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In
the absence of an agreement to the contrary, the meaning of a reference
to claims and the application of an excess set out in a follow the settlements
clause was the same in each of a series of contracts declared pursuant
to a broker's facility.
In 2001
Frankona agreed a facility with AHJ pursuant to which Frankona was to
reinsure "100% of orders" and which provided that Frankona
was "to follow original settlements of the Reassureds in all respects,
being a reinsurance subject to the same clauses and conditions against
the same perils as in the original policy or policies, but only to pay
claims excess of amounts stated each declaration". Accordingly,
AJH proposed risks on the basic terms and conditions set out in the
facility, with variations applicable to each risk being as declared
or agreed. The reinsurance of "Treasure Bay", a floating casino,
was declared to the facility, Allianz being the reinsured. The follow
the settlements clause in the reinsurance was in the same terms as stated
in the facility, save that a $5m each vessel each accident excess was
declared. The Treasure Bay was damaged in a tropical storm and Allianz
claimed under the reinsurance in relation to its settlement with the
original assured.
At issue
was the proper application of the excess. Allianz contended it was to
be applied to the 100% settlement figure. Frankona contended the excess
was to be applied to the Allianz 45.238% share of the settlement figure.
The difference in the corresponding recoverable amounts being over $2.7m.
The Treasure Bay claim was the only significant claim under declarations
made to the facility. The Court had to determine whether the "claims"
referred to in the follow the settlements clause were the claims of
the original assured upon Allianz, or Allianz' claims upon Frankona.
It was
agreed by the parties that in the 80 declarations preceding the Treasure
Bay declaration the excess was to be deducted from the figure at which
the original underwriter settled the claim. Allianz contended the Treasure
Bay declaration was to the same effect, Frankona contended that the
circumstances were different and a different conclusion must follow.
Having
considered the genesis, context and market in which the contract was
made, Clarke J accepted submissions made on behalf of Allianz to the
effect that the inclusion of the excess wording in the follow the settlements
clause shifted the focus of attention to the claim of the original insured.
This then limited the amount which reinsurers were to follow to settlements
by insurers of claims, by the original insured, in excess of $5m each
vessel, each accident. The Treasure Bay declaration had to be viewed
in the context of the facility and the 80 declarations preceding it.
Many of these would be meaningless unless the Allianz construction were
adopted because the apparent cover for partial loss would otherwise
be rendered illusory. Furthermore, one purpose of the facility was that
certain terms would be standard for each declaration and mean the same
in each case unless otherwise agreed. In the absence of an agreement
to the contrary, the meaning of the words in the Treasure Bay declaration
would be the same as that which it had been accepted they meant in the
80 preceding declarations. Clarke J rejected contentions on behalf of
Frankona that there were features of the Treasure Bay declaration or
the circumstances surrounding it, that showed that the word "claims"
meant something different or the excess should be applied differently.
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