AIG Insurance Hong Kong Ltd v McCullough & Anor  HKCFI 1649 comes on the back of Re Dickson Valora Group (Holdings) Co Ltd  HKCFI 482 – both cases acknowledge that the courts will ordinarily grant an anti- suit injunction to restrain a party to an arbitration agreement from suing in a non-contractual forum, unless there are good reasons not to do so.
Applying Dickson Valora (Industry Insights, April 2019 – “Arbitration and Non-Parties”), in McCullough the court held that under Hong Kong law a party was not entitled to found a claim on rights arising out of an insurance policy without also being bound by the dispute resolution provisions in the policy. As the court explained, the underlying rationale for this is that the dispute resolution provisions are an essential part of the basis upon which coverage arises under the policy and a party or counter-party seeking to enforce the policy (in order to benefit from it) cannot do so free of the contractual dispute resolution provisions. Such reasoning is important to the basis upon which insurance business is conducted.
In McCullough the issue arose in a rather novel way. The first defendant, while on holiday in the Eastern Caribbean, suffered a serious injury during an excursion organised by the insured. The defendants commenced a tort claim (based on alleged “bad faith”) against the plaintiff insurer in the US District Court in Miami after the insurer declined to cover the insured party save for defence costs.
The principal issue for determination was whether the defendants’ claim was in substance a claim to enforce the policy or an independent claim in tort. In the former case, the claim fell to be determined according to the policy and was subject to the dispute resolution provisions which required arbitration in Hong Kong – in that event, the plaintiff insurer was entitled to injunctive relief to restrain the defendants from commencing proceedings overseas. In the latter case (an independent claim in tort), the defendants were entitled to commence the proceedings in Miami. The proper characterisation of this issue fell to be determined according to Hong Kong law.
Given that the defendants’ tort claim against the plaintiff insurer under Florida law was dependent on a resolution of the coverage issue in favour of the insured (and described as “a pre-condition”), the court held that the Miami proceedings were in substance proceedings to enforce an obligation created by the contract of insurance. While the defendants’ claim was framed in tort, the principal issue for determination was in substance a contractual one – therefore, the plaintiff insurer was entitled to have it determined by arbitration in Hong Kong.
The court’s grant of an anti-suit injunction in these novel circumstances in consistent with other recent cases in which parties and non-parties that seek to enforce rights under commercial contracts have been bound by agreed dispute resolution mechanisms – whether they be litigation or arbitration in Hong Kong (Dickson Valora). This principle is wide enough to extend to disputes as to whether a party is insured at all under an insurance policy (XL Insurance Company SE v Little  EWHC 1284 (Comm); and US District Court, S.D., New York, 18 November 2019).
The outcome in McCullough and Dickson Valora is also consistent with Hong Kong’s pro-arbitration credentials. It is important to note that the grant of anti-suit injunctive relief, in these circumstances, gives effect to valid agreements to arbitrate in a particular forum and recognises the primacy of contractual terms – such relief is not an exercise of supremacy by the Hong Kong courts over the courts or tribunals of another jurisdiction. However, anyone that seeks to challenge an arbitration agreement in an insurance contract has a high threshold to overcome.