Recent judgments are pointing the way for Silverstein, say David Murphy and Veronique Chenu
The recent judgment of Murray Arnold Campbell Scott v Copenhagen Re (UK) is likely to be of considerable assistance in determining the correct approach under UK law to aggregation issues arising from WTC.
This case relates to the insurance claims from the loss of aircraft and spares located at Kuwait airport at the time of the Iraqi invasion on 2 August 1990. It is the latest chapter in the history of authorities on the meaning of "event".
Within days of Iraq invading Kuwait and capturing its main airport, Iraq seized 15 aircraft worth $692m (£440m) and more than $300m (£191m) of spare parts belonging to Kuwait Airways Corporation (KAC). One British Airways aircraft was left stranded and eventually destroyed during Operation Desert Storm in February 1991.
The issue of whether KAC's losses could be aggregated at the primary insurance level was decided in 1995 in Kuwait Airways Corporation v Kuwait Insurance Company (KAC v KIC). The insurance contract stated: "Maximum sum insured in respect of ground risks is $300m (£191m) or any one occurrence and any one location." The clause relating to spares set the maximum at $150m (£95m) in any one location. The court had to decide whether there were 15 occurrences or one.
It was held that the KAC aircraft and spares were lost as a result of one occurrence - the invasion of Kuwait and the capture of the airport - not when the aircraft were individually flown out of Kuwait.
But the reinsurance dispute had yet to be resolved. Under the standard 1.1.90 Joint Excess of Loss Committee wording, losses "arising from one event" can be aggregated. The Scott syndicates argued that all the losses suffered by KAC and BA arose from one event, while Copenhagen Re argued that they arose out of two or more events.
The judgment last week held that while the losses of the 15 KAC aircraft and spares arose out of one event, the loss of the BA aircraft could not be aggregated with these losses.
The reasons the loss of the Kuwaiti aircraft arose from a single event were that it was agreed in KAC v KIC that "occurrence" and "event" are usually synonyms and that the "event" in this case was Iraq's invasion. The "four unities" of cause, locality, time, and intent were all present which meant all the losses could be treated as one occurence or event. The court ruled that the BA losses could not be aggregated with the KAC losses because the BA aircraft was not lost as a result of the invasion on 2 August.
There was no unity of time. At the time of the invasion, the BA aircraft could not be considered lost - there was no certainty that the aircraft would never be recovered; of intent - no intent to permanently deprive BA of the aircraft; or of cause - the cause was the destruction of the aircraft, or the Gulf War.
Equitas' has been refused leave to appeal. But it now has until this week to apply for leave to appeal.
David Murphy is a partner and Veronique Chenu a solicitor at Eversheds Insurance Group
