Liability Insurance in International Arbitration: Choice of Law Issues in 'Bermuda Form' Arbitrations

Abstract

In the mid-1980s the excess casualty insurance market in the USA collapsed to a very substantial extent. A number of insurance companies rose from the ashes, fuelled in part by capital from large US manufacturing companies. Two of these companies, ACE and XL, were based in Bermuda and began to write insurance on a freshly-drafted and novel policy form which rapidly became known as the ‘Bermuda Form’. The Bermuda Form has been through a number of revisions1 and is now one of the principal policy forms used in high-level excess liability insurance policies purchased by large US corporations for the purposes of insuring against the risk of catastrophic liabilities, for example the manufacture of a product which gives rise to mass tort litigation or a refinery explosion which causes substantial property damage and personal injury. Insurance policies written on the Bermuda Form have a distinctly international flavour. The policyholder and the insurers are often based in different countries, the policy includes an express choice of New York law (with certain modifications), and invariably provides for disputes to be settled by arbitration, usually in England, sometimes in Bermuda. The flavour of the contractual provisions can be gleaned from the ‘Construction and Interpretation’ and ‘Arbitration’ clauses in one current version of the Bermuda Form.2 The former provides: