04/02/2014

"ST EFREM" – San Evans Maritime & Ors v Aigaion Insurance [2014] 1 C.L.C. 883

Michael Ashcroft QC and Rupert Hamilton acted for the successful Third Claimant in this unusual case, which raised questions concerning the effect of a follow clause in an insurance policy.

Following a grounding of their Vessel, the Claimants claimed on a H&M policy underwritten by several Lloyd's syndicates, who settled the claim. The Claimants also claimed on a H&M policy underwritten by the Defendant, relying on a follow clause in the policy to the effect that the Defendant would follow the Lloyd's underwriters in relation to claims.

The Defendant contended that the follow clause had the effect of appointing the Lloyd's underwriters as its agents, and that, as they had expressly not acted as the Defendant's agents when settling the claim, the Defendant was not bound to follow the settlement. Teare J rejected this argument, but acknowledged that the question of whether a follow clause did have the effect of making Lloyd's underwriters the agents of the following underwriter was the subject of conflicting authority and gave permission to appeal.

The Defendant also argued that a term of the settlement agreement reached between the Claimant and the Lloyd's underwriters conferred a benefit on the Defendant, to the effect that the Claimant could not rely on the agreement as triggering the follow clause. Teare J rejected this argument too, on the basis that the purpose of the clause was to protect the Lloyd's underwriters, not to benefit the Defendant, and also on the basis that clear words would have been needed to show that the Claimants had intended to give up their valuable rights under the follow clause.

Michael Ashcroft QC and Rupert Hamilton were instructed by Watling & Co