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PI and Civil Litigation

Law - practice - procedure

Anthony Gold Solicitors , 28 JUL 2014

The Federal Mogul Asbestos Personal Injury Trust v Federal Mogul Ltd (Formerly T & N plc) & Others [2014] EWHC 2002 (Comm)

The Federal Mogul Asbestos Personal Injury Trust v Federal Mogul Ltd (Formerly T & N plc) & Others [2014] EWHC 2002 (Comm)
Contract – Insurance – Personal Injury – Asbestos - Declaratory orders

High Court, Queen’s Bench Division, Commercial Court
Mr Justice Eder
27 June 2014

Summary

The claimant trust sought declarations with regards to the obligations of the insurers and reinsurers relating to the handling and settlement of asbestos related personal injury claims. The trust was a third party and was not entitled to a declaration as to the meaning or performance of a contract to which it was not a party, where the parties to that contract are not in dispute.

Detail

The claimant was a Trust established by the order of a US Bankruptcy Court, authorised to bring claims on behalf of a very large number of individuals in the US who had suffered injury as a result of exposure to asbestos and asbestos related products supplied and or distributed by the first defendant, T & N PLC. The second defendant, Curzon Insurance Ltd was the captive insurers for T & N PLC and the other defendants were the reinsurers for Curzon Insurance Ltd. The Trust had itself established an appropriate mechanism for valuing individual asbestos claims and it was considerably lower than the likely settlement or award value of such claims if litigated in the US tort system. The Trust claims it was the only businesslike approach for the reinsurers to settle them in accordance to this process. The Trust sought to obtain certain declarations with regards to the obligations of the reinsurers relating to the handling and settlement of the claims. The reinsurers alleged that the Trust had no standing to seek any declaratory relief and that there was no obligation on them to handle or settle asbestos claims by reference simply to the value ascribed to them by the Trust’s process and that unless settled by agreement any asbestos claim should be pursued by the Trust in the US tort system in the usual way. The Trust sought 11 declarations.

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It was held that the Trust had no proper standing to seek declarations (i) and (iii) – (vii). The Trust was a third party and was not entitled to a declaration as to the meaning or performance of a contract to which it is not a party, in circumstances, where the parties to that contract are not in dispute. Neither was it an exceptional circumstances and this was consistent with the ratio in Meadows Indemnity Co Ltd v Insurance Corp of Ireland Plc [1989] 2 Lloyd’s Rep.298, although the law has moved on since that case, this remains the general position. The grant of declaratory relief was held as discretionary and the cases in which it had been recognised that the declarations may be granted in a wider category of case than suggested by Gouriet v Union of Post Office Workers [1978] AC 435 was far removed from the present.

There was no relevant dispute between the contracting parties themselves, the Trust had interests which were directly opposed to one or more of the contracting parties, the insurance arrangements cannot be prayed in aid by non- parties, that the availability of insurance to a claimant in a tort action has no effect on the liability of the defendant to the claimant. Also the power of attorney did not give the Trust a right to seek declaratory relief.

It was accepted that there was a contractual obligation on the reinsurers to exercise their authority, discretion and control in a businesslike manner. Whether the reinsurers required the Trust to pursue claims in the US tort system would be considered un-businesslike was to be determined. It did not necessarily follow that the reinsurers were in breach of their obligations by refusing to accept the process of claims handling and settlement purposes used by the Trust. What may be considered ‘best practice’ was not directly relevant in the context. The judge stated that there was no monopoly on what may be 'businesslike'.

The Trust was granted declarations in part, subject to some modifications to reflect the conclusions reached by the judge.

Comment
This is an interesting case that seeks to address the complexities involving insurance contracts and third party right to information.
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