Insurance

• Author: International Law Group

J.P. Morgan Chase (formerly Chase Manhattan Bank) (Chase) lent substantial amounts of money to finance the making of films. It also took out policies of insurance with certain insurers, HIH Casualty and General Insurance Ltd. and others (claimants). Heath North America and Special Risks Ltd and Heath Insurance Broking Ltd. (collectively Heaths) brokered the policies as Chase's agent. Lord Hoffman sets forth the context of this dispute. "My Lords, this appeal is concerned with a new high risk, high premium insurance product used in financing film production. The risk insured against is that a party who has advanced money for the production of a film against the security of a defined share of future revenue will fail to recoup his advance within a specified period."

"It is high risk, first, because the commercial success of a film is notoriously difficult to predict and, secondly, because a good deal will turn upon how the lender's revenue entitlement is defined. If all expenses have first to be paid, the lender will be subject to unpredictable cost overruns. Fees, commissions, royalties, overriding payments to director and stars and similar skimmings may also deplete the lender's share of gross revenue. And in an industry where possession of the money tends to be nine-tenths of the law, much will depend upon who banks the money and keeps the books. It is a form of insurance in which the players need to have their wits about them." [ 25]

Each of the present policies contained a "truth-of-statement clause." The clauses provided, in relevant part that: "[6] the Insured [Chase] will not have any duty or obligation to make any representation, warranty or disclosure of any nature, express or implied (such duty and obligation being expressly waived by the insurers) and [7] shall have no liability of any nature to the insurers for any information provided by any other parties and [8] any such information provided by, or nondisclosure by, other parties . . . shall not be a ground or grounds for avoidance of the insurers' obligations under the Policy or the cancellation thereof." The policies also made English law applicable to contract-related disputes and chose the English court system as the proper forum.

There turned out to be substantial shortfalls in the revenue assigned to Chase by way of security and it made claims under the policies. The claimant-insurers, however, denied liability on the grounds of misrepresentation and non-disclosure...