Aioi Nissay Dowa Insurance Company Ltd v Heraldglen Ltd & Ors

Under an aggregation clause referring to losses arising out of one event, the court must apply the “unities” analysis. It must assess the facts in the round, from the viewpoint of an informed observer in the position of the insured, and in the context of the wording and commercial purpose of the contract. Relevant considerations may include cause, time, locality and the intentions of human agents. A coordinated plan or common terrorist purpose does not, by itself, constitute one occurrence or event. Where separate operations independently cause separate loss, an arbitral tribunal may conclude that the losses arise from separate events. An appellate court will not interfere under section 69 of the Arbitration Act 1996 where the tribunal identified and applied the correct legal approach and reached a conclusion open to it on the evidence.

The claimant appealed under section 69 of the Arbitration Act 1996 against an award concerning four aviation retrocession excess of loss reinsurances. The defendants’ inward reinsurance losses arose from the attacks on the World Trade Center’s Twin Towers on 11 September 2001. The tribunal held that the losses resulted from two separate occurrences, caused by the successful hijackings of two aircraft, and did not arise out of one event for the purposes of the outward aggregation clause.

The claimant argued that the tribunal had misapplied the unities analysis, including by treating the wider terrorist conspiracy and the other two hijackings as relevant, by adopting an insufficiently insured-centred viewpoint, and by giving inadequate weight to the common purpose and proximity of the attacks. The central issue was whether the tribunal had made an error of law.

1. Appeal dismissed. The award stood. The tribunal had made no error of law in concluding that the World Trade Center losses arose out of two events rather than one.
2. The tribunal correctly treated the issue as one requiring an assessment of the relevant unities. The facts were to be considered in the round and in the context of the contractual wording and purpose. Cause, time, locality and the intentions of the persons responsible were relevant considerations.
3. A conspiracy or coordinated plan could not, of itself, constitute an occurrence or event for an insurance aggregation clause. The tribunal nevertheless had regard to the terrorist plot and was entitled to conclude that two successful hijackings of two separate aircraft constituted separate causes.
4. The tribunal was entitled to find insufficient unity of time and location. The Towers were separate buildings and did not stand or fall together. It was also entitled to consider the period from passenger check-in and scrutiny through to the collapse of each Tower, because the liabilities concerned the hijackings and the resulting losses.
5. The tribunal’s reference to an independent observer did not vitiate its decision. Read as a whole, the award showed that it understood the need to consider the facts from the standpoint of an informed observer in the position of the insured, having regard to the outward reinsurances and their contractual purpose.
6. The tribunal’s comparison with the four hijackings was merely a sense check and did not show that it had lost focus on the Twin Towers attacks. It correctly applied the law, considered materially relevant matters, and took no impermissible matters into account.

High Court (Commercial Court): appeal under section 69 of the Arbitration Act 1996 against the arbitration award dated 26 January 2012. The appeal was dismissed and the award stood.