Equitas appealed the original July 2002 test case decision of the High Court (known as Scott v. Copenhagen Re) that the Kuwait Airlines and BA losses in 1990/91 should be treated as two events, following an unsuccessful attempt to find a market solution. The Court of Appeal has however now upheld that decision.

The "Kuwait spiral" has proven particularly problematic for the London market. A number of "spiral" reinsurers originally presented their Kuwait claims as a single loss and were paid on that basis.

Indeed, in 1995, Rix J. held in Kuwait Airways ("KAC") v. Kuwait Insurance Company (1996) that the seizure of KAC’s fleet and spares in August 1990 amounted to one "occurrence" for the purposes of a claim under KAC’s war risks cover.

However, in mid 1996, the House of Lords held in Hill v Mercantile & General (1996) that a cedent who had presented his Kuwait losses as one event to reinsurers, was not entitled to summary judgement on the basis that reinsurers had an arguable defence against such a treatment of the losses.

This created uncertainty and the market simply stopped paying as a result. A huge log-jam of claims developed with all the attendant problems and inevitably the run-off market was affected worst.

As a result, Equitas, which was set up in 1996 by Lloyd’s to handle all 1992 and prior year claims and as such, was central to any effort to break through the impasse, launched a test case in 2000 for a determination of the issue of how many events there were. It will be recalled that when the invading army of Saddam Hussein seized control of Kuwait Airport in 1990, it seized KAC’s fleet of 15 planes plus a quantity of spare parts and removed them to Iraq (for the most part) within the period 2 and 8 August. A British Airways Boeing 747, delayed on a flight to Madras, was on the runway when the army arrived and was seized. It however remained at the airport, eventually being destroyed by coalition fire in February 1991 during the bombing phase of "Operation Desert Storm".

Langley J held at first instance that the KAC aircraft could be aggregated with the spares to form one loss, but not with the BA loss, which was separate. He held that they arose from separate events; the KAC loss from the invasion of Kuwait and the BA loss from the war or the aircraft’s destruction in the war.

The Cedents criticised this view and asked the Court of Appeal to find that there need only be a relatively weak causal link imposed when assessing whether losses "arise out of " one event. On that basis, the invasion of Kuwait was the ultimate "cause" of all the losses. Further, it was suggested that the loss of the BA aircraft should relate back to the date of the invasion, when BA was deprived of possession, to create a unity of time for all the losses.

The Court of Appeal did not agree and upheld the BA loss as arising from a separate event.

Clarity is to be welcomed, but it comes at a price and not everyone will welcome a resumption of a spiral claim! Rumour has it that a further "LMX" test case is being considered in relation to Exxon Valdez, where another log-jam has developed; this time, the issue is when her underlying settlements made to Exxon can be recovered from excess of loss reinsurers, following the uncertainty generated by the decision in Commercial Union v. NRG Victory (1998). We shall see.