Groupama Insurance Company Ltd. v Overseas Partners Re Ltd. & Anor

In a reinsurance transaction, a request for information about losses incurred on a programme ordinarily concerns losses reported to the relevant reinsured and affecting the reinsurance book. It does not ordinarily require brokers or a reinsured to investigate claims further up the insurance chain or to identify incurred-but-not-reported losses.

A request for a warranty does not, without clear words, expand that obligation into an assurance about matters of which the giver is unaware or about uncertain future claim development. A misrepresentation or non-disclosure is material only if it would have affected the judgment of a prudent underwriter. Where a contract is varied only as to the percentage participation, any right of avoidance is confined to the variation.

Groupama sought payment and an indemnity under a marine personal accident quota share retrocession. Overseas Partners Re Ltd had increased its participation from 50% to 75% after receiving a fax confirming that no losses had been advised which would affect the ceded declarations. Aon Limited acted as broker.

Claims had been notified further up the insurance chain but had not been reported to the relevant reinsured or broker. The issues were whether the fax was misleading, whether there was a duty to make inquiries further up the chain, whether any non-disclosure was material, and, hypothetically, whether avoidance would affect the original participation as well as the increase.

1. Claim against Overseas Partners Re Ltd allowed; claim against Aon Limited dismissed. The court found in Groupama’s favour against Overseas Partners Re and dismissed the claim against Aon.
2. The two faxes had to be read together. In their ordinary and market context, “losses incurred on the programme” and “losses advised ... that would affect any of the declarations ceded hereunder” referred to losses reported to the relevant reinsured, which had affected or might give rise to claims against the reinsurance book. They did not include claims which had not yet resulted in a loss on that book or incurred-but-not-reported losses.
3. Aon and LDG were obliged, as a matter of fact and law, to do no more than check and report the information described in the request. There was no general obligation to investigate claims further up the chain. The request for a warranty did not widen the obligation. It would be impracticable to warrant against claims of which the parties were unaware or against uncertain reserve development.
4. The deletion of the words “to LDG” from the draft fax should have been cleared with Mr Smart, but it did not alter the meaning of the communication and was not intended to deceive.
5. Even if the Cobb loss ought to have been reported, its amount was immaterial. It would not have affected the judgment of a prudent underwriter and therefore did not constitute a material misrepresentation or material non-disclosure.
6. Obiter, and assuming a material non-disclosure inducing the increase, the court considered itself bound by K/S Merc-Skandia XXXII v Certain Lloyd’s Underwriters & Others [2001] Lloyd’s Rep 563. Avoidance would relate only to the 25 per cent variation, not the original 50 per cent participation.