BA loses out in Kuwait Airways insurance case

Landmark ruling could affect World Trade Center claims

The insurance issue at the heart of claims arising out of the destruction of the World Trade Center became the crucial issue in a case concluded this week relating to the Iraqi invasion of Kuwait in 1990.
Murray Arnold Campbell Scott v Copenhagen Reinsurance concerned the loss of 15 aircraft owned by Kuwait Airways Corporation (KAC) and one owned by British Airways, as well as aircraft spares lost during the Iraqi invasion of Kuwait.
The claimant argued they should be aggregated as one loss, while the defendant argued the loss of each aircraft arose from separate events. This issue is at the heart of claims facing UK lawyers acting for the London reinsurance market against largely US claimants regarding the World Trade Center.
Reinsurers face a lower liability if the events in Kuwait are treated as two events rather than one. This is because their policies with their insurers state that they are not liable for recoverability until the claim reaches a certain level. In Copenhagen Reinsurance many of the scores of reinsurers' policies relating to BA's plane fall below this level.
It was concluded that the loss of the Kuwaiti aircraft and the spares arose from a single event. There was unity of time as it coincided with the capture of Kuwait Airport, and unity of cause as it arose out of the invasion. There was also unity of intent as it was deemed to have been part of the Iraqis' plan to deprive KAC of its planes permanently.
However, it was concluded that the loss of the BA plane, which was destroyed during the bombing of Kuwait Airport by allied forces during Operation Desert Storm, was not part of this event and therefore should not be aggregated as part of the single loss. This was because, while the Iraqis wanted to deprive KAC of its aircraft 'permanently', this was not the case with the BA plane. It also was not a target of the invasion and was effectively “stranded” when the invasion occurred. Mr Justice Langley said: “I think that had the question been asked on 2 August, 'is the aircraft lost [as in the case of the Kuwaiti aircraft]?' the answer would have been, 'I don't know. Wait and see'.”
Dominic Kendrick QC, Adam Fenton, and Caroline Laband, all of 7 King's Bench Walk, instructed by Andrew Bandurka of Hol-man Fenwick & Willan, acted for Copenhagen Rein-surance. Stewart Boyd QC of Essex Court and Colin Wynter of Devereux Cham-bers, instructed by CMS Cameron McKenna, acted for the underwriters.