INSURANCE CO OF THE STATE OF PENNSYLVANIA v. GRAND UNION INSURANCE CO AND ANOTHER

Headnote

when dismissing retrocessionaires appeal held :-

(1) when construing re-insurance or retrocession slips underwritten in the London insurance market the court :

(a) has to put itself into the factual matrix of market practice; and

(b) may rely directly upon expert evidence as to the meaning of the slip in the market.

(2) where a insurance slip contains a covenant by the re-insurer to follow the insured's settlements, the re-insurer may challenge any settlement upon the basis either that the risk was not covered by the policy of re-insurance (not insurance) or that the insurer has not acted honestly or taken all proper and businesslike steps. But the onus of proving this allegations lies upon the re-insurer.

BETWEEN

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J U D G M E N T

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Hunter, JA

1. This is an appeal from a decision of Mortimer J given on 22nd November when he entered judgment for the plaintiffs (ICSP) as re-insurers against the defendant (Grand Union) as retrocessionaires. As he put it conveniently at the outset of his judgment: "the plaintiffs ICSP claim as the reassured under two contracts of retrocession. Each contract was contained in a slip broked on the London Insurance Market by Lowndes Lambert Construction Limited, (Lowndes Lambert)" the brokers, and the then second defendant, "to Grand Union the first defendant. In each case ICSP were reinsurers themselves. The type of business was contractors all risks, (CAR) and claims were made by the original insured. ICSP have settled the claims and they now seek full indemnity from Grand Union under the retrocessions.

2. The two retrocessions were described in each slip as 'reinsurance'. The first slip in time, the Mecca Taif Slip, concerned a contract to construct a saline water plant at Mecca Taif in Saudi Arabia. The second the Fougerolle slip, concerned construction work relating to two roads in Algeria".

3. The judge granted the plaintiffs the indemnity they sought. The defendants raised a host of defences in a multi-coloured defence. Many of these defences were jettisoned at mid-trial. The issues narrowed themselves down to five. Upon each of these the judge found against the defendant. This appeal now challenges three of the judge's conclusions and conveniently they can all be considered in principle in relation to the Fougerolle slip. The three questions raised are these :

(1) Did the judge misconstrue the contracts recorded in the slips in relation to the degree of risk accepted and underwritten by Grand Union?

(2) Did he misconstrue the word renovation in the Fougerolle slip?

(3) Was he wrong to hold that the "follow settlements" clauses in the slips put an onus of proof upon Grand Union?

4. The judge very helpfully started his judgment with an introductory description of the London insurance market based upon the expert evidence led before him and upon a number of earlier reported cases in London. This introduction both counsel adopted as introduction both counse1 adopted as correct. I am happy to follow suit. It reads :

"    Before dealing with Grand Union's defence to the action, I will outline briefly some of the salient features of the London insurance market. This will enable me to deal more briefly with the issues in due course. When dealing with reinsurance, including retrocession, the market aims to achieve speed, simplicity and certainty in its dealings; including both the underwriting and dealing with claims. It is upon these qualities that the undoubted success of the market depends. Whether these qualities are achieved depends in part upon the applicable law. In certain types of business - CAR in one - the whole risk involved is often great. One insurer may be unwilling or unable to accommodate it. The insurer therefore reinsures part of, or all of, the risk. This is achieved by brokers who act for the reassured or retrocedent, not the reinsurer or retrocessionaire. Whenever I speak of reinsurance in this judgment I include retrocession unless I say otherwise.

    Reinsurance may take at least two forms. A reinsurer may write a percentage of the whole risk up to 100%; described during this case as 'vertical reinsurance'. Alternatively, or additionally, a reinsurer may take a percentage up to 100% or a layer of the risk involved. Layered reinsurance (referred to as 'horizontal reinsurance') relates to losses up to a certain limit. This may be the first loss or primary layer. Sometimes layered reinsurance involves higher layers between specified limits, but there were none in this case.

