Reed Smith Client Alerts

ABN Amro Bank NV v. Royal & Sun Alliance Insurance and others [2021] EWCA Civ 1789

Earlier this month, the Court of Appeal handed down judgment in the appeal proceedings arising out of the decision of Mr Justice Jacobs at the start of 2021 in ABN Amro Bank NV v. Royal & Sun Alliance Insurance and others [2021] EWHC 442 (Comm).

We previously updated you on the High Court decision.

In the High Court, ABN Amro Bank N.V. (the Bank), represented by Reed Smith LLP and Ms Sabben-Clare and Mr Parker of 7KBW, obtained judgment in respect of its £35 million insurance claim relating to losses suffered as a result of defaults by the Transmar Commodities Group under cocoa commodity repo transactions.

The central and most important issue in the case was the scope and extent of cover available under an all-risks marine cargo insurance policy that contained a bespoke ‘Transaction Premium Clause’ (the TPC). The Bank and Edge Brokers submitted that the TPC was designed to provide for financial loss arising from default by a borrower under a repo transaction irrespective of whether there had been physical loss or damage to the goods. Marine cargo underwriters that had subscribed to the risk baulked at the notion that they had agreed to provide stand-alone credit risk/financial default cover – they blamed the broker, Edge, for failing to make the extent of the clause properly known to the underwriting market, and certain underwriters said they had not read the policy. One thing was clear – the underwriters contended that they did not intend to cover losses where there had been no physical loss or damage to the goods.

Following a five-week trial in November and December 2020, the judgment of Mr Justice Jacobs was handed down on 26 February 2021. The court found in favour of the Bank and against Royal & Sun Alliance Insurance plc (the lead underwriters), 11 of the 13 following underwriters and, to a more limited extent, the Bank’s insurance broker, Edge Brokers (London) Limited. In a considered and lengthy judgment, Mr Justice Jacobs found that the TPC provided credit risk/financial default insurance to the insured Bank and thus the Bank’s £35 million losses from defaulting repo transactions fell to be covered.