Duties under a follow clause: lead underwriters left in the dark?
In the recent case of San Evans Maritime Inc v Aigaion Insurance Co  EWHC 163 (Comm), the Commercial Court held that a ‘follow clause’ had the effect of binding Aigaion to a settlement agreed by Lloyd’s syndicates under a separate insurance policy even though the settlement agreement expressly stated that the syndicates were not acting in their capacity as lead underwriters when they signed the agreement. The decision can be explained, however, by the circumstances of this particular case and the clear wording of the ‘follow clause’.
The dispute arose from the grounding of the vessel St Efrem in Brazil in July 2010. The insurance position for the vessel was as follows: a 50 per cent share had been insured with three Lloyd’s syndicates — Catlin, Ark and Brit (‘the Lloyd’s Policy’); a 30 per cent share had been insured with Aigaion (‘the Aigaion Policy’); and the remaining 20 per cent share had remained uninsured.
Critically, the Aigaion Policy contained the ‘follow clause’: ‘agreed to follow London’s Catlin and Brit Syndicate in claims excluding ex-gratia payments’…
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