Insurer agreeing to indemnify policyholder for loss in excess of retained limit - policyholder going into administration - policy 'contract of insurance' prior to retained limit being reached

Centre Reinsurance International Co and another v Curzon Insurance Ltd: ChD (Mr Justice Blackburne): 12 February 2004

By a liability policy, the insurer agreed to indemnify a company for any 'ultimate net loss' in excess of a 'retained limit' of 690 million in connection with asbestos claims up to a limit of 500 million.

By a separate agreement the insurer's liability under the policy was wholly reinsured by the reinsurers.

The company and others within its parent group were put into administration after a large quantity of personal injury claims were made against it arising from asbestos exposure from the company's products.

The reinsurers sought declaratory relief against the insurer and orders and directions against the joint administrators of the company.

A number of issues of law arose concerning the impact of section 1 of the Third Parties (Rights Against Insurers) Act 1930 on the provisions of the policy relating to the transfer of claims handling rights.

Elizabeth Gloster QC, Christopher Butcher QC and David Lord (instructed by Kendall Freeman) for the reinsurers; Iain Milligan QC, Gabriel Moss QC and David Leslie Edwards (instructed Denton Wilde Sapte) for the joint administrators.

Held, that the primary purpose of the statutory transfer effected by section 1(1) of the 1930 Act, which was to prevent the benefit of an insurance contract from forming part of an insolvent's estate, would not be achieved if, before exhaustion of any policy excess and notwithstanding the happening of the insolvency event, there had been no transfer of rights; that the statutory transfer under section 1(1) occurred notwithstanding that the insured's liability to the third party had yet to be established; and that, accordingly, the policy was, prior to the retained limit being reached, a contract of insurance within section 1(3) of the Act.