1. INTERNATIONAL MARINE CLAIMS CONFERENCEDublin1 October 2004 Tim Taylor Barlow Lyde & Gilbert

2. Communication What's the worst that can happen if it breaks down

3. Topics • Dual Role of Advisers • The English approach • Follow Leader Clause • Claims and Underwriting • Practical Issues • Split markets • Relations with brokers

4. Dual Role of Advisers • The US experience • English approach

5. Basic Rules • Instruction for both underwriters and insured to defend claim • What happens if lawyers discover something detrimental to coverage? • Lawyer can and must report to underwriters matters relevant to coverage (Brown v Guardian Royal Exchange [1994])

6. Limitations • Joint retainer, the insured waives solicitor/client privilege • Waiver is limited • Duty not to act in bad faith (TSB Bank v Robert Irving & Burns [2000])

7. Role of Leading Underwriter • No duty of care to followers when risk first bound • Case law suggests position changes post placing • The “LEEGAS” [1987] “Underlying the whole relationship between the leading underwriter and the following underwriters, furthermore, is the former’s manifest duty of care” • If leader is negligent theoretically followers could sue for damages

8. Agency or Trigger • Conflicting authorities

9. Mander v Commercial Union [1998] • Leader not agent when agreeing declarations to an open cover. The lead acts as a “trigger” “It is agreed with or without previous notice to follow British underwriters in regard to agreements, alterations, extensions, additions, endorsements….”

10. Charman v Roadworks [1994] • A slip can evidence the terms of a contract of agency between the leader and followers • What if there is no slip?

11. Scope of Leader Clauseon Placing • Very wide in LEEGAS “Any amendments, additions, deletions, including new and/or acquired and/or managed and/or chartered, notices of assignment, ratings and alternations of any description to be agreed by Leading Underwriter and to be binding on all others hereon”

12. BP plc v GE Frankona & Others [2003] “it is agreed to follow automatically all additions and/or deletions and/or amendments and/or alterations of any description whatsoever therein, Underwriters hereon waiving advice hereunder and also to follow all claim settlements made by the Leading Underwriters of this policy ……..without exception” • Held “The Leading Underwriters clause was not concerned with declarations to the Open Cover “

13. Claims Situation • Practice varies • No general rule that decision of leader binds followers (Paul Tudor Jones v Crowley Colosso [1996]) • LMP Protocols • Claims management controlled by leader and “agreement parties” • International Placings?

14. International Markets • DTV German Conditions Hull 1978 • Leaders have powers • to provide bail • to make amendments (other than for increases in value) and settle claims which are binding on followers • commence proceedings

15. Norwegian Plan • Article 9-Powers of claims Leader “Unless otherwise agreed, the claims leader is entitled to take the steps referred to in §§ 9-3 to 9-9 with binding effect on the co-insurers. In all such cases he shall, as far as possible, take into consideration the interests of all the insurers. If time permits he should, in cases of importance, consult those co-insurers of whose existence he is aware”

16. International Hull Clauses • Cl 45 “Where there is co-insurance in respect of this insurance, all subscribing Underwriters agree that the Leading Underwriter(s) designated in the slip or policy may act on their behalves so as to bind them for their respective several proportions in respect of……….”

17. the appointment of surveyors, experts, average adjusters and lawyers • the duties and obligations to be undertaken by the Underwriters including, but not limited to, the provision of security • claims procedures, the handling of any claim and the pursuit of recoveries • all payments or settlements to the Assured or to third parties under this insurance other than those agreed on an ‘ex-gratia’ basis. the Leading Underwriter(s), or any of them, may require any such matters to be referred to the co-subscribing Underwriters.

18. Responsibilities of Leader in Claims Situation Under English Law • Leader can only agree claims within protocol • Ex gratia settlements not (usually) included • Roar Marine v Bimeh Iran Insurance Co [1998] “It is agreed with or without previous notice to follow leading British Underwriters in regard to agreements, alterations, extensions, additions, endorsements and cancellations and attaching and expiring dates, and also in regard to all decisions, surveys, the providing of bail and settlements in respect of claims and returns, but excluding ex gratia and without prejudice settlements.”

19. Can Follower Sue Leader? • If a leader settles a claim (negligently) outside cover • The following market is bound to follow and pay claim but could claim against leader • If there is an agency, probably under normal principal/agency rules

20. If no agency, is there a duty of care? • LEEGASsupports view that leader owes duty of care to following market “Underlying the whole relationship between the leading underwriter and the following underwriters, furthermore, is the former’s manifest duty of care.” • Doubted in Roar “The law does not have to afford a legal remedy for every conceivable failure to behave properly or professionally “ • Not happened yet………….but • Key issue is for leaders to communicate in difficult cases or include a hold harmless clause in the slip

21. Dangers • Leaders should be careful not to act outside their authority • Advisers should not give the impression that all followers support a position unless that is clear • More important when international split markets are involved

22. Practical Issues • Be alert to the risks • Communicate with other markets • Do not assume that the rules in other markets are the same • Relationship with brokers • Varies in different markets