Ace Bermuda Insurance Ltd v Continental Casualty Company and Continental Insurance Company

• Jurisdiction: Bermuda
• Judgment Date: 01 June 2007
• Date: 01 June 2007
• Docket Number: Civil Jurisdiction 2007 No. 41
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Bell, J

Civil Jurisdiction 2007 No. 41

BETWEEN:

Ace Bermuda Insurance Ltd (formerly A.C.E. Insurance Company, Ltd)

Plaintiff

and

(1) Continental Casualty Company

(2) Continental Insurance Company

Defendants

Mr N Hargun for the Plaintiff

Mr D Kessaram for the Defendants

The following cases were referred to in the judgment:

Finnish Marine Insurance Co Ltd v Protective National Insurance CoUNK [1989] 2 All ER 929

BP Exploration Co (Libya) Ltd v HuntUNK [1976] 3 All ER 879

DR Insurance Coo v Central National Insurance Co [1996] 1 Lloyd's Law Rep 74

Youell v Kara Mara Shipping Co Ltd [2000] 2 Lloyd's Law Rep 102

DVA v Voest Alpine [1997] 2 Lloyd's Law Rep 279

The Ines [1993] 2 Lloyd's Law Rep 492

Gulf Bank v Mitsubishi [1994] 1 Lloyd's Law Rep 323

Rules of the Supreme Court, O. 11, r. 1(1)(d)

Excess liability insurance policies — Application to set aside order for anti-suit injunction — Arbitration proceedings — Contractual nexus — Service out of the jurisdiction

RULING of Bell, J

Introduction

1. This ruling arises from the defendants' application to set aside the orders made by the Hon. Chief Justice on 15 February 2007, the reasons for which were set out in his ruling dated 19 February 2007. By his orders, the Chief Justice restrained the defendants (to whom I will refer in this ruling simply as ‘Continental’) from commencing, continuing, proceeding with, or taking any other action in relation to litigation instituted by Continental in the District Court for the Fourth Judicial District of the State of Minnesota (‘the Minnesota Proceedings’) relating to an excess liability insurance policy, designated MMM-371/4 issued by the plaintiff (‘ACE’) to Minnesota Mining and Manufacturing Company (‘3M’), and gave leave to ACE to issue a writ for service out of the jurisdiction on Continental.

The Minnesota Proceedings

2. By its action in Minnesota, Continental seeks a determination of the scope of its obligations under certain excess liability insurance policies issued to 3M at various times between 31 December 1969 and 1 January 1986. What is perhaps unusual about the Minnesota Proceedings is that there are more than 60 insurers (together the ‘Defendant Insurers’), including ACE, joined in the proceedings on the basis that 3M purchased potentially applicable insurance from such Defendant Insurers. Continental states in the suit that it brings the action against the Defendant Insurers for the purpose of binding those Defendant Insurers to the relief sought in those proceedings, and for the purpose of achieving a comprehensive resolution of the issues underlying the complaint. Continental indicates that it would dismiss the action as to any Defendant Insurer shown not to have issued any policy potentially covering 3M's underlying liability, but as Mr. Hargun pointed out in argument, Continental does not say whether ‘shown’ involves a determination by the Minnesota court or a decision made by Continental. The issue is not an academic one for ACE, since it contends that the policy which ACE issued to 3M was issued subsequent to the period referred to above, but that is not an issue for this application.

3. The policies which Continental issued to 3M pertain to liability in respect of claims arising from exposure to toxic substances caused by 3M products. In the nature of such claims, complex questions arise as to when liability under particular insurance policies was triggered and as to the appropriate allocation between the various different policies. Continental pleads that coverage is not triggered on the polices which it issued to 3M until 3M can affirmatively prove exhaustion of all the insurance policies written by the Defendant Insurers underlying Continental's own policies issued to 3M. Continental seeks declarations in relation to the issues of triggering and allocation in relation to the various underlying insurance policies issued by the Defendant Insurers, as well as a declaration that Continental's policies have not been triggered by the exhaustion of the underlying insurance. This, submitted Mr. Hargun, will necessarily require the Minnesota court to determine, so far as ACE is concerned, the contractual rights and obligations between ACE and 3M with regard to the terms of their contract and the extent of coverage thereunder. Mr. Hargun further submitted that this contention has been accepted by Continental in its skeleton argument, which acknowledged that the potential liability of the Defendant Insurers (including ACE) to 3M, subject to the terms and conditions of their respective policies, would be determined if the Minnesota court applied the doctrine of ‘continuous trigger’ for which Continental contends in the Minnesota Proceedings.

