Royal & Sun Alliance Insurance Plc v Retail Brand Alliance Inc

The Defendant (“Retail Brand”) seeks a stay of these proceedings on the basis that New York is the natural forum for the resolution of the issues to which they give rise.

The Claimant insurer (“RSA”) insured Marks & Spencer plc and its subsidiary and associated companies (then including Brooks Brothers Inc) under a Master Policy of Insurance in respect of material loss and damage to property occurring within the period 1 July 2001 to 30 June 2002 and business interruption losses resulting from that material loss or damage. RSA is incorporated under the laws of England and Wales.

Retail Brand acquired Brooks Brothers Inc from Marks & Spencer on 29 December 2001. Retail Brand is the successor in interest to Brooks Brothers Inc and continues to trade as Brooks Brothers. Retail Brand is incorporated under the laws of the State of Delaware.

In addition to the cover provided by the Master Policy, Brooks Brothers had the benefit of a Local Policy of Insurance issued by Royal Indemnity Company (“RIC”), a wholly-owned subsidiary of RSA, incorporated under the laws of the State of Delaware.

Brooks Brothers is a clothing retailer with many stores in the United States of America including a store at One Liberty Plaza in New York City.

The store at Liberty Plaza sustained damage as a result of the terrorist attack on the World Trade Centre on 11 September 2001.

Retail Brand has made a claim for some $13.6m under the Local Policy in respect of business interruption. There is a dispute between Retail Brand and RIC as to the extent of coverage and in particular whether it extends beyond 12 September 2002. Retail Brand has made an alternative claim for the full amount not recovered under the Local Policy against RSA under the Master Policy for the period after 12 September 2002 up to either 2009 or the date that the World Trade Centre is replaced.

On 26 April 2004 RIC issued proceedings in the Supreme Court of the State of New York seeking declaratory relief intended to resolve the disputes under the Local Policy.

Also on 26 April 2004 RSA issued the proceedings before this court seeking declaratory relief in respect of the Master Policy. Leave was given on 20 May 2004 for the service of those proceedings on Retail Brand out of the jurisdiction on the basis that the contract of insurance was made in England and was expressly governed by English Law (Claims Condition 9).

On 19 June 2004 Retail Brand commenced proceedings against both RSA and RIC in the Superior Court of the State of Connecticut. The principal place of business of Retail Brand is in Connecticut. Those proceedings were withdrawn on 22 July following service by Retail Brand of a Defence and Counterclaim in the New York proceedings commenced by RIC. Retail Brand, on 17^th July, also issued a Complaint against RSA and, on 19 July, a Summons seeking to join RSA as a party to the New York proceedings.

Essentially, therefore, RSA/RIC took contemporaneous steps in these courts and the New York courts seeking separately to resolve issues under the Master and Local policies respectively whereas Retail Brand seeks to resolve those same issues only in New York.

The Master Policy only provides cover (if it does) where cover is not provided by a local policy. If Retail Brand is correct in its construction of the Local Policy the losses it claims, to the extent proved, will be recoverable under that policy. To the extent that proved losses are not recoverable under the terms of the Local Policy then, subject to its terms, they may nonetheless be recoverable under the Master Policy.

I do not think it necessary for the purposes of determining the present application to set out the issues of construction of the Local Policy and Master Policy which give rise to the present disputes. Both parties are agreed that such issues as arise on the construction of the Master Policy are “short points”. They are also agreed that they are subject to English law. Neither Policy contained any applicable jurisdiction clause, albeit the Master Policy provided for arbitration in Great Britain of differences about the amount to be paid under the policy where liability was admitted.

The parties are not in agreement about what other issues might arise. Indisputably, however, questions of calculation, and in particular the losses recoverable on different hypotheses as to the true meaning of the Policies, are involved. Mr Symons QC, for RSA, submitted that no factual evidence would be required to resolve the disputes on the Master Policy. But he did so on the basis that if any factual matters arose on the calculation of damages “RSA have made it clear that they will agree to be bound by any findings of fact in the New York proceedings in so far as they are relevant” and that if such facts were not determined “it is very likely such facts can be agreed or assumed”. Mr Beltrami, for Retail Brand, is not so sanguine. Nor am I. If, as RSA submits should happen, and is agreed to be sensible should the court refuse the stay Retail Brand seeks, the New York proceedings then involving only the Local Policy were to proceed in advance of the proceedings before this court, I can envisage room for much debate in these proceedings (if they were still pursued) about what findings of fact had been made, whether they were binding, and what further facts required to be established.

This is a case in which this Court does not have jurisdiction as of right. It is therefore for RSA to show that it is the natural forum.

There are a number of potentially material uncertainties about how matters might proceed in the two alternative outcomes to this application.

