AIG Insurance Hong Kong Limited v. Lynn McCullough and William McCullough

At a glance

Parties

AIG Insurance Hong Kong Limited (plaintiff) v. Lynn McCullough and William McCullough (defendants)

Case no.

HCMP 2216/2018; [2019] HKCFI 1649

Court

High Court of the Hong Kong SAR, Court of First Instance (Deputy High Court Judge Sir William Blair, in Chambers)

Forum and rules

Anti-suit injunction in support of HKIAC arbitration seated in Hong Kong (Clause 8.9 of a D&O policy; HKIAC Domestic Arbitration Rules)

Treaty

Contract clause: Clause 8.9 (disputes) and Clause 8.12 (Hong Kong governing law) of the insurance policy

Sector

Insurance (D&O liability)

Outcome

Anti-suit injunction continued, limited to the coverage issue; the defendants' applications to set aside the injunction and service out, or to stay the action, were refused (3 July 2019).

Amount

Policy limit US$5,000,000 plus a US$50,000 defence costs extension; underlying Miami judgment US$65.5 million. Costs of the applications to AIG on a nisi basis.

The dispute

On 15 July 2015 Mrs McCullough, a US cruise passenger, fell about 43 feet from a zip-line platform in St Lucia and was left permanently quadriplegic. The McCulloughs sued the operators in the US District Court for the Southern District of Florida (Miami). After an arbitration under a "high-low" agreement, they obtained a judgment of US$65.5 million against, among others, Mr von der Goltz, a director insured under a D&O policy that AIG had issued to Rain Forest Adventures. AIG had refused cover, apart from defence costs, under the bodily injury exclusion. The McCulloughs then added AIG to the Miami proceedings with a Florida common law "bad faith" tort claim. AIG obtained an ex parte anti-suit injunction in Hong Kong, arguing that coverage must be decided by HKIAC arbitration under the policy. The McCulloughs argued that they were non-parties bringing an independent tort claim. They also argued that the injunction was procedurally improper, that AIG had failed to make full and frank disclosure, that AIG had delayed, that Miami was the more convenient forum, and that AIG had submitted to the Miami court.

Key holdings

1. Characterisation is governed by Hong Kong law as the lex fori and turns on issues, not on how the claim is labelled. Under Florida law, coverage must be established before a bad faith claim can be brought. The coverage issue is contractual, so for that issue the Miami proceedings are in substance proceedings to enforce the insurance contract, even though the claim is framed in tort. ¶¶ 69–74
2. A party may not found a claim on rights arising out of a policy without also being bound by its dispute resolution provisions. Applying The Jay Bola, The Yusuf Cepnioglu and Dickson Valora, an anti-suit injunction will ordinarily be granted against such a remote party unless there are strong reasons to the contrary. ¶¶ 74, 100
3. Leave to serve out under the contractual gateway (Order 11, rule 1(1)(d)(iii)) was properly granted. AIG had shown a high degree of probability that the McCulloughs are bound by the dispute resolution provisions, and there was no material non-disclosure on that point. ¶ 75
4. The injunction is not discharged for procedural impropriety, even though the short notice given to Miami counsel is open to criticism. Time was genuinely pressing, and the judge would have re-granted the injunction in any event. The delay objection also fails, because the Miami proceedings had not materially progressed. ¶¶ 84, 89
5. Forum non conveniens does not arise where the right relied on is contractual. AIG's motion to compel arbitration in Miami and its appeal are not a submission to the Miami court or an election against anti-suit relief. The allocation clause (Clause 6.5) does not apply. ¶¶ 91–95, 99
6. The Miami decision of 10 May 2019 stayed that case until coverage is determined and is not inconsistent with the injunction. The injunction must be limited to the coverage issue, with wording to be agreed (including the Fourth Amended Complaint), and AIG is expected to take a proactive part in getting coverage determined. AIG has its costs on a nisi basis. ¶¶ 97, 102–105

Procedural history

1. 15 January 2016The McCulloughs sue the Rain Forest defendants in the Miami court.
2. 12 July 2018Judgment for US$65.5 million is entered on the arbitral award of 28 May 2018, which followed the high-low agreement.
3. 20 August 2018The Third Amended Complaint adds AIG as a defendant on a bad faith claim.
4. 29 November 2018AIG moves in the Miami court to compel arbitration in Hong Kong.
5. 18 December 2018DHCJ Simon Leung grants an ex parte anti-suit injunction and leave to serve out of the jurisdiction. DHCJ William Wong SC continues the injunction on 28 December 2018.
6. 23 April 2019Hearing before Deputy High Court Judge Blair.
7. 10 May 2019Judge Gayles in Miami refuses to compel arbitration and stays the case until coverage is determined. AIG files a notice of appeal on 29 May 2019.
8. 3 July 2019Decision: the injunction is continued, limited to the coverage issue; the defendants' applications are refused.

Tribunal, counsel and experts

Decided by

• William Blair Judge, High Court of the Hong Kong SAR, Court of First Instance

For the claimant

Kennedys Law LLP

For the respondent

Luk & Partners in association with Morgan, Lewis & Bockius

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Keywords

• anti-suit injunction
• HKIAC
• non-signatory
• remote party
• bad faith claim
• Florida law
• D&O insurance
• coverage issue
• bodily injury exclusion
• characterisation
• lex fori
• The Jay Bola
• Yusuf Cepnioglu
• Dickson Valora
• service out of jurisdiction
• forum non conveniens
• ex parte
• AIG

Summary generated with AI from the published documents — refer to the award for the authoritative text.