COURT FILE NO.: CV-19-00632073-00CL DATE: 20230921 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

BETWEEN:

WIENER STÄDTISCHE VERSICHERUNG AG Vienna Insurance Group Plaintiff – and – INFRASSURE LTD. Defendant

Counsel: William McNamara, Chris Hunter and Morag McGreevey for the Plaintiff Robert B. Bell, Shannon M. Gaudet, Emily Y. Fan and Lucy Sun, for the Defendant

HEARD: May 25-26, 29-31, June 1-2, 5-6, 8-9, 12-13, August 15-16, 2023

REASONS FOR JUDGMENT

Conway J.

Introduction

[1] On February 6, 2011, a failure occurred in the north-east tap block in flash furnace 2 at the Vale (Canada) Limited (“Vale”) smelter in Sudbury, Ontario. That failure led to a run-out of molten matte from one of the tap holes in the furnace.

[2] The building was immediately evacuated and the Ontario Ministry of Labour issued a stop work order. Over the following months, Vale did a partial rebuild of the furnace, which came back into operation in June 2011.

[3] Vale made a claim for business interruption losses under the insurance policy with its lead insurer Zurich Insurance Company Ltd. (“Zurich”). In December 2014, Vale and Zurich settled the claim for $140 million (the “Settlement”). [1]

[4] The plaintiff Wiener Städtische Versicherung AG Vienna Insurance Group (“VIG”) was one of Zurich’s reinsurers. VIG was a fronting reinsurer for the defendant Infrassure Ltd. (“Infrassure”) pursuant to a retrocession agreement between VIG and Infrassure (the “Retrocession Agreement”). VIG retained a small portion of the risk for regulatory purposes and ceded the remaining 99.89% of the risk to Infrassure under the Retrocession Agreement.

[5] In March 2015, VIG paid $8,433,643.78 to Zurich representing VIG’s portion of the Settlement. In this action, VIG seeks to recover 99.89% of those Settlement funds from Infrassure pursuant to the retrocession agreement. VIG further seeks to recover its payment of $539,116.39 in loss adjustment costs.

[6] Infrassure denies liability for VIG’s claim. It says that it was not contractually required to follow the Settlement entered into by Zurich and that in any event, it is relieved from following the Settlement.

[7] For the reasons that follow, I grant judgment in favour of VIG.

Evidence at Trial

[8] The record before this Court consisted of a substantial amount of documentary evidence and testimony from 19 witnesses over the course of 13 days of trial.

[9] The plaintiff VIG called 13 fact witnesses and one expert witness. VIG’s fact witnesses worked for Vale, VIG, Zurich, Infrassure, Cunningham Lindsey (the insurance adjuster for Zurich), and the forensic or technical advisors to Zurich and the reinsurers at the time of the events. VIG called one expert witness on Swiss law.

[10] The defendant Infrassure called one fact witness and four expert witnesses. Infrassure’s fact witness was William Bachmann, its Chief Executive Officer. Infrassure called an expert on refractory failures, a mechanical and control systems engineer, a forensic accountant, and an expert on Swiss law.

Factual Background

[11] The following is an overview of the factual background in this litigation.

The Vale Operations in Sudbury and the Run-Out Incident

[12] In Vale’s operations in Sudbury, nickel and copper ore are mined from several mines and transported to the Clarabelle Mill, the concentrator. The ore is then transported to two flash furnaces (“Flash Furnace 1” and “Flash Furnace 2”) where the minerals are smelted. The matte and slag by-products are removed from the flash furnaces and the matte is sent for further treatment in converters. From there, the nickel oxide is shipped for further refining to Vale’s refineries in Copper Cliff, Port Colborne, Clydach (Wales), and the Utility Nickel Plants.

[13] The run-out incident occurred on February 6, 2011. As noted, there was a failure in the north-east tap block of Flash Furnace 2. Matte and slag leaked out of the tap hole. Paul Kenny was Manager of Process Technology (Pyrometallurgy) for Vale in 2011. He accessed the building in which the furnace is located within hours of the run-out. He testified the molten matte flowing out of Flash Furnace 2 had cut the lines feeding water into the copper coolers, causing steam explosions. There were 300 to 400 tons of molten material in Flash Furnace 2 at the time of the run-out.

