DAC man claims a win for Lloyds

Davies Arnold Cooper litigation partner Andrew Higgs is claiming a landmark victory for the 19 Lloyd's underwriting syndicates in the Court of Appeal after a five-year battle with minerals trader Glencore.

Higgs said: “This judgment puts a cap on a developing line of law and should lead to a reduction of litigation in the marine insurance market.”

When an insured company has a dispute with its insurer about what its policy actually covers, the test used, known as the “objective test”, is generally that the policy is valid if a prudent underwriter would take the risk.

Higgs said that as a result of the latest judgement, “the objective test lives on”. But he said that an underwriter would have to be prepared to give evidence in his support in any dispute.

The case began in 1990 when Lloyd's underwriters refused to pay out on a shipping claim by Marc Rich (now Glencore). Marc Rich had asked for additional cover and said the cover presented minimal additional risk. The underwriters had extended the cover without looking at the fine print and had already paid out on nine claims.

Marc Rich sought a summary judgment to get its claim, but pulled out at the last minute. The company then took the case to the Commercial Court which in the spring of 1995 ruled that the underwriters were right not to pay out and made Marc Rich pay back nine claims, worth around £1m, that it had already received.

Clyde & Co represented Glencore and Ince & Co advised the brokers, which were not named in the proceedings.