Direct Action Claims Against Insurers and Jurisdiction
Direct Action Claims Against Insurers and Jurisdiction – Assens Havn v. Navigators Management (UK) Limited (Case C-368/16).
On 13 July 2017, the European Court gave their ruling in the case of Assens Havn v. Navigators Management (UK) Limited, a case concerning a direct action claim for compensation advanced against an insurer.
The European Court was asked to consider whether an exclusive jurisdiction clause in a policy of marine insurance was binding on a third party victim of harm who sought to advance a direct action claim in the courts of their domicile against the insurer of the assured who, on the third party’s claim, allegedly caused the harm. The Court was thus asked to rule on the interpretation of Article 13(5) of the Brussels I Regulation (EC Regulation No. 44/2001), read in conjunction with Article 14(2)(a) of the Regulation.
In their decision, the European Court ruled that “an agreement on jurisdiction made between an insurer and an insured party cannot be invoked against a victim of insured damage who wishes to bring an action directly against the insurer before the courts for the place where the harmful event occurred, …, or before the courts for the place where the victim is domiciled.” (paragraph 40).
As such, the claimant victim, Assens Havn, was free to pursue their direct action claim against the insurer Navigators Management (UK) Limited, in Denmark, being the place where Assens Havn had its domicile and the place where the harmful event occurred. Assens Havn was not bound by the exclusive jurisdiction clause contained in the policy, which provided for the exclusive jurisdiction of the English High Court.
This ruling is in line with that made in FBTO Schadeverzekeringen NV v. Oldenbreit (Case C-463/06) and is important to anyone advising insurers in relation to cross-border disputes.
The decision arose by virtue of a request from the Danish Supreme Court for a preliminary ruling pursuant to the procedure set out in Article 267 of the TFEU.
The Danish Supreme Court’s request was made in proceedings advanced by Assens Havn (the Port of Assens, Denmark) against the insurance company Navigators Management (UK) Limited (“Navigators”). The proceedings concerned a claim for compensation for damage caused to Assens Havn’s quay installations by the Tug “Sea Endeavour 1”. The Tug had been chartered by Skåne Entreprenad Service AB (“Skåne”) for the carriage of a cargo of sugar beet between two Danish ports. When the Tug arrived in Assens Havn, damage was caused to quay installations, however, the parties disagreed as to how that damage had occurred and who therefore was liable for it.
Skåne had obtained liability insurance from Navigators. Since Skåne had gone into liquidation, Assens Havn brought a direct action claim in the Danish courts against Navigators, as the liability insurer of the party which, on Assens Havn’s case, caused the harm. Such a direct action claim was permitted under Danish law.
The policy included an exclusive law and jurisdiction clause, which provided for the exclusive jurisdiction of the English High Court. Furthermore, Navigators’ conditions of insurance included the following clause:
“(7) Law, practice and dispute resolution
This insurance shall be governed by and construed in accordance with English law and, in particular, be subject to and incorporate the terms of the Marine Insurance Act 1906 and any statutory modification thereto. This insurance, including any dispute arising under or in connection with it, shall also be subject to the exclusive jurisdiction of the High Court in London [United Kingdom].”
The Danish Supreme Court asked the ECJ to decide “whether Assens Havn which, pursuant to Article 95(2) of the Law on insurance contracts, is entitled to act directly against the insurance company of the party which caused the harm, is bound by the agreement on jurisdiction in the insurance contract between Skåne Entreprenad and Navigators, by virtue of Article 13, point 5, of Regulation No. 44/2001, considered in conjunction with Article 14, point 2(a), of that regulation.” (paragraph 24).
In answering this question, the ECJ was required to bear in mind two key principles found in the recitals to the Regulation, namely that jurisdiction is generally based on the defendant’s domicile (Recital 11) and that in relation to matters of insurance, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules provide for (Recital 13). The Regulation makes special provision for insurance so as to protect the “weaker” policyholders, although the commercial reality is that may not always be reflective of the policyholder’s status in the insurance relationship.
Article 9(1) of the Regulation provides that an insurer domiciled in a Member State may be sued not only in the courts of its Member State domicile but also, where the action is brought by the policyholder, the insured or a beneficiary, the insurer may be sued in the courts of the Member State where the claimant is domiciled and, in the case of liability insurance, in the courts of the Member State where the harmful event occurred (Article 10).
Article 11(2) of the Regulation provides that Article 9 (and Articles 8 and 10) shall apply to actions brought by the injured party directly against the insurer, where such direct actions are permitted.
Article 13 of the Regulation provides that the provisions of Section 3 (jurisdiction in matters relating to insurance) and so the Articles mentioned above, may be departed from only by an agreement “which relates to a contract of insurance in so far as it covers one or more of the risks set out in Article 14” and Article 14(2)(a) defines these risks as “any liability, other than for bodily injury to passengers or loss of or damage to their baggage, …, arising out of the use or operation of ships…”.
The Court noted that although under Article 13(5), read with Article 14(2)(a), it is possible by agreement to derogate from the provisions of Section 3 of the Regulation, that in matters of insurance such derogations must be interpreted strictly. Further, the Court considered that Article 11(2) does not refer to Articles 13 and 14 and accordingly to agreements of prorogation of jurisdiction. With these points in mind, the Court ruled “It is therefore not apparent from the scheme of the provisions of Chapter II, Section 3, of [the] Regulation… that an agreement on jurisdiction may be invoked against a victim” and “In that regard, the Court has previously noted that, in matters of insurance, prorogation of jurisdiction is strictly circumscribed by the aim of protecting the economically weaker party”.
The Court concluded “The view must therefore be taken that an agreement on jurisdiction made between an insurer and an insured party cannot be invoked against a victim of insured damage who wishes to bring an action directly against the insurer before the courts for the place where the harmful event occurred, …, or before the courts for the place where the victim is domiciled…”, and that to rule otherwise could compromise the Regulation’s objective of protecting the economically and legally weaker party.
The ruling is thus in line with the ruling in FBTO Shadverzekerigen NV v. Oldenbreit (C-463/06).
Neither this ruling, nor the ruling in Oldenbreit, decides which law has to permit the direct action contemplated by Article 11(2) of the Regulation. In this case, the Danish Supreme Court applied Danish law to the question, in the Oldenbreit case the German Court applied German law to the question and in both cases the ECJ clearly considered that to be correct. Thus, the issue is to be decided by the law of the forum in which the direct action proceedings are advanced, which law will include its rules of private international law. For more on this point, see the recent English Court of Appeal judgment in Keefe v Mapfre Mutualidad Cia De Seguros Y Reaseguros SA and another  EWCA Civ 598.