[14] According to Dan Legrand, the General Manager of Process Technology for Vale’s North Atlantic Operations at the time, the loss of Flash Furnace 2 meant that Vale lost half of its production capacity. He testified about the steps Vale took to mitigate the loss, primarily by increasing the target grade of nickel concentrate used in Flash Furnace 1. He further testified about the various repair options that Vale considered for Flash Furnace 2. In particular, he testified about the safety concerns that were the driving force in Vale’s decision to do a partial rebuild of the four walls and roof of Flash Furnace 2 instead of a localized repair to the tap holes only.

Overview of the Vale Insurance Program and Structure

[15] Vale S.A. is a Brazilian mining company. Vale is one of its Canadian affiliates. Vale S.A. had a global insurance program in place for its worldwide operations that was put into place by the brokerage firm Bowring Marsh (“Marsh”).

[16] Zurich, a Swiss insurance company, issued Material Damage and Business Interruption Policy (#PR80’796C) (the “Master Policy”) as part of the Vale S.A. global program for the period May 5, 2010 to May 5, 2011. Zurich also issued Material Damage and Business Interruption Policy (#8838345) (the “Local Policy”) to Vale for the same period.

[17] VIG is an Austrian company and a member of the Vienna Insurance Group. VIG was a direct reinsurer to Zurich pursuant to a reinsurance agreement effective May 6, 2010 (the “Reinsurance Agreement”). As described below, VIG was a fronting reinsurer for Infrassure, which entered into the Retrocession Agreement with VIG effective May 6, 2010.

[18] Infrassure is a Swiss company with its head office in Zurich. As noted, Mr. Bachmann is the Chief Executive Officer of Infrassure. He testified that in 2014, Infrassure went into run off, the insurance equivalent of insolvency. It ceased underwriting new claims and is running off its existing policies before the business can be wound down.

The Vale Claim

[19] After the run-out incident on February 6, 2011, the insurers and reinsurers became involved immediately. Zurich assigned Michael Alwyn of Cunningham Lindsey as the insurance adjuster to investigate the loss. The reinsurers created a steering group (the “Steering Group”) to coordinate the investigation and adjustment of the Vale claim for the reinsurance market. Infrassure was a member of the Steering Group from the outset.

[20] Vale, Zurich, and the Steering Group each retained numerous advisors and professionals in the course of investigating and assessing the claim, including adjusters, forensic accountants, lawyers, and technical experts. In particular, Zurich retained three furnace experts during the course of the investigation. The reinsurers did not retain any technical experts apart from those retained by Zurich.

[21] Vale made a business interruption claim under the Local Policy on January 17, 2012. The first claim was for $484 million, net of deductible, and was based on a gross earnings calculation.

[22] The claim progressed over the next three years. In July 2013, Vale revised its claim to seek losses on a gross profits basis. The amount of that claim was $254 million net of deductible and was based on a 26-week period of business interruption. Zurich and the reinsurers continued to investigate the claim.

[23] In July and September 2014, there were two hot tub meetings between Vale and Zurich and their technical experts. According to Mr. Alwyn, at that point the insurers had an “awakening” when they more fully understood Vale’s position that the water leakage from the coolers resulted in significant hydration of the furnace refractory.

[24] Zurich retained an Australian mineral process firm named Mineralurgy Pty Ltd. (“Mineralurgy”) to assess the technical aspects of Vale’s claim. Among other things, Mineralurgy analyzed the claims made by Vale for gas handling delays and mill loss costs from a technical perspective. Mineralurgy issued its reports in November 2014.

[25] In November 2014, the forensic accountants for Zurich and the reinsurers, LBC International Investigative Accounting, Inc. (“LBC”) and Matson Driscoll & Damico Ltd. (“MDD”), prepared a slide deck estimating the Vale losses at between $69.9 million for a 10-week repair excluding oxidation (also referred to as gas handling delays, as described below) and $227 million for a 26-week rebuild including oxidation.