The Chief Justice's Ex Parte Order

4. The basis upon which the Chief Justice made his orders on 15 February 2007 was that the policy issued by ACE to 3M contains an arbitration clause requiring any dispute arising out of the policy to be settled by arbitration in Bermuda under the Bermuda Arbitration Act 1986. The policy itself is expressed to be governed by the law of the State of New York, with the exception of the arbitration clause which is expressly governed by the law of Bermuda. ACE contended before the Chief Justice that the Minnesota Proceedings will effectively decide the issues between ACE and 3M arising from their policy of insurance in a final and binding manner, and that this infringes the arbitration clause. The Chief Justice was satisfied that there was a serious issue to be tried in this regard, and a good arguable case that the action was within the terms of Order 11 rule 1 (1) (d) (iii) of the Rules of the Supreme Court 1985 as amended. Finally, the Chief Justice accepted the argument by ACE that it was bringing these proceedings to enforce the arbitration clause which is expressly governed by the law of Bermuda. He concluded that it mattered not that Continental were not themselves parties to the contract as a whole or the arbitration clause, and that this was plainly a proper case for service out under Order 11 rule 4 (2).

5. In relation to the grant of an anti-suit injunction, the Chief Justice took the view that ACE had made out a strong prima facie case that it would be unconscionable and unjust for it to be subjected to the Minnesota Proceedings, and that by seeking to bring ACE into the Minnesota action simply for the purpose of binding it, Continental was officiously interfering with ACE's contractual relations with 3M such that ACE was entitled to be protected by the grant of an injunction.

The Basis for Challenge

6. The basis on which Continental seeks to set aside the Chief Justice's ex parte order granting leave is essentially its contention that ACE's cause of action does not fall within the terms of Order 11 rule 1 (1) (d) (iii), which is the particular sub-rule relied upon by ACE when seeking leave to serve out. That rule provides (leaving out the irrelevant provisions) that service of a writ out of the jurisdiction is permissible with the leave of the Court if in the action begun by the writ the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract ….. which …. is by its terms, or by implication, governed by the law of Bermuda.

7. In his written submissions on behalf of Continental, Mr. Kessaram submitted that ACE's cause of action did not come within the sub-rule because

• i. there is no contract or sufficient contractual nexus between ACE and Continental, and alternatively

• ii. even if ACE could rely upon the terms of its policy issued to 3M to provide the requisite contractual nexus, the relevant obligation under the contract which ACE is seeking to enforce is not governed by Bermuda law.

In the event, this alternative argument was abandoned by Mr. Kessaram when it was pointed out that the terms of the arbitration clause between ACE and 3M were identical to those in the case which Mr. Kessaram had sought to distinguish, ACE Bermuda Insurance Ltd v Pedersen et al (Civil Jurisdiction number 89 of 2005, Decision dated 12 September 2005).

8. Mr. Kessaram further contended that ACE did not have a good cause of action against Continental in Bermuda as required by Order 11 rule 4, on the basis that there was no contractual nexus between ACE and Continental and that consequently there was no obligation upon Continental to arbitrate any issue with ACE. Finally, Continental contended that even if (which was denied) the Minnesota Proceedings were unconscionable, that could not be a stand-alone basis for an anti-suit injunction, since Continental maintained that the Bermuda Court did not possess jurisdiction over it.

9. So Continental's position was that the existence of a contract as between ACE and 3M did not afford a sufficient contractual nexus as between ACE and...