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Poor Contract Drafting Threatens to Derail COVID-19 Insurance Claim

Jurisdiction clauses are often skimmed over by businesspeople who foresee no risk of future dispute, but they are amongst the most important constituent parts of many commercial contracts. A High Court case involving a COVID-19 insurance claim served to illustrate the difficulties that can arise where they are poorly drafted.

The case concerned a group of companies involved in the food, beverage and retail sectors which had the benefit of a suite of 17 ‘multi-risks’ insurance policies taken out with insurers in three Middle Eastern states. The group launched proceedings against the insurers in England, seeking an indemnity in respect of business interruption losses arising from the COVID-19 pandemic. It valued its claim at around $40 million. The insurers, however, asserted that the English courts had no jurisdiction to entertain the claim.

The policies were in materially identical terms and the issue hinged on a jurisdiction clause that was common to all of them. It was agreed on all sides that it was not a model of good drafting. The insurers asserted that, when it came to resolution of disputes arising under the policies, the clause conferred exclusive jurisdiction on the courts of the state in which each of them was issued.

Ruling on the matter, the Court noted that the wording of the clause was odd and its interpretation problematic. As a matter of impression, and on close analysis of the words used, however, the Court preferred the group’s argument that it conferred non-exclusive jurisdiction on the English courts. That reading of the clause posed fewer difficulties than that contended for by the insurers.

The insurers also failed to establish strong reasons why England should be viewed as an inconvenient forum in which to resolve the dispute. The policies were issued overseas and the group did not trade in this country. However, if the group were precluded from bringing its case in England, it would on the face of it be required to issue essentially identical claims in each of the three Middle Eastern states.

22 September 2022
Last Updated
18 October 2022