It is common for many (re)insurance companies to incorporate and register in Bermuda and operate through foreign branches established in jurisdictions outside of Bermuda (Foreign Branch/es). Foreign Branches operate through the main Bermuda based (re)insurer (Bermuda (Re)insurer) and do not have separate legal personality. (Re)insurance policies issued by Foreign Branches to local customers in the jurisdictions where they operate will generally cite the Bermuda (Re)insurer as the contracting party.
In these circumstances, the Bermuda (Re)insurer will be regulated by Bermuda law. The Foreign Branches, depending on the regulatory requirements of the jurisdictions in which they operate, will be subject to varying degrees of local regulation.
(Re)insurance policies issued by Foreign Branches to foreign customers are often governed by Bermuda law. When claims are submitted to Foreign Branches, conflict of laws issues may arise concerning the law that applies to the claims handling process and/or the substantive determination of coverage.
This article aims to highlight the conflict of laws questions which may arise in this context, many of which require careful analysis of the relevant facts and conflicting legal regimes involved, and do not always have straightforward answers. It is beyond the scope of this article to suggest comprehensive solutions to these issues, or to enumerate all legal conflicts which may arise in these circumstances. This article therefore simply draws attention to the different factors to consider in determining the outcome of such conflicts from a Bermuda law perspective.
Bermuda law: Jurisdiction and choice of law clauses
Bermuda’s commercial law generally follows the English common law, as amended by local statute and case law, and is subject to local public policy considerations. Therefore, the English common law principles of private international law, or conflict of laws, will generally be applied by the Bermuda Courts. Given that the English common law in this regard has been significantly amended over the past 30 years by the United Kingdom’s accession to the European Union conflict of laws treaties (pre-Brexit), reliance should be placed on the English common law principles, unamended by treaty and statute.
Jurisdiction: Claims submission and litigation
The place where policyholders are required to submit their claims will be determined by the specific policy wording. The policy may require that claims be submitted by (re)insureds to the Foreign Branch that issued the policy or to the Bermuda (Re)insurer’s headquarters.
In the event that a claim is subject to a litigious dispute – whether or not the courts of the country where the Foreign Branch is located have jurisdiction to hear the claim – will depend on the laws of that country.
The Rules of the Supreme Court (of Bermuda) 1985 prescribe the circumstances where a Bermuda based plaintiff may be given leave by the Court to serve originating process out of the jurisdiction (on a foreign defendant). A foreign plaintiff is not required to obtain leave of the Court to serve originating process on a Bermuda based defendant, however the plaintiff will need to instruct local counsel in Bermuda to commence the proceedings. The Bermuda Courts are likely to assert jurisdiction over proceedings commenced in Bermuda relating to a (re)insurance policy governed by Bermuda law and entered into with a Bermuda (Re)insurer.
Governing law clauses
It is common for (re)insurance policies issued by Bermuda (Re)insurers to contain choice of law clauses that select Bermuda law as the governing law of the contract. The effect of such clauses is that any issues of interpretation, validity, coverage and scope of the policy will be determined by Bermuda law.
Sources of potential conflicts/difficulties
The below examples highlight potential conflict of laws issues which may arise where a foreign policy holder:
- submits a claim to a Foreign Branch of a Bermuda (Re)insurer; or
- commences litigious proceedings against a Bermuda (Re)insurer arising from a policy issued by the Foreign Branch of that Bermuda (Re)insurer.
- In doing so, we suggest the Bermudian legal considerations which may be taken into account to resolve such conflicts. Each dispute will, however, always need to be assessed according to the particular facts of the case (as well as with reference to the particular foreign laws involved in the dispute).
References to foreign statutory provisions
Policies may include wording that refers to foreign legislative standards, when defining terms or concepts relevant to the risks covered. For example, a policy may exclude cover for certain offences defined by local financial regulation legislation. Where no equivalent statutory provision exists in Bermuda, or where the local equivalent of the offence is defined differently, this may give rise to questions of the scope of the exclusion. This may require the parties to adduce expert evidence regarding the foreign statutory offence. If no such evidence is provided, the Bermuda Courts are empowered to presume that the foreign law is the same as Bermuda law on the issue.
1.1 Third party claims
1.2 A third party may have a right to seek relief directly against the Bermuda (Re)insurer under the laws of country where the Foreign Branch is located or where the (re)insured is domiciled. For example, certain jurisdictions have legislation which permits an insured to sue a reinsurer directly, rather than proceeding exclusively against the insurer that the insured contracted with. Difficulties may arise in determining whether the third party has standing before the Bermuda Courts to take direct action against the Bermuda (Re)insurer if no corresponding right exists under Bermuda law. In order to argue its case for standing, the third party would need to adduce expert evidence on the applicable consider conflicting local law, as well as public policy considerations, in determining whether to recognise the third party’s rights.
Law of the place of performance
In the context of life insurance policies, depending on whether the policy includes a named beneficiary, and whether the life insured has died testate or intestate, several different legal regimes may need to be consulted in order to assess a claimant’s right to the proceeds of the policy. Depending on the circumstances of the case, there are four possible legal regimes which may be relevant:
- the law of domicile of the life insured;
- the law of domicile of the beneficiary/claimant;
- the law of the country where the Foreign Branch is located; and/or
- the law of the (re)insurance company (for present purposes, Bermuda).
Issues of this nature will need to be carefully considered with reference to the policy wording and different legal regimes involved.
Issues of substance vs. procedure
It is settled law that the law of procedure is governed by the jurisdiction in which proceedings are instituted. Where litigation arising from a Bermuda law governed policy issued by a Foreign Branch of a Bermuda (Re)insurer is commenced:
- In a foreign court, the procedural rules of that jurisdiction will apply, however the foreign court will be bound to apply substantive Bermuda law to the determination of the dispute. In such circumstances, it is common for expert evidence on Bermuda law to be introduced to assist the Court.
- In Bermuda, Bermuda procedural and substantive law will apply to the determination of the dispute.
In the former case, difficulties may arise where the boundaries between procedural and substantive law overlap. For example, it is generally settled that standing is a matter of procedural law, however considerations of a particular litigant’s rights to proceed against a defendant may raise issues relevant to both procedural and substantive law.
Bermuda (Re)insurers with Foreign Branches (and policyholders submitting claims to these entities) should be aware of the above issues when processing policy claims or considering litigation arising from (re)insurance policies linked to multiple jurisdictions. The legal questions raised in this context are often complex and do not always have straightforward answers. Advice should be sought from local counsel in the relevant jurisdictions concerned to ensure that such matters are dealt with in a manner that is fair to all parties involved.