Litigation Recent Decisions 06/12/94

Lloyd's syndicate: arbitration results confidential

Insurance company sub nom v Lloyd's syndicate [1994] (Ch.Div) (Colman J)

Summary: When parties agree to go to arbitration over a dispute concerning an insurance contract, this agreement contains an implied term which imposes on both parties to it a duty to keep confidential from third parties the award, the reasons and all other documentary materials relating to the arbitration; an exception allows disclosure only for the purpose of establishing that party's legal rights against a third party.

Trial of an action arising from an insurance agreement between the reassured defendant syndicate and the reinsuring plaintiffs. The defendants were insured by six reinsurers in total but the plaintiffs in the action took the lead risk under two notes, totalling 67.5 per cent, the remainder being constituted by the following market. The dispute arose out of insurance claims in 1992 whereby the defendants claimed for 'hull losses' under their 'ILU companies excess of loss marine policy' which was undisputed, but also claimed for 'sports losses' accrued through the sponsorship of sporting events and teams and the provision of the incentive prize money. The plaintiffs and the following market disputed this, claiming they were entitled to avoid that part of the contract due to the defendants' non disclosure, and on the basis of the wording of the policy cover itself. The matter went to arbitration, and an award was made in the defendants' favour on 4/8/94 pertaining to the 67.5 per cent share the plaintiff had underwritten. The defendant wished to inform the following market of the decision and of the reasons for the decision in a bid to convince them of their liability for the disputed 'sports losses'. An ex parte injunction was granted restraining the defendants from disclosing to the five following reinsurers on the same risk the amount of the arbitration award and the reasons for it. The main question was: Is it open to a reassured as of right to disclose to reinsurers who constitute the following market, an arbitration award and the reasons made in an arbitration between a reassured and the leading reinsuring underwriter?