    A reinsurer may be prepared to underwrite a percentage of the whole risk only when he is certain that he can retrocede a primary layer of that risk. That happened in this case. The broker's task is to achieve this. Sometimes therefore, a broker may seek the underwriting of a layer of risk up to certain limits from a retocessionaire before the retrocedent is prepared to underwrite part of the whole risk. This also happened in the instant case".

5. The background to the Fougerolle slip was this. Fougerolle area French firm of public works contractors. They entered into a contract to reconstruct two roads in Algeria. It was a substantial job. The initial contract price was 506m French francs, which in a currency more familiar to some, represents E50m sterling. Fougerolle required and obtained CAR cover for the full contract sum. They did this from French insurers who are known by the initials S.M.A.B.T.P. In July 1983 SMABTP were plainly looking for reinsurers, up to if necessary the whole risk. We know that a slip intended to bring this about, was circulating from as early as 12th July. ICSP was contemplating accepting part of this risk on a vertical basis, a percentage of the whole risk under the contract. Before deciding upon that however they wanted to test the market to see if they could lay off or retrocede a bottom layer of that risk, a form of the horizontal cover described by the judge. The brokers put this layer at FF7.5m; ie each and every loss up to that limit of 7.5m.

6. The plaintiff's view as to what happened thereafter goes like this. A proposal to this effect was put by the brokers to Grand Union. They accepted 33 1/3% of this bottom layer. ICSP was then free to write up to 33 1/3% of the whole contract i.e. FF506m, confident that the bottom layer of that risk would be covered by Grand Union. 1/3 of the bottom layer precisely coincided with an accepted 1/3 of the whole. Each in other words was to be concerned with 1/3 of the whole risk. Up to the limit of FF7.5m it was to be the business of Grand Union. Between FF7.5m and FF560m, it was to be the responsibility of ICSP. That is the view advanced by the plaintiff and which the judge ultimately accepted.

7. The defence in this case was described by the judge as "stonishing". This construction plea was raised by amendment some year or so into the action. Three alternative meanings were pleaded. The form of that pleading is so incoherent, that it has defeated every single member of this court. It is therefore with some relief that one is able to turn to the issues which were agreed between counsel as arising for consideration early in the case, where this particular question was defined in these terms: "What was the line which Grand Union wrote on the Fougerolle slip?

In particular was it:

(a)    33.3% (up to FF7,500,000 for each and every loss) of ICSP's line? [the defendants case] or

(c)    33.3% (up to FF 7,500,000 for each and every loss) of 100% of the limits?" [the plaintiffs case],"

As I indicated the judge preferred (c) and it is from that decision that this appeal is principally brought.

8. It is necessary now to read the material parts of the slips in question. The first slip, the Fougerolle slip, has been referred to throughout the argument as "slip C" and I shall continue so to describe it. It is in this form:

"TYPE:    CONSTRUCTION "ALL RISKS' AND P.C.C. REINSURANCE

FORM:    As orginal (LLC6 Amended) (that was a particular form drafted by the brokers)

REASSURED:    Insurance Company of the State of Pennsylvania

ORIGINAL

INSURED    FOUGEROLLE and/OR LOMBARDI and/or BELLER CONSULT and /or     Co-/Sub-Contractors - Suppliers and other interested parties connected with the Contract for their respective rights and interests and/or as original.

PERIOD:    ... (sets out completion dates)

INTEREST    In respect of the performance of the Insured's contract for

(a) Renovation of CW1 Road between Bouati Mohmoud Guelma and Guelma Ben Smih and

(b) Renovation of Route Nationale 20 between outskirts Ain-Adib and Guelma/including all associated and ancillary works connected therewith and/or as original.

SUMS

INSURED:   SECTION I - CONSTRUCTION/ERECTION "ALL RISKS"

FF7.5m Each and Every Loss on "Works", (permanent and/or temporary) materials in progress and/or completed including removal of debris, professional fees and expediting expenses etc.

