Two different views on the meaning of the term "100 per cent" in an energy facultative reinsurance policy were examined by the Commercial Court.

The judge confirmed the traditional view held in the energy insurance market according to which the term "100 per cent" (whether contained in the original insurance or reinsurance policy) referred to the total insured value of the original asset where the original insured held only a partial interest in that asset.

What does "100 per cent" mean? The Commercial Court was asked to consider this question in the context of a notation on an energy facultative reinsurance policy. The answer, it turns out, is that 100 per cent has a specific and generally accepted meaning in the energy insurance market.

In Gard Marine v Lloyd Tunnicliffe (on his behalf & on behalf of all other members of Lloyd's Syndicate 780 for the 2005 year) & Others (2011), the claimant, Gard had subscribed a 12.5 per cent line on an energy package policy taken out by Devon Energy Corporation, which was subject to a limit on cover for named windstorm in the Gulf of Mexico of US$400 million (for interest) any one accident or occurrence, reflecting the fact that Devon had interests of varying percentages in a number of Gulf of Mexico wells and platforms.

Gard reinsured its exposure under the Devon package policy with various Lloyd's syndicates, including Advent, the defendants in this case. The reinsurance policy expressed the sum insured in the following terms: "To pay up to the Original Package Policy limits/amounts/sums insured excess of USD250m (100 per cent) any one occurrence of losses to the original placement."

Gard settled certain losses under the original policy and made an onwards claim under the reinsurance. When the reinsurance claim came to be adjusted, a dispute arose as to the meaning of the reference to 100 per cent in the reinsurance wording. Gard contended that it meant that the excess point is based on the total insured value of the original lost asset and not just Devon's interest in the original lost asset, so that each indemnity paid by Gard to Devon has to be grossed up or scaled proportionately to Devon's interest in the asset.

Advent took a different view, arguing that the reference to 100 per cent was to be construed as referring to losses of US$250 million to the full market of insurers on the Original Policy, not just Gard's 12.5 per cent participation.

The Commercial Court (Steel J) accepted Gard's contention that, in the market for insurance of offshore energy risks, the notation 100 per cent has a specialised and recognised meaning when used to qualify limits or deductibles, irrespective whether used in an original policy or policy of reinsurance: it denotes that the limit, deductible or excess point scales for interest, so that the excess point in the Sum Insured clause in this reinsurance policy was based on the total insured value of the original lost asset and not Devon's interest in that original lost asset.

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