Insurance Law

An American Abroad: The Divergent Worlds Of U.S. And U.K. Insurance Arbitrations

By Rita Davis, Allan B. Moore, Joanna Page, Stephen Moriarty, QC, and Thomas R. Newman


Rooted in common beginnings, the American and United Kingdom legal systems are cousins with many similarities. As with most relatives perched on opposing branches of a family tree, however, there are numerous and significant differences. One example of how the two legal systems diverge exists in the realm of insurance arbitrations. This article focuses on some of the procedural and substantive concerns that arise in arbitrating insurance disputes in the U.K. (and Bermuda) relative to what one might expect when arbitrating in the U.S.2 To provide the American lawyer a frame of reference, and where appropriate, the article discusses these concerns by highlighting the differences and similarities between U.S. and U.K. insurance arbitrations with an eye toward providing some practical guidance to the American lawyer arbitrating an insurance dispute in the U.K.


American lawyers have a role to play in English arbitrations.

This is particularly so where the governing law is that of a U.S. state. Some features of English arbitrations may make the American lawyer feel at home, others will seem very odd. American lawyers do not have to retain English counsel. In London, American lawyers may appear as advocates in arbitrations without a local license to practice law. The restrictions on legal practice, which are generally much less severe in the U.K. than they are inthe U.S., do not apply to arbitration. Arbitration is a private dispute resolution procedure subject to the limited supervision of the English courts.


In a London arbitration, English choice of law principles apply. Under English choice of law rules, in theory, three different laws may apply in insurance arbitrations:

a. the governing (or "proper") law of the policy, which will determine the substantive legal issues and the principles of construction to be applied;

b. the law of the arbitration agreement, which will generally be the same as that of the policy. The arbitration agreement may however survive the main contract (following e.g., repudiation) and will govern such matters as the interpretation, validity, avoidability, and discharge of the agreement to arbitrate. The law of the arbitration agreement may also control similar issues concerning the reference to arbitration and enforcement of the award; and

c. the procedural law, which will generally be English in a U.K. arbitration. International insurance arbitrations having their juridical seat in London are governed procedurally by the English Arbitration Act 1996. Thus, English law will determine how the arbitrators are to be appointed; the role, if any, of the court; what law the arbitrators are to apply and how to do it; the procedural powers and duties of the arbitrators and the availability of judicial remedies, including the right to seek leave to appeal on a question of law (where not waived). The procedural law generally governs the determination of interest (pre- and post- award) and costs. Issues overlap because, for example, questions of remoteness and heads of damage (i.e., what kinds of loss can be recovered) are matters for the governing law but measure and quantification are issues governed by the procedural law.

Generally in most policies, the parties will have agreed what jurisdiction's governing and procedural laws apply. Even so, complications may still arise. For instance, what is the effect outside England when a foreign court takes a different view of what the governing law covers or, what is substantive versus procedural (where do questions of remoteness and of assessment overlap), or how does one define what the "governing law" is? A difference of opinion between English law and New York law over the proper of procedural law might well lead to difficulties in enforcing an arbitration award.

Furthermore, a feature classified as procedural under English law may be substantive under the governing law of the policy, or vice versa. For example, in disputes governed by the substantive law of a U.S. state but by English procedural law, the argument can be made that interest is an issue to be determined by the substantive law, where (as in New York) there is support for that proposition under the substantive law. An even more vexing example may be found in policies containing the following (or materially similar) language:

This policy shall be governed by the laws of the State of New York, except in so far as such laws may prohibit payment for punitive for damages butthe provisions of this policy are to be construed in an equally balanced fashion as between the insurer and policyholder and where the language of this policy is ambiguous or unclear the issue shall be determined without regard to authorship of language, without any presumption in favor of either the insurer or the policyholder and without reference to parol evidence.

Have the parties actually selected New York as the governing law here? If so, are the italicized words at risk of being struck down under New York law as being inconsistent with public policy or for some other reason? Or rather, is this provision the selection of a self-contained regime of New York law, as varied by the language - the selection not of New York law per se but of a modified version of New York law? If the latter is right, then the governing law is that modified regime and it may or may not be possible to apply public policy or other New York legal considerations to strike down the italicized language (assuming there is one that prohibits it). On the other hand, there may be an issue as to whether or not the "modified version" is a system of law that can constitute a valid choice of law. There is also the question of how to apply New York case law to an arbitration calling for such modified New York law, as New York case law has evolved, by definition, without such contractually specified modifications. Can New York case law be read and applied like the offerings on a buffet table, selecting only the parts to which the parties agree?


Whatever law governs the policy, one or more arbitrators in a U.K. arbitration are likely to be English lawyers or retired judges. With an English arbitrator comes an English approach to policy interpretation. Although the principles of contractual interpretation of many U.S. states and England are very similar in theory, in practice the approach can be very different. The English approach, traditionally, has been to take the policy in its factual setting, but to interpret the wording quite strictly, albeit with a healthy dose of common sense. Resort to extrinsic evidence has been very limited. In recent years, however, a more liberal and purposive approach to construction has been taking hold, with evidence of any background knowledge reasonably available to the parties being admissible for the purpose of ascertaining what the words used would mean to the reasonable person reading them.3 There is no need for the literal meaning of the words to be ambiguous before it is possible to adopt a commercially sensible interpretation.4 Reliance on case law, except where the policy wording is virtually the same as that being considered in the case, is sometimes limited. customers may click here to read the complete commentary.

Rita Davis is counsel at Hunton & Williams LLP, where she specializes in commercial disputes and has litigated insurance coverage disputes in state and federal courts, as well as in international arbitrations; she has been a contributor to Law360 on arbitration issues. Allan B. Moore is a partner at Covington & Burling LLP in Washington and London, where he is Co-Chair of the International Arbitration Practice and has represented policyholders in insurance disputes for over 20 years; he currently represents BP in insurance coverage disputes arising from the Deepwater Horizon oil spill. Joanna Page is a partner in Allen & Overy LLP, where she is Head of Commercial Litigation in London and developed the firm's top-rated contentious insurance practice; most of her insurance cases involve arbitration in London, often with US co-counsel; she is a Fellow of the Chartered Institute of Arbitrators. Stephen Moriarty QC is a barrister who practises from Fountain Court Chambers in London, where he handles commercial litigation and international commercial arbitration, including insurance and reinsurance disputes; he taught law at the University of Oxford, has edited the insurance chapter in Chitty on Contracts,and has acted as counsel and arbitrator in insurance and reinsurance arbitrations. Thomas R. Newman is of counsel to Duane Morris LLP and co-author of Ostrager & Newman, Handbook on Insurance Coverage Disputes (16th ed.); he is a Fellow of the Chartered Institute of Arbitrators and has participated in scores of insurance and reinsurance arbitrations in London and Bermuda as arbitrator, co-counsel and New York law expert.Copyright (c) 2014 by Rita Davis, Allan B. Moore, Joanna Page, Stephen Moriarty QC, and Thomas R. Newman.Responses are welcome

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