EXCESS:

FF100,000 each and every loss

SECTION III - DAMAGE TO PROPERTY OF THE PRINCIPAL/PROPERTY IN CARE, CUSTODY OR CONTROL

FF1.875m any one occurrence/unlimited.

EXCESS:

FF25,000 any one occurrence.

TERRITORIAL

LIMITS:    Anywhere in Algeria....

CONDITIONS:    1.     Reinsurance of Insurance Company of the State of Pannsylvania whose Gross (net plus treaties) retention is Nil of amounts hereon.

............................

                     2.    Full Reinsurance Clause (excluding rate and retention).

                     6.     Simultaneous Claims Payments Clause.

PREMIUM:    FF399,985.70 adjustable at 0.79% (per mille) on Final Contract Price estimated at FF506,311,035. Total premium payable in instalments as follows : 1/3 Inception; 1/3 at 15th October, 1983; 1/3 at 15th October, 1984"

That was subscribed, having obtained confirmation from Hong Kong, 33 1/3% by Mr Parry, the London underwriter, on 19th July 1983.

9. I then turn on to slip D which is the SMABTP slip. The type and form are identical. The reassured is the French company not the plaintiffs. The next entries original insured, period and interest are identical to the slip C. Then

SUMS

INSURED:     SECTION I - CONSTRUCTION/ERECTION"ALL RISKS

FF506,311,035 (ie the full contract price) .... (the rest of the wording is the same)

EXCESS:

FF100,000 each and every loss

SECTION III - DAMAGE TO PROPERTY OF THE PRINCIPAL/PROPERTY IN CARE, CUSTODY OR CONTROL

FF5m any one occurrence/unlimited.

EXCESS

FF25,000 any one occurrence.

CONDITIONS:    1.     Reinsurance of SMABTP whose gross (net plus treaties) retention is ... The original wording was: "amount to be advised to L/R only". Those words were crossed out and " substituted is "1% gross". That did not happen until 1st September 1983

        2.    Full Reinsurance Clause (excluding rate and retention) - Claim co-operation clause.

PREMIUM:    FF1,321,471.80 adjustable at 2.6150 (per mille) on Final Contract Price estimated at FF506,311,035 (and the premium is payable in the same instalments)"

10. On 20th July that is the day after Mr Parry signed slip C, the plaintiff subscribed that slip in the percentage of 30%. Between 12th July and 20th July four other well  known re-insurers subscribed the slip for amounts of 10%, 10%, 20% and 30% with the result the whole totalled 100%.   SMABTP then had second thoughts, and decided to retain 1%.  That is when the change was made to condition 1. That meant that by custom of the market all the subscribers' quantities had to be written down to produce a total of 99% percent and the plaintiffs' became 29.7%. Consequentially, if and only if the plaintiffs are right in their contention under C, that necessarily Meant that Grand Union's figure on slip C had likewise to be written down from 33.3% to 29.7% and that was done. This was because 29 7%, then represented the plaintiffs' maximum insurable interest.

11. Now the impact of these arrangements has been conveniently expressed in graphical form. There are two scales on the graph. The vertical scale is the total risk in French Francs and extends at the top to the contract price. The bottom scale gives you percentages of risk accepted. The vertical divisions are very simple. On the left hand side you have the 1% retained by SMABTP. You then have the 29.7% taken up by the plaintiffs ICSP. You have a vertical line showing the extent of that, which not unnaturally drops on the figure of 30% on the bottom line. Then to the right there are the other re-insurers; INA for another 29.7%, Commercial Union for 19.8% and then two smaller names for 9.9%. That much is simple.

