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INSURANCE AND REINSURANCE DISPUTES 2020 REVIEW The contents of this publication are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication. INSURANCE AND REINSURANCE DISPUTES – 2020 REVIEW 01 Contents Preface Insurance and reinsurance Endurance Corporate Capital Ltd v Sartex Quilts & Textiles Ltd [2020] EWCA Civ 308 Court of Appeal confirms indemnity to be awarded on a reinstatement basis for damaged property which had not been reinstated . 05 Niramax Group Ltd v Zurich Insurance Plc [2020] EWHC 535 (Comm) Another recycling plant fire, another non–disclosure case . 08 Aspen Underwriting Ltd & Others v Credit Europe Bank NV [2020] UKSC 11 UK Supreme Court confirms bank named as loss payee under assignment of insurance policy not bound by exclusive English jurisdiction clause under the Brussels Regulation Recast 1215/2012 .. 10 UK Acorn Finance Ltd v Markel (UK) Ltd [2020] EWHC 922 (Comm) The better part of valour – limits on insurers’ absolute discretion . 13 Generali Italia SpA & Others v Pelagic Fisheries Corp & Another [2020] EWHC 1228 (Comm) English Commercial Court considers the application of the Recast Brussels Regulation when construing potentially conflicting jurisdiction provisions in insurance policies . 16 Young v Royal and Sun Alliance Insurance Plc [2020] CSIH 25 Scottish Appeal Court revisits first Insurance Act 2015 decision on whether an insurer had waived its right to disclosure . 18 TKC London Ltd v Allianz Insurance Plc [2020] EWHC 2710 (Comm) No business interruption cover for Covid-19 closure where policy requires property damage . 20 Baines v Dixon Coles and Gill [2020] EWHC 2809 (Ch) Aggregation considered under the Minimum Terms and Conditions for solicitors' professional indemnity insurance . 21 Spire Healthcare Limited v Royal & Sun Alliance Insurance plc [2020] EWHC 3299 (Comm) Spire and RSA contest aggregation once more . 23 The Financial Conduct Authority v Arch Insurance (UK) Ltd & Others [2021] UKSC 1 Supreme Court hands down judgment in FCA's Covid-19 business interruption test case . 25 Covid-19 Force Majeure, frustration and material adverse change . 33 Impact on civil litigation in England and Wales . 39 PRA and FCA confirm expectations for regulated firms under SMCR . 40 Practical tips for renewing your business’ insurance programme during the Covid–19 pandemic . 42 Impact of Covid–19 on class actions in the UK . 45 Directors’ duties in a Covid–19 world . 47 02 HERBERT SMITH FREEHILLS Professional negligence LIV Bridging Finance Ltd v EAD Solicitors LLP (In Administration) [2020] EWHC 1590 (Ch) High Court applies SAAMCO principle in case of breach of trust by solicitor . 52 Assetco Plc v Grant Thornton UK LLP [2020] EWCA Civ 1151 Court of Appeal considers application of SAAMCO principle in context of auditor's negligence case . 54 Regulatory FCA review of outsourcing by life insurers . 57 FCA’s approach to international firms . 59 In the matter of the Prudential Assurance Co Ltd v In the matter of Rothesay Life Plc [2020] EWCA Civ 1626 Court of Appeal overturns refusal to approve Prudential/Rothesay Life transfer . 60 FCA publishes Final Report on general insurance pricing practices market study and accompanying Consultation Paper . 65 Beyond Brexit – impact on insurers’ legacy business . 69 Health & safety/Personal injury R (on the application of Maughan) (Appellant) v Her Majesty’s Senior Coroner for Oxfordshire (Respondent) [2020] UKSC 46 Supreme Court reduces burden of proof for verdicts of unlawful killing in inquests . 71 Product liability Criminal Liability for Defective Products . 73 Sandra Bailey & Others v GlaxoSmithKline UK Limited [2020] EWHC 1766 (QB) High Court confirms the interpretation of “defect” under the Consumer Protection Act 1987 and highlights the duty of claimants to continually assess the merits of their case . 79 General interest The Civil Aviation Authority v R on the application of Jet2.com Ltd [2020] EWCA Civ 35 Legal advice privilege: a dominant purpose test, but to what end? . 81 Rowe v Ingenious Media Holdings PLC [2020] EWHC 235 (Ch) High Court orders security for costs against member of Association of Litigation Funders . 83 Sports Direct International Plc v The Financial Reporting Council [2020] EWCA Civ 177 Court of Appeal finds regulator cannot demand production of client’s privileged documents unless statute overrides privilege . 86 ChapelGate Master Fund Opportunity Ltd v Money [2020] EWCA Civ 246 Court of Appeal confirms funders’ adverse costs liability not limited to amount of funding provided: Arkin “cap” not a binding rule . 88 Pipia v BG Group Ltd [2020] EWHC 402 (Comm) High Court finds “control” for the purposes of disclosure includes third party documents that the litigating party can access under a standing consent short of an enforceable right . 90 INSURANCE AND REINSURANCE DISPUTES – 2020 REVIEW 03 Rihan v Ernst & Young (Global) Ltd [2020] EWHC 901 (QB) High Court finds in favour of novel duty of care on employers (or quasi-employers) to protect against economic loss by providing an “ethically safe” work environment . 