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A recent jurisdiction result - Common sense over chaos

News / / A recent jurisdiction result - Common sense over chaos

Catlin sought an order restraining Weyerhaeuser from pursuing proceedings before the District Court in the State of Washington, on the basis that the parties had agreed to refer the relevant disputes for resolution by arbitration in London Catlin and Weyerhaeuser were parties to an excess insurance policy (the Layer 4 Policy) The wording of the Layer 4 Policy provided alongside the heading Choice of Law and Jurisdiction for an NMA 1998 Service of Suit Clause (USA) and As per Lead Underlying Policy The Layer 4 Policy also provided under the Insuring Agreements clause that Catlin agreed to follow the terms of the Lead Underlying Policy except as may otherwise be endorsed to this PolicyThe NMA 1998 Service of Suit Clause stated that (1) in the event that Catlin failed to pay any amount claimed to be due hereunder then (2) then Catlin would submit to the jurisdiction of a competent court in the United States This clause did not, of itself, preclude Catlin from commencing an action in or transferring an action to the US Court The Lead Underwriting Policy, which the Layer 4 Policy followed, contained three endorsements that were relevant to the dispute-1nbspEndorsement 7 any dispute, controversy or claim arising out of or relating to the policy was to be determined in London under the Arbitration Act 19962nbspnbspEndorsement 8 provided for the construction and interpretation of the policy to be governed by the laws of the State of Washington in the USA3nbspnbspEndorsement 9 stated that Solely for the purpose of effectuating arbitration, in the event of the failure of the Company to pay any amount claimed to be due hereunder, the Company, at the request of the Insured, will submit to the jurisdiction of any court of competent jurisdiction within the United StatesIn resolving the dispute, the court stated that it was a matter of construction of the Layer 4 Policy as a whole It held that-a)nbspnbspThe Choice ofhellipJurisdiction was to be As per Lead Underlying Policy The Lead Underlying Policy provided for London arbitration pursuant to the Arbitration Act 1996 as per Endorsement 7 (see 1 above)b)nbspnbspThe wording of the Layer 4 Policy read in conjunction with the Lead Underlying Policy led to the conclusion that (i) if Catlin failed to pay any amount claimed to be due (see the wording of the NMA 1998 Service of Suit Clause above) and (ii) this was solely for the purpose of effectuating arbitration (see the wording of Endorsement 9 of the Lead Underlying Policy) then (iii) Catlin would submit to the jurisdiction of a competent court in the US In other words, provisions of (i) (iii) of this paragraph had to be read as being inferior to the headline provision for London arbitration (Endorsement 7) and provisions (i) (iii) applied in circumstances concerning the enforcement of an arbitration awardIn coming to that conclusions above, the court noted that-(i)nbspnbspThere was no conflict in the drafting and the court should not come to the conclusion that there was a conflict lightly ie the court would seek to read the various provisions of such a contract together in order to make it work and(ii)nbspnbspIt was an important factor that the result works commercially The alternative interpretation of the jurisdiction provisions proposed by Weyerhauser, that the London arbitration provision survived as a dispute resolution mechanism except when money was due, was chaotic It was quite simply unlikely that the parties, having negotiated a policy that sat within a number of excess layers of reinsurance, would have intended such a complexity, and that it was difficult to see why commercial parties would aim for such a result (it being certainlyhellipunusual)(iii)nbspnbspUpon hearing expert evidence on the law of Washington state (see Endorsement 8 above), the court concluded that the English law view above would have been no different if Washington state law had been appliedAs a result of the English court's decision above, Weyerhaeuser are unable to pursue Catlin in the courts of Washington State The decision is a useful reminder of the common sense and commercial approach taken by judges in interpreting policies and it is an important prompt for parties to be sure of what they have agreed, even in relation to the more boilerplate clauses

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