12. Then you have to show this layered reinsurance brought about by the risks in C. The first thing the draftsman has done is to draw a horizontal line across the bottom at the mark of FF7.5m on the vertical scale. You then have to indicate the limit of that cover. That again being 29.7% precisely coincides with the vertical line showing the edge of ICSB's horizontal cover. This graphically reveals what the plaintiffs aimed to achieve by dovetailing their acceptance under D with Grand Union's existing acceptance under C, and to bring about the result of enjoying a 100% protection at the bottom layer below 7.5m. Grand Union dispute the accuracy of this. They say that to show what really happened, which they assert is that they only wrote 10% of that bottom layer of risk, is that the vertical line as far as they are concerned should fall at the mark 10% on the bottom scale.

13. There was a good deal of common ground on the legal and market principles applicable. First, it is accepted that a slip constitutes a binding contract when subscribed, subject only to this market practice of signing down: General Reinsurance Corporation v. Fennia Patria [1983] 1 Q.B. 856 at 866. Secondly the whole contract is to be found in the slip and only in the slip. The slip stands alone, or as Mr Hamilton put it, it is free standing. This point is made in many cases particularly The Zephyr [1984] 1 Lloyds' Rep 58 at 69. Third, the contract must be certain. It cannot depend on or be made subject to some unknown or future event like the size of the future reinsurance order, or, what comes down to the same thing, the size of the risk later accepted. This emerges from Phillips v. Dorintal [1987] 1 Lloyds' Rep 482. The relevant passage is at 485 where Steyn, J. said this

"The defendants' interpretation introduces a concept which does not appear on the body of the slip, viz the order. That order, as I have explained, was not known when the slip was signed signed. On this simple ground I am constrained to conclude that the natural interpretation of the language of the slip is that advanced by the plaintiffs."

14. The fourth accepted principle is that it is the almost invariable market practice for slips to be written as a percentage of 100% of a risk stated on the slip within the limits so described. This is reflected in the decision of Mocatta, J. J. in Wace v. Pan Atlantic [1981] 2 Lloyds Rep 339, 349.

15. Agreement of those principles has led to agreement on the facts in two significant respects. I am happy to take this from Mr Collins skeleton argument for the appellants. In para 2 of that skeleton one finds this:

"By scratching a 33 1/3% line on slip C Grand Union wrote 33 1/3% of the risk, or limits, on slip C, i.e. 33 1/3% of 7.5m French francs ...............The only relevant limits are those on slip C."

And in para 3:

"They (ICSP) chose to reinsure, the primary layer of their liability, up to 7.5m FF each and every loss.................................slip C is concerned only with the limits stated upon it, and only with the reinsurer identified in it."

16. I do not know how the matter was, presented in the court below, and it may well have been presented differently. The judge identified those two elements s in particular, and with the addition of Condition 1 in slip C. regarded them as decisive. You must look at slip C alone. The prima facie meaning of slip C is that described in the first sentence that I have just read; one-third of a hundred, percent of each and every loss up to the limit of 7.5m.  You cannot look at D. That is the only place where the ICSP limits are to be found. If you look a little more closely at C, you can see that nothing in D can impinge upon C, by reason of Condition 1. That is a promise that no retention will be retained by the reinsirer in the future. So there is a promise not retain anything underwritten on slip C.

17. I can see no trace of fallacy in that approach. Further it seems to me that the acceptance of the Grand Union construction leads to a host of objectionable consequences. First there is complete uncertainty. The ICSP limits were not decided upon or known on the 19th July. There is no distinction between the position here and that in Phillips v Dorintal. Secondly it leads to variable results, which is unacceptable in itself and quite impossible when it would increase Grand Union's exposure and its obligations without reference to them. For example if Grand Union's right, it would follow that if ICSP chose on D to write 66 2/3%, Grand Union's obligations would be doubled. Thirdly the construction would leave ICSP with a two-thirds retention in plain breach of Condition 1. Fourthly, and perhaps most perculiarly, it would leave Grand Union with 1/3 of the premium agreed in C on this horizontal layer, but carrying they say only 1/9 of that risk. All these matters seem to me to violate first principles of underwriting.

