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Nominating Insurance Arbitrators – from the bar or the market?

  • United Kingdom
  • Litigation and dispute management

16-03-2018

In Allianz Insurance PLC and another v Tonicstar Limited [2018] EWCA Civ 434, the Court of Appeal was asked to consider the meaning of the words “persons with not less than ten years’ experience of insurance or reinsurance” in the JELC Excess Loss Arbitration Clause.  The Commercial Court, applying a 17-year old judgment of the same court interpreting the same clause against materially identical facts, held that this term precluded the nomination of Alastair Schaff QC as the appellant’s arbitrator because he did not have experience of the business of insurance or reinsurance itself.  The earlier decision had concluded that based on the context in which the clause appeared, the parties’ common intention must have been that their disputes would be resolved by a “trade arbitration”. Both courts in the current case took this to mean an arbitration decided by the members of a particular trade only.

The Court of Appeal analysed the reasoning of the earlier judgment followed by the Commercial Court and decided that it was “not defensible”.   It then considered a new interpretation put forward by the respondent which sought to distinguish between “experience of insurance or reinsurance” and “experience of insurance and reinsurance law (emphasis added).  Counsel for the respondent supported his argument by drawing analogies with experience in sports and in sports law and also experience in engineering or telecommunications and advising on disputes involving engineering or telecommunications.

The Court did not accept this submission, although it acknowledged it had been made “attractively”.  It decided that the insurance and reinsurance context is different because “the practical and legal aspects of insurance and reinsurance are…intertwined”.  Underwriters, brokers and claims professionals are required to have some understanding of insurance law to engage in their business e.g.  they need to understand the pre-contractual duty of the insured to disclose facts material to the risk to the insurer.  The converse is also true i.e. insurance lawyers need practical knowledge of the insurance business in order to give effective representation and advice.  Lord Justice Leggatt noted that this was precisely why both market professionals and lawyers are commonly appointed as arbitrators in insurance and reinsurance disputes.   It appears from his judgment that a lawyer who does not understand how to set an underwriting rate for a risk has no less suitable experience of insurance and reinsurance to serve as an insurance arbitrator than an underwriter with no expertise in analysing case law or conducting arbitration proceedings.

Importantly the judgment acknowledges that a clear expression of words is required to exclude lawyers from the category of persons with “experience” of insurance and reinsurance.  Absent such expression parties contracting according to the JELC form are free to nominate their arbitrators from the bar or the market.  

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