The Insurance Company of the State of Pennsylvania v Equitas Insurance Ltd

The claimant sought indemnity from the defendant under alleged historical Lloyd's reinsurance contracts relating to two umbrella excess liability policies. The defendant applied for an anti-suit injunction to restrain parallel proceedings the claimant had issued in New York and opposed a stay of the English proceedings; the claimant sought a stay of the English action pending jurisdictional motions in the United States. The court held that, on balance, English law was likely to govern the reinsurances and that the English Commercial Court was the appropriate forum, but nonetheless refused to grant an anti-suit injunction because, although the claimant had behaved unsatisfactorily in launching the New York proceedings after negotiating on the basis of contemplated English proceedings, the defendant had not suffered such prejudice as to make the New York action vexatious or oppressive.

The court further refused the claimant's application for a stay of the English proceedings pending the outcome of the defendant's motions in the US Court. The judge applied authorities on stays where a claimant has issued parallel proceedings and distinguished Arthur Andersen on its facts, concluding that a claimant who has put its hand to the plough should generally continue unless rare circumstances justify a stay.

Background and parties: The Insurance Company of the State of Pennsylvania (ICSOP) claimed indemnity from Equitas Insurance Limited (EIL) under alleged Lloyd's reinsurance arrangements relating to two umbrella excess liability policies (policies 418 and 4171) issued to Castle & Cooke (later Dole). ICSOP alleged it had paid over US$30 million in settlement and sought contribution from EIL of US$10,246,025. EIL is the transferee of pre-1992 Lloyd's names' liabilities pursuant to a Part VII Financial Services and Markets Act 2000 transfer.

Procedural posture and relief sought: ICSOP issued proceedings in the Commercial Court (Claim Form 30 November 2012; served 26 July 2013). ICSOP also filed a Complaint in the US District Court for the Southern District of New York on 26 July 2013 asserting a service-of-suit clause and US jurisdiction. EIL applied for an anti-suit injunction to restrain the New York proceedings and asked the English court not to stay the English litigation; ICSOP applied to stay the English proceedings pending disposition of EIL's jurisdictional/forum non conveniens motions in New York.

Issues framed:

• Was the English Commercial Court the appropriate forum or should the New York court determine the dispute?
• Was ICSOP's commencement of the New York proceedings after negotiations focused on English proceedings vexatious or oppressive, justifying an anti-suit injunction?
• Should the English proceedings be stayed pending the outcome of interlocutory motions in the US Court?
• Related subsidiary issues included governing law of the reinsurances, the effect of the Part VII transfer, limitation and proof of the identity and participation percentages of the original Lloyd's underwriters.

Court's reasoning: The judge concluded that under English conflict rules it was overwhelmingly likely that English law would govern the reinsurance contracts (factors included London market placement and underwriters based in England), and so the Commercial Court was the appropriate forum on that ground. The judge accepted, however, that ICSOP might have a potential limitation advantage in the US and that ICSOP relied on a service-of-suit clause to argue for New York law; these points were reasonably arguable. On the anti-suit application, the court found ICSOP's conduct in launching the US action after months of negotiations framed around English proceedings to be unsatisfactory and misleading, but held that EIL's reliance had not been sufficiently prejudicial to make New York proceedings vexatious or oppressive; therefore the anti-suit injunction was refused. On the stay application, the judge applied authorities that a claimant who has itself instituted parallel proceedings will only obtain a stay in rare cases and distinguished Arthur Andersen as materially different; accordingly the stay of the English proceedings was refused and ICSOP was required to continue the English action unless and until it obtained leave to discontinue or have it dismissed following the US court's decisions.

Practical note: the judgment emphasises the strong reluctance of English courts to stay claimants' own parallel proceedings and the careful application of forum, governing law and Part VII transfer issues in reinsurance disputes.

The court refused EIL's application for an anti-suit injunction and refused ICSOP's application for a stay of the English proceedings. Although the Commercial Court was held to be the appropriate forum and English law was likely to govern the reinsurance contracts, the court concluded that ICSOP's commencement of proceedings in New York was not sufficiently vexatious or oppressive to justify restraint. ICSOP must therefore continue the English action unless and until it obtains an order to discontinue or dismiss it following the US Court's determination.