Facts
- Owens Corning arranged a worldwide property insurance program through its broker, Marsh & McLennan (Bermuda branch), seeking a single program rather than separate regional placements.
- XL offered coverage on express special conditions, including (i) arbitration in London under the Arbitration Act 1996 and (ii) policy interpretation under the internal laws of New York.
- Marsh & McLennan, acting for Owens Corning, accepted XL’s quotation; XL then issued a binder that did not restate the special conditions.
- XL later issued full policy wording stating the policy followed the underlying form but included XL’s London arbitration clause and the New York governing-law clause; no objection was raised for Owens Corning.
- Owens Corning later sued its insurers (including XL) in Delaware, seeking declarations of coverage for certain Y2K-related costs.
- XL applied in the English Commercial Court for an anti-suit injunction to restrain Owens Corning from continuing the Delaware proceedings and to require arbitration in London.
- Owens Corning argued that New York law governed the arbitration agreement and, under that law (including the FAA), the arbitration clause was not enforceable; therefore, the Delaware suit was not a contractual breach.
Issues
- Whether the insurance contract incorporated a binding London arbitration clause despite the binder’s failure to set it out.
- Whether the validity and effectiveness of the arbitration agreement were governed by New York law (as the policy’s governing law) or English law (as the law applicable to a London-seated arbitration and the requested anti-suit relief).
- Whether an asserted inability to enforce the clause under the FAA justified refusing an anti-suit injunction.
Decision
- The court held that the contract included a valid London arbitration clause because XL offered cover subject to that clause and Owens Corning’s agent accepted; the binder did not operate as a counter-offer.
- The court held that, for purposes of determining the existence/validity of the arbitration agreement and granting anti-suit relief in support of a London arbitration, English law applied.
- The court rejected the argument that the New York governing-law clause required treating the FAA as controlling on the arbitration clause’s enforceability in this context.
- The court granted an anti-suit injunction restraining Owens Corning from pursuing the Delaware proceedings against XL and requiring the dispute to proceed in London arbitration.
Legal Principles
- A quotation offering insurance cover on stated special conditions can form a concluded contract upon acceptance by the insured’s agent; later documentation that omits those conditions does not necessarily negate incorporation.
- A contractual choice of law for the substantive contract does not automatically determine the law governing the arbitration agreement; where arbitration is seated in London and relief is sought in England, English law may govern the arbitration agreement’s validity and the court’s supportive powers.
- English courts will generally restrain foreign proceedings brought in breach of an arbitration clause unless there is a strong reason to refuse relief; comity does not ordinarily displace enforcement of the parties’ agreement to arbitrate.
Conclusion
The Commercial Court enforced a London arbitration clause in an international insurance policy and restrained parallel Delaware litigation, holding that English law governed the arbitration agreement for purposes of anti-suit relief notwithstanding a New York governing-law clause for the substantive policy.