[26] Both the Mineralurgy report and the MDD/LBC slide deck were presented to Zurich and the reinsurers at a meeting in London on November 25, 2014.

The December 2014 Settlement

[27] By the fall of 2014, Vale was not willing to wait any longer. Michael Butler was the insurance manager for Vale’s base metals division at the time. He testified that the insurers had requested numerous extensions and had made many information requests but had not made a lot of progress. Mr. Alwyn testified that Vale had made it clear that if the claim was not resolved by year end, Vale was going to initiate litigation. Meetings were scheduled between Vale and the insurers on December 11 and 12, 2014.

[28] On December 1, 2014, the forensic accounting experts for both sides exchanged reports. Vale’s December 1, 2014 revised claim was for $246 million net of deductible, down approximately $8.5 million from its previous claim in July 2013. It was based on a 20-week period of business interruption and included $100 million for oxidation and mill losses.

[29] MDD and LBC submitted a joint assessment of the claim that they valued at $69.9 million (the “Joint Report”). The Joint Report was based on a 10-week period and assumed no coverage for oxidation and mill losses. Their presentation slide included various other scenarios. At 14 weeks, the estimate would have been $86.4 million excluding oxidation and $135 million including oxidation. At 15 weeks, it would have been $96.4 million and $148.4 million, respectively.

[30] There were two pre-meetings of the insurers and their advisors and experts before the December 11 and 12 meetings. Mr. Bachmann attended the meetings on behalf of Infrassure.

[31] At the December 10, 2014 pre-meeting involving the forensic accountants, technical experts, and Zurich, MDD prepared a spreadsheet with a week-by-week breakdown of the amounts that Vale had claimed. This spreadsheet showed that at 14 weeks, Vale would have put the loss net of deductible at $169.9 million excluding oxidation and $241.7 million including oxidation. At 15 weeks, the numbers would increase to $194.7 million and $272 million, respectively.

[32] MDD prepared another spreadsheet on the same day that broke down Vale’s claim but with all disputed issues corrected in Zurich and the reinsurers’ favour. According to this spreadsheet, at 14 weeks, the loss net of deductible was $92.2 million excluding oxidation, and $133.7 million including oxidation (that MDD adjusted down to $47.3 million). At 15 weeks, the numbers were $101.1 million and $145.5 million, respectively.

[33] On December 11, 2014, Vale, Zurich, and certain of the reinsurers, including Infrassure, signed an Agreement to Negotiate with respect to the upcoming settlement meeting (the “Agreement to Negotiate”).

[34] On the first day of the settlement meeting, December 11, 2014, each side made presentations. LBC and MDD made a joint presentation that detailed how they would apply a series of adjustments based on the disputed items to the $246 million number claimed by Vale. According to the presentation slides, at 20 weeks, the loss net of deductible would be $102 million excluding oxidation and $161.3 million including oxidation.

[35] The second day involved negotiations conducted by Mr. Butler on behalf of Vale and Jose Mogartoff (Claims Manager for Zurich’s Energy Group) on behalf of Zurich and the reinsurers.

[36] On December 12, 2014, Vale and Zurich reached an agreement to resolve the claim for $140 million, net of deductible but gross of a prior advance payment of $30 million. They signed a Settlement Agreement and Release on December 23 and 24, 2014 (the “Settlement Agreement”).

Infrassure Declines to Participate in the Settlement

[37] When it became clear that a settlement was about to be reached on December 12, 2014, Mr. Bachmann advised that Infrassure did not agree with the settlement. He left the meeting.

[38] Once the Settlement was reached, Mr. Mogartoff from Zurich wrote to the Steering Group to confirm the settlement. Kevin Hutcheon, a representative of another reinsurer and the point person for the Steering Group, responded to confirm his support for the Settlement.

[39] On December 12, 2014, Mr. Bachmann wrote an email to Zurich and representatives of the Steering Group to advise that Infrassure did not agree to the Settlement and reserved its position. Mr. Mogartoff responded two days later and explained that all of the other reinsurers had agreed to pay their respective shares of the Settlement. Mr. Mogartoff advised Infrassure that legally it was not entitled to decline participation in the Settlement.

