Astrazeneca Insurance v XL Bermuda and Ace Bermuda is the first time an issue concerning the construction of a “Bermuda Form” policy has been dealt with by the English Courts.  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, a second-generation anti-psychotic.  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.  There was a trial of two preliminary issues concerning the basic nature of cover: whether the policy provided an indemnity in respect of settlements only in circumstances where Astrazeneca could show that it would have been liable for the claims in question, and whether the policy provided a free-standing indemnity for defence costs regardless of whether Astrazeneca was or would have been liable.  Mr Justice Flaux answered both questions in favour of XL and Ace.  David Edwards QC of 7 King’s Bench Walk (leading David Scorey of Essex Court Chambers) instructed by Michael Payton and Jon Turrnbull of Clyde & Co appeared for the successful reinsurers.

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