The Insurer is always reluctant to take issue with the insights of Warren Buffett’s right-hand man but it is arguable that for a long time when it came to litigating insurance disputes in the English courts only three of Munger’s observations applied.
Time consuming, inefficient and costly yes, unpredictable not so.
This is because English law has consistently applied pro-insurer interpretations of causation and loss in coverage disputes while London market employees defecting from one employer to the next were always held to the highest standards of fiduciary and contractual duties.
The contrast with, say, the typical stance of the courts across the pond – more employee and policyholder friendly despite often similar contractual wordings – often echoed the old adage that the US and UK are two countries divided by a common language.
But this position is challenged by a flurry of high profile decisions in the English courts. Most recent was the famous FCA BI test case which as a matter of urgent public (and legal) interest was accelerated to the Supreme Court, the highest court of the land, in admirably swift time.
The judgement was complicated (inevitable considering it involved multiple wordings and insurers) but in essence in one area, the Supreme Court swept away what was previously regarded as the defining decision (Orient Express Hotels) on quantifying complicated BI losses. That and some of the policy interpretations were a victory for hundreds of thousands of policyholders, a setback to a number of UK insurers and a surprise to many experienced insurance litigators.
“One could almost imagine the venerable Justice Freedman’s top lip curling with distaste as he recalled some of these heat-of-the-moment insults”
It wasn’t that they necessarily approved of the decision – opinions varied and many felt it was both unfair and unrealistic in its application – it was simply the fact that Orient Express was settled law. In January, however, the Supreme Court effectively upturned the status quo with its decision. As a matter of “fairness” it was probably the right decision but even now one wonders whether the volte-face was motivated as much by the Court’s sympathetic leanings towards the claimants and disapproval of the Orient Express’ outcomes as it was by strict application of the law.
2019 saw another high profile London dispute culminate in a decision which surprised many litigators. This was the bitter poaching dispute between Ardonagh and the UK arm of Gallagher. Just as the Supreme Court took an unexpectedly pro-policyholder stance in the FCA case, in the High Court Justice Freedman’s sympathies were very much with the defecting employees and their new employer (Ardonagh). One of the defendants, observed a clearly disapproving Justice, was subject to a “frenzy of abuse” by his former colleagues when he resigned akin to “the reaction of fanatical supporters in the terraces”.
One could almost imagine the venerable Justice Freedman’s top lip curling with distaste as he recalled some of these heat-of-the-moment insults that were disclosed during the proceedings, prompting a flurry of embarrassing headlines in the process.
Despite losing a flurry of lucrative accounts and the grubby matter of £625,000 being paid by an Ardonagh affiliate into an offshore bank account of one of the defecting brokers before he jumped ship, Justice Freedman found for the defectors.
Add in the potential implications of the pro-policyholder Insurance Act of 2015 and it is clear the picture is much changed from a few years ago.
Which brings us to the present. As initially revealed by this publication, in March Howden began an audacious series of raids on its larger rival Guy Carpenter. It has culminated in 31 London-based reinsurance executives resigning including a number of valuable producers.
Inevitably, this prompted a vociferous response from GC. The Marsh McLennan-owned firm filed a complaint in the High Court in May alleging an unlawful conspiracy against Howden and five of its former employees, including its erstwhile vice chairman of Global Specialties Bradley Maltese (“one of Guy Carpenter’s most senior and trusted employees”). So far, very predictable.
Also predictable was the inclusion of salacious allegations and embarrassing titbits within the 63-page legal claims form. These includes Maltese’s annual salary, clandestine meetings not recorded in work diaries, claims that some of the “resigning employees pried open a locked pedestal cabinet”, the printing off of confidential data and the apparent destruction of documents in a “chiminea in her garden”.
It must be said that these allegations are untested and Howden is yet to file its response.
In the meantime, Guy Carpenter’s priority is to secure the valuable business of its departing employees. In this regard – and somewhat paradoxically – Guy Carpenter’s position is improved the more extreme the alleged misbehaviour of its departing employees.
“All brokers worth their salt protect their lucrative accounts with the ferocity of a cornered polecat”
After all, they enable senior GC leaders to call their client CEOs and say: “Look, what they have done. Broken into a cabinet. Taken your client information. Don’t encourage them by asap moving your account. Stick with us and we’ll demonstrate our bench strength by extracting a rate discount next renewal and reward your loyalty with a fee reduction, etc, etc”.
The fact the allegations are reproduced in a legal document even provides a greater stamp of validity to them.
None of this is a surprise. All brokers worth their salt protect their lucrative accounts with the ferocity of a cornered polecat. Arguably, the concentration of business into the big two (three if you include the soon-to-be Gallagher Willis Re) incentivises the sector heavyweights to protect their strong franchises all the more from interlopers such as Howden, Lockton Re, et al.
Nonetheless, it can still be a dangerous game to play. As both the FCA test case and the Ardonagh-Gallagher poaching dispute demonstrates, litigating in London can now be as unpredictable as it is costly.
Yes, the smart money would still be on a resolution ahead of trial (GC parent Marsh McLennan settled confidentially with Howden in 2019 after 47 separate employees migrated. Like the latest defectors, these were principally former JLT staff that became part of the Marsh McLennan empire after its £4.3bn acquisition).
But even if that were still to be the case, a lot of dirt can still be thrown in the meantime. Dirt that assists no one including clients. There is already chatter, for example, that client data identified by GC in its legal documents includes sensitive Lloyd’s Corporation market data actually prepared by GC’s rival Aon. The Insurer, of course, has no idea what is true but it might prove awkward if it comes out later in proceedings or indeed trial that the facts are more complicated.
Associates of some of those named in the proceedings claim documents they printed off were done in the knowledge of their superiors or that they co-operated with requests to return GC property. The prizing open of the “locked pedestal cabinet” was done, they claim, to retrieve a pair of shoes put away during the extended lockdown and with the knowledge of a senior colleague who is not moving, as opposed to taking confidential client or company property (Guy Carpenter says it is investigating whether it was done to “misappropriate… confidential information”).
It would take forensic cross-examining to discover what precisely occurred, but anyone with litigation experience realises things are rarely entirely one-sided.
In the meantime, the next chapter of the story will likely be Howden’s formal response to the Guy Carpenter allegations.
We will soon find out – presumably next month – because the Pandora box of litigation has been pried open. The Insurer believes in transparency and employers must be able to enforce their rights. But some disputes are still best settled confidentially. Teams and clients move. It’s a fact of business life. If the firms involved in such disputes are sensible, they see the merit in an early resolution rather than endure torrid waves of headlines which may entertain the masses but do little for those who really matter and who pay all our wages – the clients.
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