93 PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393 (Comm) High Court takes expansive view of when reference to legal advice may result in broader waiver . 96 Sevilleja v Marex Financial Ltd [2020] UKSC 31 Untangling, but not killing off, the Japanese knotweed: Supreme Court confirms existence and scope of “reflective loss” rule . 99 FS Cairo (Nile Plaza) LLC v Christine Brownlie [2020] EWCA Civ 996 Court of Appeal gives wide interpretation to “damage” for the purposes of the common law jurisdictional gateway for tort claims . 103 Jalla v Shell International Trading and Shipping Company Ltd [2020] EWHC 2211 (TCC) High Court finds claims arising out of oil spill cannot proceed as representative action under CPR 19.6 . 106 Barclays Bank plc v Various Claimants [2020] UKSC 13 WM Morrisons Supermarkets plc v Various Claimants [2020] UKSC 12 Chell v Tarmac Cement and Lime Ltd [2020] EWHC 2613 (QB) Vicarious liability in the spotlight . 108 The Financial Reporting Council Ltd v Frasers Group Plc (formerly Sports Direct International Plc) [2020] EWHC 2607 (Ch) High Court rejects claims on litigation privilege in advice from accountants on tax structure . 111 Stoffel & Co v Grondona [2020] UKSC 42 Supreme Court applies Patel v Mirza to reject illegality defence to solicitors’ negligence claim where claimant had engaged in mortgage fraud . 113 Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd [2020] UKSC 48 Supreme Court judgment clarifies English law on arbitrator apparent bias . 115 Disclosure Pilot Scheme: report and proposals for reform . 118 Witness statements: significant changes proposed for Business and Property Courts . 119 Disputes after the end of the Brexit transition period: where are we now? . 120 Alternative dispute resolution Telecom Centre (UK) Ltd v Thomas Sanderson Ltd [2020] EWHC 368 (QB) McParland & Partners Ltd and Another v Whitehead [2020] EWHC 298 (Ch) Post Lomax v Lomax: Two judgments relating to ADR and the courts . 123 DSN v Blackpool Football Club Ltd [2020] EWHC 670 (QB) BXB v Watch Tower and Bible Tract Society of Pennsylvannia & Others [2020] EWHC 656 (QB) Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd & Another [2020] EWHC 1050 (Comm) Costs implications arising from a failure to engage in mediation . 124 The Singapore Convention on Mediated Settlement Agreements . 126 Preface 04 HERBERT SMITH FREEHILLS Preface Our Insurance Annual Review brings together 2020 also saw some significant changes proposed to two important procedural aspects of litigation – the preparation of the various articles that we have produced over witness statements and disclosure in the Business and Property the last 12 months . We hope that they will be a Courts (one of the key forums for resolving insurance disputes) . useful source of reference to our clients and The changes proposed to witness statements aim to improve witness evidence by reducing the potential for a witness’s contacts with an involvement or interest in recollections to be influenced or overwritten by the process of developments in the UK insurance and taking the statement itself, as well as refocusing witness reinsurance market . evidence on the areas where it is actually needed . These changes are likely to come into force on 6 April 2021 and, it is hoped, will 2020 has been a year like no other and one which will live in the increase cost efficiency and reduce the burdens on witnesses . history books for many years to come, as well as in the On disclosure, the Disclosure Pilot Scheme that has been memories of those of us who have lived through it . The operating in the Business and Property Courts since 1 January disruption to people’s lives and livelihoods has been significant . 2019 is now set to continue until the end of 2021 . Both of these The role that insurance has to play in the economic losses procedural changes are explored further in this Annual Review . suffered by many businesses as a result of the Covid-19 pandemic has received much attention . This gave rise to the From a regulatory perspective, Brexit continued to be top of most significant insurance case of the last decade in 2020 – the mind for many insurers and intermediaries as the end of the Covid-19 business interruption test case which was brought by transition period approached on 31 December . Our work with the FCA against various insurers . The case considered whether clients across the sector continued throughout 2020 to assist certain common non-damage business interruption wordings them in preparing for the UK’s exit from the EU, particularly provide cover for Covid-19 related business interruption losses . given the lack of focus on financial services in the negotiations . We represented the FCA . As befits the year of 2020, this was Elsewhere in the regulatory sphere, the FCA published its final an unprecedented case on many fronts with an expedited report on general insurance pricing practices and concluded timetable .