18. Mr Collins is a late comer in this case. He has said everything that could be said skillfully and most persuasively on the appellant's behalf. But I regret that there is no way in which he could make bricks with the straw with which he was presented; and no way in which he could convincingly span the gap between slip C and Slip D, or make the leap from one to the other, whilst all the time purporting to look only at C. The closest he got it seemed to me, was when he asserted that what mattered was one third of ICSP's liability under C, or one third of what ICSP is seeking to pass on. But both founder upon Condition 1, and both involve indirectly looking at D, and to an uncertain future. So simply looking at the slips alone against the market background recorded by the judge, I would accept the  judge's construction.

19. The judge directed himself correctly, it is common ground, in relation to the factual matrix. He said, quoting the felicitous language of Lord Wilberforce in Reardon Smith v Hansen [1976] 1 WLR 989, that "what the court must do must be to place itself in thought in the same factual matrix as that in which the parties were" p 997. In so doing, he followed the example of Mocatta J in Wace v Pan Atlantic. It is interesting to notice that the same path was retrodden in like circumstances by Lord Lowry in Vesta v Butcher [1989] 2 WLR 290 311.

20. There is a question here as to the extent of the admissibility and of the use that can be made of evidence of market practice and, in Mr Hamilton's phrase, of the market in practice. A body of evidence was lead about market practice generally, and this market in practice, in relation to this slip. With one exception it was all one way. It was to the effect that ICSP's reading of the slip was the only reading which accorded with market practice; and furthermore it was the understanding of all concerned with these contracts of retrocession including the underwriter himself Mr Parry. A striking feature of the construction urged upon us so persuasively by Mr Collins as obviously correct, is that it was first thought up years later and then advanced in incoherent alternative forms in an amended defence.

21. The exception to this evidence was a Mr Wells called by Grand Union. He advanced a view on construction favourable to Grand Union. But he did so purely on construction and upon his reading of the slip. He asserted no market experience, and specifically denied that market practice was of any importance.

22. The judge adopted a traditional, careful approach. First, he directed himself that direct evidence of intent or on construction was inadmissible. Secondly, he expressed his own view on the construction of the slips simply having put himself in the factual matrix of the market background. Thirdly he added that he "derived comfort" from the fact that this was the contemporary view of all the parties. I accept that Mr Wells' evidence created a special problem having regard to the form in which it was given, and that it had to be rejected as inadmissible. But the same does not follow for those witnesses who gave evidence based upon market experience. When evidence is lead from those experienced in the market and that evidence is based upon market practice, it seems to me unreal to try to distinguish, or to assert an ability to distinguish, reasoning from result, and to accept that the reasoning is admissible and available, whereas the result is inadmissible and has to be rejected. As all the authorities show this is a very special market. The practitioners in it write in a form of professional shorthand, which they understand, but which is not necessarily instantly understandable to new-comers. They have to do this in order to get a great deal of information upon a single slip which may literally bind hundreds of people. A count, it seems to me, must receive their explanation, and receive their evidence as a whole. I respectfully adopt the view of Steyn J in Phillips v Dorintal Insurance Ltd [1987] 1 Lloyd's Rep 482 at p 486 column 2 when he held that such evidence is admissible as a whole, and that full use can be made of it. I do not wish to add anything in relation to that judge's view as to the full extent of such use, since the problems of ambiguity or conflict do not arise in this case.

23. I think that it was open to the trial judge to rely upon this market evidence positively in support of his construction and not simply to say that he derived comfort from it. When that evidence is put into the scales, it seems to me positively to confirm his view on construction, with which I agree. It further confirms the force of the criticism of counsel for the brokers in the court below who stigmatised the defendant's construction as a "Temple point". So the criticisms directed at the judge under this head, in my view, fail.

