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Courts back "follow the leader" clause on claims


Recent English cases reinforce the principle that following markets will be forced to pay claims as settled by their expressly designated lead underwriter, as Bill Perry, senior partner of Carter Perry Bailey and immediate past president of Insuralex, explains.

It has recently been held by the English courts that where there is a “follow” clause by which a following market agrees to follow the claims settlement of designated lead underwriters, the courts will enforce that agreement regardless of any agreement to the contrary entered into between the lead underwriters and the insured.

That is the warning of Bill Perry, senior partner of Carter Perry Bailey LLP, speaking in the context of the San Evans Maritime Inc & Ors v Aigaion Insurance Co, decided by the Commercial Court in February of this year.

He observes that this reflects a similar attitude to upholding “follow the leader” provisions as the court displayed in 2011 when it found that MMI would have to follow AXA’s claim settlement even if the insured had been operating its vessel in breach of warranty (P T Buana Samudra Pratama v Marine Mutual Insurance Association). He suggests that as the English courts will enforce the language used, it is ever clearer that contract certainty means giving careful thought to all “follow” clauses, whether “follow the leader” or, in reinsurance, “follow the settlements”.

Insuralex, Bill Perry, Carter Perry Bailey, follow leader clause

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