that it has had to borrow money on which it has incurred interest charges as a borrower or that it has lost the opportunity to invest the promised money or that, in the absence of the money of which it has been wrongfully deprived, the plaintiff has had to use funds that otherwise would have earned such interest: Lord Hope at paras 16 and 17, Lord Nicholls at para 95, Lord Scott at para 132, and Lord Mance at para 216. If these strictures in Sempra Metals are good authority, Mr Seaton’s third and fourth claims must fail.”
“33. The Board agrees with Males J that, in assessing a claim for financial loss caused by the failure to pay money that is contractually due, the law does not require a detailed examination of a plaintiff’s financial affairs and that an extensive process of disclosure by the plaintiff to make or verify that assessment is likely to be unhelpful and is in any event disproportionate. The question of what evidence is required from which a court can infer that a plaintiff has suffered financial loss in the form of the incurring of borrowing costs will depend upon the circumstances of the particular case, as Lord Nicholls recognised in para 95 of his speech in Sempra Metals (para 25 above). The Board also does not question the judge’s view that in the EquitasLtd case the state of the insurance market at the relevant time and the evidence which was available of the importance in that market of prompt cash flow supported the inference that the claimant had suffered financial loss in the form of incurring borrowing costs to replace the withheld money. But the Board does not agree with Males J’s conclusion that the common law has gone so far as to recognise that a claimant or plaintiff kept out of his or her money in a commercial context is as a norm entitled to claim and receive as damages for breach of contract interest on the withheld sums that is calculated by reference to the cost of borrowing such sums at a conventional rate without evidence from which such a loss can be inferred. As the Board stated in its discussion of Sempra Metals in National Housing Trust v Y P Seaton &Associates Co Ltd[2015] UKPC 43 ;[2016] BLR 215 , para 31, it is open to a plaintiff to plead and prove an actual loss of interest caused by late payment of a debt: ‘[s]uch claims are for actual or real damages, not theoretical and non-existent loss.’ 34. The Board has reached this view for the following four reasons. First, the existence of such a general rule is inconsistent with the speeches of the House of Lords in Sempra Metals. See Lord Hope at para 17 of his speech which is quoted in para 24 above and Lord Nicholls at paras 95 and 97 of his speech which is quoted in para 25 above. The Board notes that in JSC BTA Bank v Ablyazov[2013] EWHC 867 (Comm) , in a judgment handed down several months before the EquitasLtd judgment, Teare J correctly and clearly stated the effect of the Sempra Metals judgment on this matter: see paras 12-13 and 18-19 of his judgment. Secondly, while such a norm might promote legal certainty in relation to such claims, there is no principle on which it is based. Thirdly, one cannot now pray in aid, as Males J did, the outcome in Sempra Metals, which was to award compound interest as part of a claim for unjust enrichment. The United Kingdom Supreme Court overruled that element of the decision in Sempra Metals in its judgment in Prudential Assurance Co Ltd v Revenue and Customs Commissioners[2018] UKSC 39 ;[2019] AC 929 , a ruling that post-dated Males J’s judgment by several years. Fourthly, so far as the Board can ascertain, the approach of Males J has not been followed in the practice of the commercial court in England and Wales. It was adopted by Stuart-Smith J in Peacock v Imagine Property Developments Ltd[2018] EWHC 1113 (TCC) , para 143, as Mr Salter points out. But there is no general practice that follows the approach in Equitas Ltd, which is not consistent with principle or with the speeches of the House of Lords in Sempra Metals. The Board is therefore satisfied that the case of Equitas Ltd does not assist Mr Seaton’s claim.”
“64. The present case involves claimants who say that they disbursed cash as a result of a legal wrong which would otherwise have been available to them. The Claimants are not commercial entities operating in a commercial market like the insurance market, but mostly retail investors (although some of the claimants are special purpose vehicles set up to hold those investments). None of the Lead Claimants have alleged, still less established, that funds had to be borrowed as a result of the wrongs complained of. I am not persuaded in these circumstances that I can simply infer a loss in the form of the compound interest which would have been earned on the funds. For compound interest to be recovered as damages at common law, the relevant loss must be pleaded and the facts from which the loss can be inferred proved.”
“It was, however, part of Walsham’s own evidence that as a broker it came under considerable pressure from syndicates to ensure the prompt collection of claims and to fund claims where payment had not yet been made by reinsurers, all because of the supreme importance of cash flow to those syndicates. This is not surprising, particularly in the market conditions which existed at the time.”