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Download a PDF of the full article - Sedgwick LLP

SDMA Reinsurance Bulletin Service

July 2006

ING Re (UK) Limited v R&V Versicherung AG

(Commercial Court, 29 June 2006)

An important decision emphasising the need for clarity when purchasing reinsurance

through an underwriting agency. Apparent authority of such an agent exists only if

based on a representation made by the principal (e.g. reinsurer) and on which the third

party (e.g. cedent) acted. The Court also ruled that, in this case, mere inactivity

(including accepting premium) was not sufficient to ratify the treaty.


This case came out of the troubles which afflicted parts of the personal accident reinsurance

market a few years ago. It concerned an 85% quota share treaty protecting ING Re (UK)

Limited (“ING”) purportedly bound on behalf of R&V Versicherung AG (“R&V”) by a group

of companies known as Risk Insurance and Reinsurance Solutions (“Risk”).

In an earlier decision 1 the Court had found that Risk had no actual authority to enter into this

treaty on behalf of R&V. This case, therefore, concerned an attempt by ING to prove that

R&V was nevertheless bound by the treaty either on the basis that Risk had

apparent/ostensible authority 2 to bind or that R&V had ratified.

Apparent Authority

Apparent authority arises where a principal represents to a third party that an agent has

authority to act on that principal’s behalf and that third party deals with the agent relying on

that representation (but the agent does not have actual authority). In those circumstances, the

principal is bound by the agent’s acts to the same extent as if the agent had the actual

authority which he was represented as having. The doctrine also operates at one step

removed. That is to say the representation can be made by agent A concerning agent B,

provided that the principal represents to the third party that agent A has the authority to make

that representation. The critical requirement is that the agent’s authority must be capable of

being tracked back to a representation or chain of representations by the principal on which

the third party relied.

In this case, the key document was a particular fax (the “September fax”). The Court

accepted that, on one level, the September fax confirmed to ING that Risk had authority to

enter into the treaty. However, the person who received the September fax at ING conceded

that he thought at the time this was a document he was not meant to have seen. Apparent



[2004] EWHC 2682 (Comm).

There is only one concept and the terms “apparent authority” and “ostensible authority” are used interchangeably.

For the purposes of this Bulletin, we use the expression “apparent authority”.

authority is based on the concept of “estoppel”, which is an equitable doctrine. Accordingly,

the judge did not see how ING could successfully base its case on a document which the

recipient believed he was not intended to see. The judge compared this to eavesdropping on a

conversation: an eavesdropper would not be entitled to treat what he heard as though it were a

representation to him.

There was a second obstacle which ING also failed to clear. Since the author of the

September fax had no actual authority, ING had to show a representation to it by R&V that

the writer did have such authority. However, none of those involved for ING knew who the

author of the fax was or what position he held. They may have guessed that he was a senior

person, but there was no representation by R&V to that effect.

In short, the judge said that ING could not hold V&A responsible for ING’s own decision to

rely, as verification of Risk’s authority, on a document issued by someone whose identity and

status was unknown and which it believed it was not meant to see. The Court concluded,

therefore, that Risk did not have the required apparent authority to bind R&V to the treaty.


ING also ran a ratification argument. It was argued that R&V knew (in its senior

management) that Risk had purported to enter into the treaty on its behalf. Despite the fact

that ING would be paying the premium to Risk (as agent) on 31 March 2003, R&V took no

steps to contact ING to inform them of any concerns regarding the treaty. Likewise, R&V did

not contact Risk to tell it not to accept any premium under the treaty. Instead R&V simply

contacted Risk and requested relevant documentation. Nothing further was done by R&V and

in April 2003 ING made a substantial premium payment to Risk.

The Court assessed the issues of what knowledge was required and what constituted

ratificatory conduct.

The Court concluded that mere knowledge on the part of R&V that Risk had entered into the

treaty purportedly on its behalf was sufficient for the purposes of ratification vis-à-vis the

third party (i.e. ING). The Court held that the question of whether or not Risk had been

authorised to enter into the treaty was not material 3 .

With regards to ratificatory conduct, the Court confirmed that whether an intention to adopt a

contract as binding should be inferred from the principal’s silence depends on whether it is

the only reasonable conclusion to draw in all the circumstances. In this case, R&V’s silence

was sensibly capable of being attributed to uncertainty on its part. If, in such a state of

uncertainty, R&V had done something positive by way of performance of the treaty without

expressly reserving its position, it would have ratified the treaty, but it did nothing.

Lessons to learn

The lessons are not new. The case highlights what the market should already know. When

dealing with an underwriting agent acting for an insurer/reinsurer, one needs to be certain

either that the agent has actual authority to bind that insurer/reinsurer or, if that is not the case,


The indications in the judgment were that this might not be the case as between the principal and the

agent. In other words ratification based on this limited knowledge might operate as against a third party

but not so as to extinguish liability as between the agent and the principal.

one needs to see proof of the agent’s authority. The proof required cannot come from the

agent; what is needed is a valid representation from the insurer/reinsurer to that effect. It is

important also to ensure that the agent’s authority covers the transaction in question.

With regards to ratification, although R&V were not prejudiced in this case, it is clearly

advisable for insurers/reinsurers to issue a reservation of rights where a question arises

concerning business purportedly bound by an agent on their behalf. While silence might not

amount to ratification, it depends on whether or not that is the only reasonable conclusion to

draw. This is a risk that need not be run.

July 2006

Sedgwick Detert Moran & Arnold LLP

Candlewick House

120 Cannon Street



Tel No: 020 7929 1829

Fax No: 020 7929 1808

This Reinsurance Bulletin provides a summary only and is not intended to be a comprehensive statement of the law. You

should not act on this information without taking relevant professional advice. For further information or advice please

contact James Pilgrim-Morris – or Mark Chudleigh –

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