If the proceedings in this country are not stayed then they will only be pursued should Retail Brand fail to recover in New York under the Local Policy all the losses it claims. In that event, it is a possibility that this court might consider that the, or some of the, “short” construction points arising under the Master Policy could sensibly be addressed as preliminary issues and only if they were resolved in favour of Retail Brand would it then be concerned with calculation issues. The obvious risk of course, is a multiplicity of proceedings with the concomitant increase in cost and the timescale for achieving a final resolution.

If the proceedings in this country are stayed, the claims under the Local Policy and (subject to any challenge by RSA to the jurisdiction) under the Master Policy will proceed in New York and of course be subject to any directions the courts there consider appropriate. As Mr Symons recognised, if this court were to grant a stay and so decline jurisdiction in favour of New York it would no doubt make any challenge by RSA to New York jurisdiction somewhat problematic particularly where jurisdiction in New York was claimed by RIC in its claims under the Local Policy on the basis that Retail Brand conducted business in New York, the claims arose from an event which took place in New York and the property the subject of the action was located in New York. It was not submitted that New York was not an available jurisdiction and I think this court should proceed on the basis that it is.

There has, at present, been no order or direction in the New York courts on whether or not, if they are to be heard there, the claims arising under the Local Policy and the Master Policy should be heard together or in some other manner or order. It will be Retail Brand’s position that they should be dealt with and tried together with the advantage that all issues between the parties will be managed and resolved in one court and calculation issues can also be addressed and managed in accordance with the various hypotheses for which the parties contend as to the meaning and inter-relationship of the provisions of both policies. Those, of course, are matters for the New York courts but the (at least) potential advantages in the management of both proceedings in one jurisdiction are, I think, obvious. The connection between the proceedings and policies is well demonstrated; it is illustrated by the concerted launch by RIC and RSA of the claims for declarations on the same date.

Mr Beltrami, indeed, submits that RIC and RSA acted cynically in issuing proceedings seeking negative declaratory relief doing so motivated simply to establish separate jurisdictions. The fact that the proceedings were issued in concert, and at a time when in correspondence Retail Brand had set a deadline for a response from insurers which had yet to expire, lends some support to this submission. Whilst it can fairly be said that the correspondence already disclosed that there were real issues between the parties there was no obvious urgency in starting proceedings as RIC and RSA did unless it was to seek to secure or assist in securing the separate jurisdictions. Insurers, of course, contend those jurisdictions are in any event the natural and appropriate jurisdictions in which to resolve the issues. That remains the key question.

The only factor on which Mr Symons relies in support of this jurisdiction is that the Master Policy is subject to English Law. I do not mean by use of the word “only” to belittle the significance which the application of English law may have as a factor in addressing the natural forum. But, to state the obvious, the degree of significance is dependant on the issues. I have been referred to authorities in which courts have expressed the view that the application of English law is of minimal significance and to the case of New Hampshire Ins Co v Philips Electronics (No 1) [1999] vol 1 58 in which Phillips LJ said, at page 63, that England was the natural forum to resolve issues of construction of a policy which fell to be determined by English law. But in that case, as the Court of Appeal decided, those issues were to be dealt with first and discretely and if resolved in one way would obviate the need for any further trial. In this case, the claims under the Local Policy, including calculation issues, have priority because, as is agreed, only if and to the extent that Retail Brand fails in those claims are the claims under the Master Policy to be pursued.

I would add that although there are (or may be) two general matters on which in a hearing in New York evidence of English law might be required, the construction of the wording itself is a matter involving no English magic nor one on which I would expect English law questions to arise. The two general matters to which I refer are Retail Brand’s claims that because RSA denied liability the period of cover is to be extended and that it is entitled to have the Master Policy interpreted “in a reasonable manner which maximises its insurance coverage”.

Although Mr Symons rightly pointed to the fact that the Master Policy covered claims which (subject to limited exceptions) could arise anywhere in the world, and so it required to be construed in a consistent manner, RSA sought to achieve that by an English law clause without the support of an exclusive or any other form of English jurisdiction clause applicable to coverage issues.

Mr Beltrami submitted that there were numerous factors in support of New York as the natural forum. In my summary they are:

In my judgment, in substantial agreement with Mr Beltrami’s submissions, the factors to which I have referred overwhelmingly support New York as the natural forum for the resolution of disputes under the Master Policy. This is a case in which I think the significance of English law to the issues is minimal and, to the extent it may arise, can readily be addressed in New York. On the other hand, the advantages of single case management in the location of the loss, in the court in which insurers themselves have chosen to pursue claims under the Local Policy, and in accordance with the commercial insurance arrangement between Retail Brand and its insurers collectively, point inexorably to New York.

I shall therefore grant Retail Brand the stay of these proceedings for which it applies. I shall expect the parties to prepare a Draft Order accordingly and to address any ancillary matters which arise and cannot be agreed when this judgment is handed down.