On appeal from: [2008] EWCA Civ 150. Concerning a term in a contract of reinsurance.

The Court of Appeal held that a term in the underlying insurance was to be construed as operating in exactly the same way in the reinsurance cover. The House of Lords, however, held there was “no principled basis” for interpreting the effect of the policy period in the reinsurance contract in the same way as had been done for the direct insurance. The “full reinsurance” clause in this case, and “follow the settlements” clauses in general, did not have the effect of bringing within the cover of a policy of reinsurance risks that, on the true interpretation of the policy, would not otherwise be covered by it. This view would effectively treat the reinsurance contract as one to indemnify the primary insurer in respect of any liability sustained under the primary cover. There might be much to be said for adopting that approach, and it was an approach that it would be open to the market, by appropriate contractual terms, to follow. 

For judgment, please download: [2009] UKHL 40
On appeal from: [2008] EWCA Civ 150

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