Supreme Court rules on “weaker party” in cross-border insurance claims

Although the Supreme Court’s rulings on vicarious liability and surrogacy costs may have stolen the limelight yesterday, eagle-eyed readers will have spotted the important jurisdiction decision in Aspen Underwriting Ltd & Ors v Credit Europe Bank NV [2020] UKSC 11. The Supreme Court, in overruling the Court of Appeal, made important comments on identification of the “weaker party” for the purposes of the insurance provisions of the Brussels Regulations.

The Supreme Court rejected an argument that a claim can be regarded as a matter relating to insurance only if the subject matter of the claim is, at least in substance, a breach of an obligation contained in, and required to be performed by, an insurance contract. In particular [35]–[36]:

• This was inconsistent with the title of the section of the Regulation: “Jurisdiction in matters relating to insurance”, rather than “matters relating to an insurance contract”.
• The scheme of the insurance section was concerned with the rights not only of parties to an insurance contract, who are the insurer and the policyholder, but also beneficiaries of insurance and, in the context of liability insurance, the injured party, who will generally not be parties to the insurance contract.

The main point of interest in this case relates to Lord Hodge’s comments on identification of the “weaker party” for the purpose of the insurance provisions. The dispute arose in the context of a claim by an insurance company to recover sums from a bank, which was a named loss payee under the insurance policy (and therefore a “beneficiary” of the policy).

The trial judge had held in favour of the proposition that the insurance section protections in the Brussels Regulations should not be extended to persons for whom that protection was not justified. That conclusion was then endorsed by the Court of Appeal. They considered that the bank could not take advantage of the insurance jurisdiction provisions.

Lord Hodge rejected this conclusion. He said at [43]:

“There is no “weaker party” exception which removes a policyholder, an insured or a beneficiary from the protection of article 14. I have come to this view for the following six reasons, which I will vouch when I discuss the case law below. First, the reason why article 14 protects the policyholder, the insured and the beneficiary of an insurance policy is because they are generally the weaker party in a commercial negotiation with an insurance company and are as a matter of course presented with a standard form contract. Secondly, while recital (18) explains the policy behind, among others, section 3 of the Regulation, it is the words of the relevant articles which have legal effect and the recitals are simply an aid to interpretation of those articles. Thirdly, derogations from the jurisdictional rules in matters of insurance must be interpreted strictly. Fourthly, the CJEU in its jurisprudence has set its face against a case by case analysis of the relative strength or weakness of contracting parties as that would militate against legal certainty. Instead, it has treated everyone within the categories of the policyholder, the insured or the beneficiary as protected unless the Regulation explicitly provides otherwise. Fifthly, the CJEU looks to recital (18) not to decide whether a particular policyholder, insured or beneficiary is to be protected by section 3 but in the context of reaching a decision whether by analogy those protections are to be extended to other persons who do not fall within the list of expressly protected persons. Sixthly, the policy which underlies the jurisprudence of the CJEU when it decides whether to extend the protection to persons not expressly mentioned in section 3 is that the court seeks to uphold the general rule in article 4 that defendants should be sued in the courts of the member state of their domicile and allows extensions to the protection of section 3 only where such an extension is consistent with the policy of protecting the weaker party.”

At [45] he explained that:

“it is clear that the recitals of the Regulation are a useful tool in interpreting the operative provisions contained in the articles of the Regulation. But a distinction falls to be made between the justification or rationale of a ground of jurisdiction and the ground itself … It is noteworthy that article 14 of the Regulation speaks of the policyholder, the insured and the beneficiary without further qualification.”

Having carried out a comprehensive review of the CJEU’s case law on the “weaker party”, he said at [56] and [59]:

“In none of these cases where the CJEU has relied on the “weaker party” criterion to rule on applications to extend the scope of the section 3 protections beyond those parties who were clearly the policyholder, the insured, the beneficiary or the injured party, did the court call into question the entitlement of those expressly-named persons to that protection by reason of their economic power. On the contrary, the CJEU has treated the exceptions to the entitlement of those persons as confined to the exceptions expressly stated in articles 15(5) and 16 of the Regulation.

…

In my view under the test laid down in CILFIT Srl v Ministero della Sanita (Case 283/81) [1982] ECR 3415, para 21, it is acte clair that a person which is correctly categorised as a policyholder, insured or beneficiary is entitled to the protection of section 3 of the Regulation, whatever its economic power relative to the insurer. It is not necessary to refer a question to the CJEU on this issue.”