Legal - Insurers' legal arsenal expands.

(From Reinsurance)

Byline: Elspeth Talbot.

The recent decision of Bristow Helicopters Ltd v Sikorsky Aircraft Corporation [2004] 2 Lloyds Rep 150 has confirmed the availability of a useful new weapon in the armoury of insurers, on the basis of which insurers can go on the attack in the courts in England in order to prevent proceedings being brought against them by potential claimants in unfavourable jurisdictions. The form of this new weapon is an action for a negative declaration.

Ordinarily, when parties litigate, a claimant is seeking to establish a defendant's liability. In the typical liability insurance context the injured claimant sues the insured in order to establish that the insured is liable. The role of insurers in such cases is therefore reactive and defensive. Subject to rules on jurisdiction and limitation, the case is brought wherever and whenever the claimant chooses. Where the US is a possible seat of the litigation, the effect of the claimant selecting the US may be devastating to insurers, not least because in the US the award of enormous damages by juries is common and litigation costs are generally not recovered.

Proceedings for a negative declaration in England give the insurer the ability to prevent the claimant from choosing to start proceedings in unfavourable jurisdictions. Where an insurer fears it may be sued in an unfavourable jurisdiction, provided that it can establish that the English courts have jurisdiction over the dispute, instead of waiting for the potential claimant to sue it in the jurisdiction of the claimant's choosing, the insurer can now strike first by commencing an action itself in the English court, asking the court to declare that it is not liable to the injured party, or only liable to them on a particular and often limited basis.

Role reversal

It will be seen from the foregoing that the natural roles of the parties are reversed: the natural claimant (the injured party) becomes the defendant and the natural defendant (usually the insured) becomes the claimant.