[40] Josef Aigner, Head of Corporate Business of VIG, emailed Mr. Bachmann on December 22, 2014 seeking clarification of Infrassure’s reasons for refusing to participate in the Settlement. Mr. Bachmann sent Dr. Aigner the Joint Report that estimated Vale’s losses at approximately $70 million and raised various issues with respect to Vale’s claim. Dr. Aigner and Mr. Bachmann discussed these issues by telephone. On January 17, 2014, Dr. Aigner wrote to Mr. Bachmann to say he did not understand Mr. Bachmann’s calculations or how he got the figure down to $70 million.

[41] Zurich continued to press VIG for payment. It demanded payment by January 30, 2015. On January 27, 2015, Dr. Aigner responded to Mr. Mogartoff and said that VIG had discussed the issue with Mr. Bachmann, who had “outlined his position clearly and convincingly”. VIG said that for obvious reasons, VIG would not take a position that was different from Infrassure’s. On cross-examination, Dr. Aigner testified that his wording in that email was one of the worst mistakes of his career and that he was just trying to buy time from Zurich while he obtained answers from Mr. Bachmann.

[42] On January 30, 2015, Dr. Aigner again asked Mr. Bachmann for an explanation. He said that it was hard for him to connect Mr. Bachmann’s points to figures that finally resulted in $70 million. Mr. Bachmann responded that the situation was at an impasse and that he was tied up with some large administrative headaches at the time. On cross-examination, Mr. Bachmann admitted that he never provided a written explanation to VIG.

[43] On February 11, 2015, Mr. Mogartoff wrote to Dr. Aigner. He referred to the clauses in the Reinsurance Agreement that required VIG to follow the Settlement and told him to pay VIG’s share to avoid unnecessary legal fees. Dr. Aigner looked to Mr. Bachmann and advised him that if Zurich initiated arbitration against VIG, VIG would have to do the same with Infrassure. He testified that he had a call with Mr. Bachmann to seek a proposal to reach a solution. He did not receive a proposal during the call. [2]

[44] On March 23, 2015, VIG paid Zurich $8,442,931.00. VIG had previously paid $409,924.81 in loss adjuster fees. It paid a further $126,781.96 in additional loss adjuster fees in April 2016.

[45] VIG initiated arbitration proceedings against Infrassure in Switzerland. There was an issue with respect to the jurisdiction of the arbitral tribunal. On December 9, 2016, pending determination of the jurisdiction issue, VIG issued the statement of claim in this Court. Ultimately, the Swiss Federal Supreme Court held that the Swiss tribunal did not have jurisdiction to hear the VIG–Infrassure dispute. The action then proceeded in this Court.

Issue #1: Is Infrassure Contractually Bound to Follow the Settlement?

[46] The first issue in this case is whether Infrassure is contractually required to follow the Settlement under the terms of the Retrocession Agreement.

Background to the Retrocession Agreement

[47] In the spring of 2010, Vale was putting the Vale Global Program into place. Nicholas Bailey was Infrassure’s Regional Head of the Construction, Mining and Metals team at the time. He testified that Infrassure wanted to participate in the Vale Global Program. He and his colleague Rogerio Batista worked together on negotiating Infrassure’s participation in the program.

[48] On April 7, 2010, Mr. Batista filled out an internal strategy form that indicated under “contractual issues/considerations” that Infrassure would seek to be a “claims agreement party”.

[49] Infrassure first sought to participate as a direct reinsurer of the Vale Global Program. Marsh provided Infrassure with its standard London market slip to sign. The standard slip consisted of two documents — a 15-page Risk Details Form (“Risk Details Form”) and a 7-page Contract Administration and Advisory Form. The latter form consisted of a subscription agreement (“Subscription Agreement”), a Fiscal and Regulatory section, and a Broker and Remuneration and Deductions section.

[50] The Risk Details Form stated, as a condition, the following clause:

This reinsurance will follow the terms and conditions of the Original polic(ies) in all respects and will follow the settlements of the Original policy(ies), in each case save insofar as any express term on this reinsurance provides otherwise.

