Grecoair Inc v Tilling & Ors

A reinsurance contract is ordinarily made between the original insurer and the reinsurer. References in reinsurance documents to provisions of the underlying policy do not, without more, confer direct contractual rights on an additional insured. A certificate of reinsurance recording the underlying cover is not itself a commitment by reinsurers.

A binding agreement to repair requires objective agreement on the work to be done and the parties’ respective responsibilities. General statements that an aircraft could be repaired did not amount to an offer where the parties remained fundamentally divided about the extent and cost of accident and non-accident damage. The doctrine of election cannot create a binding repair commitment where no concluded election has been made.

Grecoair owned an aircraft dry leased to Angola Air Charter Ltda, which insured it with ENSA. The defendants were reinsurers of ENSA. Grecoair claimed directly against the reinsurers for damage said to have resulted from two accidents.

Two preliminary issues were tried: whether Grecoair could sue the reinsurers directly under the reinsurance contracts, and whether statements made at a meeting on 11 March 1997 created an agreement requiring the aircraft to be repaired. The claim depended principally on reinsurance information clauses referring to the lease and underlying policy, and on an alleged offer by a representative of the reinsurers.

1. Direct claim against reinsurers. The claim failed. The reinsurance contracts were contracts between ENSA, as reinsured, and the reinsurers. The “Information” clauses recorded matters concerning the underlying ENSA policies. They were not terms granting Grecoair direct rights under the reinsurances. The clauses had to be distinguished from the contractual conditions and from an express cut-through clause used for other aircraft.
2. The certificates of reinsurance did not alter that conclusion. They were issued by ENSA’s brokers to evidence that ENSA had obtained reinsurance and recorded the terms of the reinsurers’ commitment to ENSA. They were not commitments by reinsurers to Grecoair. There was no agency allegation capable of succeeding, and no estoppel was established.
3. The contractual structure and the parties’ conduct supported the conventional relationship of assured, insurer and reinsurer. Reinsurers’ handling of the claims under Aviation 41 did not create direct liability to Grecoair. The direct claim therefore failed.
4. Alleged repair agreement. No binding agreement was made at or after the 11 March meeting. The statements that the aircraft could be repaired by FLS were brief and general. Objectively, the parties remained in radical disagreement about which damage was accident-related, what work was required, who would instruct FLS, and who would pay. Each party used “repair” to mean something different. The correspondence showed that the dispute continued and did not evidence offer and acceptance.
5. The alleged offer could not in any event have bound all relevant underwriters and deductible reinsurers without further authority. The doctrine of election could not provide a different result because no conclusive election for repair had been made.
6. The reinsurers succeeded on both preliminary issues. Grecoair’s claim was unsustainable. The form of order and ancillary matters were left to be dealt with on hand-down if not agreed.