24. The second point can be dealt with more shortly. It arises out of the presence of the word "renovation", which I have read in the paragraph sideheaded "Interest". It concerns a single word. I am bound to say that it can be dismissed with a single word, which is hopeless. It is said that the word renovation creates a false description; that it can only mean renewal of something existing; and that what was being done here was the reconstiuction of new roads largely alongside the old and to new dimensions and lines.

25. There is and can be no issue as to the identity of the Fougerolle contract and of the work involved under it. Again there can be no issue but that the claims arose under that contract. If this is a false description it cannot alter that contract, or substitute for that contract some other non-existent contract. It is at most a false or inaccurate way of describing Fougerolle's work.  Not surprisingly therefore it was principally pleaded as a misrepresentation or non disclosure, leading to the right of avoidance. But that point was expressly abandoned at mid-trial. No reasons were given. However a brief look at the documents adds force to the judge's surmise that it may have had something to do with the defence of waiver. By that abandonment the defendants were expressly accepting that there was no misrepresentation or non-disclosure. Having thrown away the only available form of relief through the front door, they cannot, in my view, try to bring in through the back door a new argument, dressed up as construction, intended to achieve the same result. On that simple ground this point fails.

26. I also agree with the judge's conclusion that if you read this description in the proper factual matrix, renovation means renovation by reconstruction at considerable cost and properly covers the work to be done.

27. The third point is of more interest. It arises on the onus of proof. Both slip C and the Mecca Taif slip contain "Full reinsurance clauses". That full clause reads:

That the re-insurance is subject in all respects to the same terms and conditions excluding rate of retention as and to follow the settlements of the Insurance company of the State of Pennsylvania and to bear its proportion of any expenses incurred whether legal or otherwise in the investigation and defence of any claim thereunder"

The issue is the impact of this covenant by Grand Union to follow ICSP's settlements. It potentially gives rise three questions:

(1) what defences are available to a covenantor like Grand Union?

(2) Where does the onus of proof lie?

(3) If the answer to (2) is that the onus of proof lies on ICSP, has ICSP discharged it in relation to specific claims?

28. On question (1), there is no issue but that the answer is to be found in the judgment of Goff LJ, as he then was, in the Insurance Company of Afr ca v Scar (UK) Reinsurance Co Ltd (1985) 1 Lloyds' Rep 312, p 330 column 1. He says:

"In My judgment, the effect of a clause binding reinsurers to follow settlements of the insurers is that the reinsurers agree to indemnify insurers in, the event that they settle a claim by their assured, ie, when they dispose, or bind themselves to dispose, of a claim, whether by reason of admission or compromise, provided that the claim so recognized by them falls within the risks covered by the policy of reinsurance as a matter of law, and provided also that in settling the claim the insurers have acted honestly and have taken all proper and businesslike steps in making the settlement".

Two points, I think, have to be noticed about these two provisos. The first, I have no doubt, was very carefully, worded and deliberately limited to the policy of reinsurance. Mr Collins argues that where, as is usual the policy of reinsurance refers to the terms of the original insurance, the reinsurer can look through to those terms and complain, as was sought to be done here, of breaches of condition in the underlying policy. I reject that. If Goff LJ meant that, he would in Mortimer J's words "be nullifying the conclusion that he already reached". I am satisfied that he meant no such thing. He was well aware that many settlements include compromises on liability and quantum and that to permit reinsurers to go back to an alleged strict construction of the policy would destroy the value of the clause. If there is any question as to the sufficiency or propriety of the settlement it arises under the second proviso.

29. In relation to the second proviso, it seems to me to have been founded upon what follows where Goff LJ says this

"Reinsurers are entitled to rely not merely on the honesty, but also on the professionalism of insurers".

A few lines later he rejects another formulation because it would have been involved "imposing a higher duty of care on insurers". It necessarily follows that he was imposing a duty of care on insurers in contradistinction to Stephenson LJ whose formulation was narrower. This means that any person who tries to bring himself within this proviso has to allege a form of professional negligence.

