Reinsurance Focus

Seaton Insurance Company and Stonewell Insurance Company are involved in litigation with Cavell USA, owned by British citizen Kenneth Randall, over Cavell’s handling of the run-off of their insurance obligations under an administration agreement. The parties entered into a written settlement of their disputes, and the settlement agreement contained a provision that the settlement “shall be governed by and construed in accordance with English law and the parties submit to the exclusive jurisdiction of the English courts.”

After entering into the settlement with Cavell, Seaton and Stonewell initiated arbitration with their reinsurers in the US, National Indemnity Company, and served subpoenas on Cavell. Seaton and Stonewell also sued Cavell in the US, alleging that Cavell fraudulently concealed its intention to delegate claims handling to the reinsurer. Allegations of such wrongdoing had been dismissed from the US arbitration. Cavell filed a motion to dismiss, and contended that any suit should be brought in the UK under the terms of the settlement.

Cavell then separately sued Seaton and Stonewell in the UK, seeking a declaration that all of their disputes had been compromised, and seeking damages resulting from Seaton and Stonewell involving it in the US arbitration and the US lawsuit. Seaton and Stonewell gave notice that they would challenge the jurisdiction of the UK court, and sought a stay of the UK lawsuit pending a decision on the motion to dismiss the US lawsuit they had filed.

The Queen’s Bench Division of the Commercial Court refused the insurance companies’ application for a stay for proceedings, finding that the resolution of the motion to dismiss in the US court would not assist it in resolving the jurisdictional challenge in the UK lawsuit. The court also stated that “it is difficult to see how the defendants can challenge the jurisdiction of this court at that stage.” This case is an interesting example of the interplay between proceedings in different countries. Cavell USA Inc. v. Seaton Ins. Co. [2008] EWHC 876 (April 11, 2008).

This post written by Rollie Goss (with thanks to Jason Morris).