Kathryn Hobbs
CMS Cameron McKenna has scored an insurance victory over Clifford Chance in the House of Lords. A ruling this week upheld the 1999 Court of Appeal decision that reinsurance brokers Johnson & Higgins (J&H) were negligent in their dealings with Aneco Reinsurance. The result marks the first successful claim of its type against a reinsurance broker.
Partners Mark Elborne and Andrew Symons led the Camerons team acting for Peter Mitchell, Aneco's liquidator at Pricewaterhouse-Coopers. J&H's defence was conducted by Stephen Lewis, a partner at Clifford Chance.
What makes this case unique is that J&H must bear the cost not only of the reinsurance protection that was lost - about $12m (£8.44m) - but also the losses suffered from the initial reinsurance contract. Its liability has been estimated at $60m (£42.2m).
The origins of the action go back to a reinsurance contract placed with Aneco by J&H. J&H was to investigate the availability of reinsurance to cover Aneco's exposure. It advised that sufficient reinsurance was available in the market, when in fact it was not.
Aneco was then faced with significant losses in the wake of a number of catastrophes. Without sufficient reinsurance in place, Aneco could not meet its liabilities and was placed into liquidation. Elborne said: "Aneco wouldn't have underwritten this risk had they known it was not reinsurable."
He added that the House of Lords ruling is a triumph for common commercial sense. "It's the first time anyone has succeeded in a claim against a reinsurance broker for damages to compensate their client for the full measure of the losses suffered as a result of their negligence," he commented.
The case has been run at Camerons by the same team since 1993.
