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Astrazeneca v XL Insurance A3/2013/0824

20th Dec 2013

On 28 February 2013 we reported on the decision of Flaux J in Astrazeneca Insurance v XL Bermuda and Ace Bermuda [click here], the first case in which the English courts had been asked to consider the proper interpretation of a “Bermuda Form” policy.

The case concerned a claim by Astrazeneca Insurance, the captive insurer of the worldwide pharmaceutical company, against XL Bermuda and Ace Bermuda under a £133 million (US$200 million) layer of liability cover in respect of over US$800 million that Astrazeneca had paid to defend and settle claims made against it in the United States and elsewhere in connection with its blockbuster drug, Seroquel. Although the policy, which was on the XL-004 form, provided for London arbitration, the parties had agreed to waive that clause and to have their dispute heard in the Commercial Court. The policy had also been modified to provide for the application of English law, rather than the usual New York law.

Mr Justice Flaux resolved two preliminary issues in favour of XL Bermuda and Ace Bermuda, deciding that the policy provided cover for settlements only where Astrazeneca could show that it was or would have been liable for the claims in question, and that the policy, on its proper construction, equally provided cover for defence costs only in circumstances where Astrazeneca was or would have been held liable. On 20 December 2013 the Court of Appeal (Moore-Bick, Briggs and Christopher Clark LJJ) unanimously upheld Flaux J’s decision. Permission to appeal to the Supreme Court was refused.

David Edwards QC of 7 King’s Bench Walk (leading David Scorey of Essex Court Chambers) instructed by Michael Payton and Jon Turnbull of Clyde & Co appeared for the successful reinsurers both before Flaux J and in the Court of Appeal. To view the judgment of the Court of Appeal [click here].