30. With that introduction, I turn to the second question which is where does the onus lie? I have no doubt that both reason and authority show that the onus lies upon the reinsurer Grand Union.

31. The principal authority is again the case of Scor. At first instance, [1983] I Lloyd's Rep 541, it is plain that Mr Hunter, counsel for the equivalent of the insurer, was then arguing that the onus lay upon the reinsurer. It is not clear what stance on this Mr Yorke for the reinsurer then took. But Leggatt J's finding is quite clear at p 555. It was that the onus was upon the reinsurer.

32. In the Court of Appeal, both counsel put the onus upon the reinsurer. Mr Hunter repeated his same submissions and Mr Yorke adopted that view and did not challenge Leggatt J's conclusion in that respect. This can be seen from the nature of the argument reported at p 319 column I and p 327 column 2. Stephenson LJ quite explicitly agreed with Ledgatt J, P. 319 column 2 and p 322 column 1. So that there is clear authority from those two judges that the onus lies upon the reinsurer.

33. Goff LJ did not expressly cover the point, perhaps because it was not in issue. But the whole of his judgment suggests to my mind that he agreed with the views of Leggatt J and of Stephenson LJ. First he cites Leggatt J's conclusion in full, without a word of criticism. Secondly he formulates his principle as subject to two provisos. I am minded to think that coming from Goff LJ that may well be significant. Provisos are examples of exceptions and it may be an echo of what Lord Goddard had said many years before in Bond Air Services v Hill [1955] 2 QB 417 at p 427 that "it is axiomatic in insurance law" that the onus of proof of an exception is upon the insurer who seeks to rely upon it.

34. Thirdly the language he uses in his judgment immediately after his formulation of principle, seems to me consistent only with this view. He cannot for example have been intending to reverse the universal rule in professional or any negligence, that he who alleges must prove. A simple example of this principle in operation is to be seen in Street v Royal Exchange Assurance [1914] 19 Commercial Cases 339 which shows that all the insurer has to do is to prove his settlement, and then if the reinsurer wishes to challenge it the onus is upon him.

35. Reason to my mind equally points to the same conclusion. The reinsurer's obligation is to follow the settlement. If he wants the right to be consulted, he can try to include a claims cooperation clause in his cover, Which is what happened in slip D. But if Mr Collins is right, even without that, the reinsures is entitled to put the insurer to proof in respect of every claim that (a) it is within the policy and (b) that the settlement is proper. If that is right, the clause is valueless and meaningless. It seems to me in this field both sensible and economical for the lead reinsurer to be trusted to do all the necessary investigation. Repetition down the line is absurd, and where, as here, the reinsurance cover spans the globe it is ruinous in cost. I agree with the judge under this head these reasons and for those that he gave. In the circumstances question (3) is not reached.

36. This will I hope be the last chapter in an unhappy insurance saga. No doubt Contractors All Risks is difficult and risky insurance. Maybe it is plain that Grand Union misjudged the risk in this case. But I have to say that it was very unfortunate that when they realised this they did not face up to the liabilities which I am convinced that they know they had accepted, and instead have wasted vast sums on arguments which vary between the faint and the hopeless.

37. In my judgment this appeal fails and must be dismissed.

Fuad, V.-P. :

38. I agree. In my judgment the strenuous efforts made by Grand Onion to escape the plain contractual obligations they have assumed to the plaintiff insurance company rightly failed before the judge. For the reasons given by Hunter JA I, too, would dismiss the appeal.

Macdougall, JA:

39. Notwithstanding the most ingenious arguments, ably and attractively presented by Mr Collins, I find it impossible to escape the conclusion that the propositions and constructions he sought to persuade this Court to accept are untenable. They reflect a desperate attempt by the appellant company to evade the responsibilities that Mortimer J correctly found it was obliged to meet under the contracts. I agree entirely with the comprehensive judgment of Hunter JA. There is nothing I can usefully add to the reasons he has given. I too would dismiss this appeal.