Addleshaw Goddard

UK 200 2013 position: 23

Actual or alleged liability — the 'Bermuda Form' under English law

In a judgment handed down on 28 February 2013, legal precedent has for the first time been set by the English Commercial Court on points of construction concerning the ‘Bermuda Form’ insurance policy wording. Specifically, when considering two preliminary issues of construction, the Commercial Court held that as a matter of English law, absent specific language to the contrary in the policy, in order to obtain indemnity under a liability policy, an insured must demonstrate an actual legal liability. This ramifications of the Judgment will undoubtedly cause insureds concern.

The Bermuda Form liability insurance policy was introduced in the 1980s by the then newly-formed Bermudian insurance companies, SL and ACE. The form was originally created to ensure the availability of high level liability cover for multinational corporations which faced exposure to large product liability claims. The corporations that required the cover themselves contributed capital to fund the original Bermuda Form insurers. The Bermuda Form wording is unique. One of its distinctive features is that whilst the insurance policy is governed by New York law, it provides for the resolution of disputes through arbitration seated in London. For this reason, until now, the English Commercial Court has never been called upon to address issues of construction relating to the Bermuda Form…

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