BDM Law and Textainer Group win Important Court of Appeal case against Insurers


In a judgement handed down by the Court of Appeal on 22 May 2024, BDM Law and its clients Textainer Group, one of the largest intermodal container lessors in the world, achieved a very comprehensive victory against various insurers under excess of loss insurance policies. The Court of Appeal [2024] EWCA Civ 547 upheld the decision of David Railton KC in Royal Sun Alliance and others v Textainer and others [2022] EWHC 1995 (Comm) that in an excess of loss insurance programme the insurance “paid up” in terms of claims and “recovered down” in terms of the insurers’ rights of subrogation. Partner David McInnes and solicitor Joshua Geesing acted for Textainer instructing Christopher Smith KC of Essex Court Chambers. The full judgement can be viewed by clicking this link.

The case concerned entitlement to substantial sums that Textainer recovered and expected to recover from the Hanjin Estate of its bankrupt lessee, Hanjin Shipping Company of South Korea. Textainer had already recovered most of its losses from its insurance programme and the insurers of the programme sought to recover the monies paid and to be paid by the Hanjin Estate by way of their rights of subrogation. A detailed summary of the background and facts can be found on our previous blog article reporting on the Commercial Court victory.

The Court of Appeal rejected all three of the main issues on appeal as advanced by the insurers.

Firstly, as a matter of principle, recoveries made by Textainer from the Estate were to be applied on a “top down” basis and not on a proportionate basis as argued by the insurers. The judgement therefore reaffirms the principles of law of subrogation under English law, as set out in the decisions of the House of Lords (now the Supreme Court) in Lord Napier and Ettrick v Hunter [1993] AC 713 and of the Court of Appeal in Kuwait Airways Corp. v Kuwait Insurance Co SAK [2000] 1 Lloyd’s Rep 252.

Secondly, the Court of Appeal held that even if subrogation applied proportionately to each layer of the insurance programme, the “insurers’ claim” in any event failed as the insurers had failed to prove their claim on the facts and which losses related to each particular layer of the insurance programme. The Court of Appeal declined to draw inferences in this respect when no factual evidence had been adduced by the insurers. The Court of Appeal considered that the insurers’ failure to adduce such evidence on the issue would, in a wider sense, risk injustice as it would encourage parties to mount inferential cases that they know or suspect the evidence, if adduced, cannot be factually supported.

Thirdly, the Court of Appeal rejected any notion that the case represented under-insurance for the purposes of Section 81 of the Marine Insurance Act 1906, such that the principle of “averaging” applied. Rather than property insurance, just like insurance of a vessel, the concept of under-insurance was therefore not engaged in excess of loss insurance as the risk was undefined and indefinite.

Accordingly, the case was a clear and decisive victory for Textainer and its legal team and the insurers recovered nothing at all in respect of the substantial sums in dispute. The judgement also marks a key application of the laws of subrogation under Napier and Kuwait Airways. Leave to appeal to the Supreme Court was denied by the Court of Appeal, but a separate application for leave could be made to the Supreme Court.

Partner David McInnes commented: “We are very happy with this important and comprehensive victory for our clients Textainer, which reaffirms key principles of the English law of insurance and subrogation.”

David McInnes - author profile
David McInnes
Joshua Geesing - author profile
Joshua Geesing
BDM is a specialist shipping law firm offering high quality legal advice and representation at a reasonable price. Please follow us on social media by clicking below.

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