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A useful purpose
English judges have recently had important things to say about jurisdiction and choice of law.
When deciding whether it has
jurisdiction to hear a dispute
already subject to foreign
proceedings, a key test for an
English court is whether the English
case would serve a useful purpose.
In the recent case of Faraday
Reinsurance Co Ltd v Howden
North America Inc [2011] EWHC
2837 (Comm), Howden – the
insured – argued that an order by
the English High Court allowing
Faraday – an excess insurer – to
serve notice of proceedings out of
the jurisdiction should be set aside.
In those proceedings, Faraday was seeking a
declaration that the key insurance contract
between itself and Howden (which was already
facing substantial insurance-related claims in
Pennsylvania) was governed by English law
and jurisdiction. In effect, Faraday wanted a
declaration that it was not liable (or possibly
only had very limited liability) for the
Pennsylvanian claims.
Since 1999, claims had been
brought against Howden in the
US, alleging personal injuries
caused by exposure to asbestos.
In front of the Court of Appeal, Howden argued
that the English proceedings served no useful
purpose and therefore should be set aside. The
court, however, concluded that the first instance
judge, Mr Justice Beatson, had clearly been
aware of the need to show useful purpose, and
(in the words of Lord Justice Longmore) “the
court should be slow to interfere” with the
judge’s exercise of discretion on this issue.
Consequently, Howden’s appeal failed.
Following the August 2010
notification, Faraday realised
that it had to protect itself,
especially as regards the 1998
policy which was silent on the
issues of law and jurisdiction.
Background
Howden is an international engineering group. It
had various primary and excess product liability
policies that had mainly been written in the US
by US insurers. These included three excess layer
policies originally written by General Star
International Indemnity Ltd and transferred to
Faraday in November 2010. The three policies
provided consecutive cover from 1998 to
2001. The second and third policies had English
law and jurisdiction clauses but the 1998 policy
was silent on these two key points.
Since 1999, claims had been brought against
Howden in the US, alleging personal injuries
caused by exposure to asbestos. Howden started
coverage proceedings against excess insurers
(but not Faraday) in Pennsylvania in 2009.
However, in August 2010, the engineering
group gave precautionary notice to higher-level
excess insurers, including Faraday. Four months
later, Faraday issued proceedings in England,
seeking a declaration that the three policies
were governed by English law. In March 2011, it
was given permission to serve the claim form
outside the jurisdiction.
In April 2011, Howden wrote to Faraday
promising not to make a claim under the second
and third excess policies. The English
proceedings were served on the engineering
group two months later. Howden then joined
Faraday to the further coverage proceedings it
had started in Pennsylvania in 2011, and applied
to set aside the English court order allowing
service outside the jurisdiction.
Faraday’s position
Following the August 2010 notification, Faraday
realised that it had to protect itself, especially as
regards the 1998 policy which was silent on the
issues of law and jurisdiction. This was because
Pennsylvanian and English courts take very
different approaches to asbestos-related claims:
• Under English law, exposure to hazardous
substances is not in itself an injury. US courts,
though, apply the theory of multiple triggers,
under which all policies in force (from the
initial exposure through to the manifestation
of the injury) respond to the claim.
• Under English law, the period of insurance is a
fundamental provision of the policy as liability
is limited to that period. The position is
different under Pennsylvanian law.
…the fact that an English court’s
decision might be disregarded
by a judge in Pennsylvania did
not rob such proceedings of
their useful purpose.
Challenging the original order
Howden tried to set aside the original order
allowing Faraday to serve notice of the
proceedings outside the jurisdiction by arguing
two things:
(1) The proceedings did not serve a useful
purpose as Howden had already given an
undertaking not to make a claim under the
second and third policies and an English
court’s judgment on the 1998 policy would
not stop a Pennsylvanian court from reaching
its own decision.
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