Liability arising out of ‘one event’
AIOI NISSAY v HERALDGLEN [2013]
This case looked at the issue of whether the attack on the Twin Towers of the World Trade Center (WTC) amounted to two ‘events’ or one for the purpose of applying the liability limits in various insurance policies.
Facts:
- Following 9/11, a large number of actions were started against the airlines and various other companies involved. The claims were settled and paid by insurers under various aviation liability policies. The insurers were indemnified by their reinsurers, Heraldglen (H), on the basis that the attacks on each of the Twin Towers were two separate ‘events’.
- H was then, in turn, entitled to be indemnified by its own insurers, Aioi Nissay (AN), in respect of “each and every loss or accident or occurrence or series thereof arising out of one event”. AN argued that the WTC losses were caused by one or more occurrences arising out of a single event. A dispute arose regarding whether one or two events had taken place, resulting in an arbitration being held in London.
Decision:
- The detail of the decision and facts are not really significant for the purposes of this discussion but the Court upheld the arbitration decision that the insured losses caused by the attacks on the WTC arose out of two events and not one. The arbitration tribunal concluded that whether something can properly be described as one occurrence or one event depends on the position and “viewpoint of an informed observer placed in the position of the insured”. It also involves the question of the “degree of unity in relation to cause, locality and time”.
- The Court agreed that when applying this test there were in fact two ‘events’ and not one.
Points to note:
- Some contracts limit liability according to a ‘per event or series of connected events’ formula. This case emphasises why it is wise not to limit liability on this basis as this opens up the possibility of a significant multiplier of the stated limit. The question of what constitutes an ‘event’ or ‘series of connected events’ will inevitably arise with the result that it may be much more difficult to rely upon the limitation clause if needs be.
- The outcome here was dependent on its specific facts and the precise wording of the applicable policy was very significant. This decision contrasts directly with the decision in the US Court of Appeals in World Trade Center Properties v Hartford Fire Insurance Co [2003] where it was held that the WTC attack was due to a single ‘occurrence’. These two cases simply highlight the uncertainty inherent in such drafting.