[51] On April 23, 2010, Mr. Bailey and Mr. Batista executed and affixed Infrassure’s stamp to the Risk Details Form. They returned it to Marsh. The stamp read:

Notwithstanding slip conditions, all terms, changes, endorsements, policy wording and claims payments to be agreed by Infrassure.

[52] Mr. Bailey testified that Marsh immediately rejected the inclusion of the words “Notwithstanding slip conditions, all terms, changes, endorsements, policy wording and claims payments to be agreed by Infrassure” as they contradicted the follow the settlements clause in the slip. He testified that he understood that deleting that language was required if Infrassure wanted to participate in the Vale Global Program. Later that day, Infrassure stamped a revised slip and deleted the specific language that Marsh had rejected.

[53] Zurich was subsequently identified as the lead insurer for the Vale program. Zurich had its own form for reinsurers to sign. Sections 3 and 5.2 of the Zurich conditions expressly required a reinsurer to follow Zurich’s settlements. Infrassure signed and stamped these conditions on April 29, 2010. Nonetheless, Zurich rejected Infrassure as a reinsurer because, according to Mr. Bailey’s understanding, Zurich was uncomfortable with Infrassure’s security and capacity.

[54] Mr. Bailey testified that Infrassure then decided to participate another way, through a retrocession instead of as a direct reinsurer to Zurich. Infrassure asked Marsh to arrange for VIG to serve as a fronting reinsurer so that Infrassure could participate in the program as a retrocessionaire. Once Infrasssure signed the Retrocession Agreement with VIG, VIG signed the Reinsurance Agreement with Zurich. The attachment point under the Reinsurance Agreement (and the Retrocession Agreement) was USD$50 million. VIG’s (and Infrassure’s) reinsurance was 9.89% of a layer above this attachment point.

[55] Infrassure signed and stamped the Marsh slip for the Retrocession Agreement on May 4, 2010. The slip identified VIG as the reinsured and Infrassure as the reinsurer. The slip contained the same follow the settlements clause as in the April 23 slip. Infrassure stamped the slip on the Risk Details Form as follows: [3]

Notwithstanding slip conditions, all terms, changes, endorsements, policy wording and claims payments to be agreed by Infrassure.

[56] Mr. Bachmann testified about Infrassure’s specialized niche in the reinsurance market. He explained that because its underwriters also handled claims under its policies, Infrassure’s business practice was to always seek claims agreement in its reinsurance arrangements, which would entitle Infrassure to decide on settlements for its own share. He said that any arrangement in which Infrassure did not have claims agreement had to be approved in advance by himself or the Chief Underwriting Officer of Infrassure.

[57] Mr. Bachmann testified about Infrassure’s stamp. He said that the stamp was a relic and that brokers felt that stamp wording could be unclear and complicated for internal compliance purposes. To work around the issues with the stamp, Marsh and Infrassure agreed that Infrassure would be a slip leader for its share on the Subscription Agreement for the risks it placed. This allowed Infrassure to have the rights it required contained in the Subscription Agreement, including claims agreement. As a slip leader, Infrassure would be designated a claims agreement party under Marsh’s standard form.

[58] Mr. Bachmann admits that he was not involved in the negotiation of the Retrocession Agreement and was not aware of the background described by Mr. Bailey. He first became involved with the Vale claim and the Retrocession Agreement in August 2014, after Infrassure went into run off in July 2014. His testimony was based on the customary practices and strategy followed at Infrassure.

[59] Mr. Bailey agreed that Infrassure sought to obtain claims approval for the risks that it underwrote, wherever possible. He also agreed that claims approval could be contained in the slip even if other wording in the stamp were crossed out. However, he testified that in this case, Infrassure agreed to strike out the language in its stamp as its participation in the Vale Global Program would otherwise not have been possible.

Principles of Contract Interpretation

[60] The Retrocession Agreement is governed by Ontario law. The principles of contract interpretation applicable to insurance contracts are generally the same as those applicable to commercial contracts: Frenette v. Metropolitan Life Insurance Co, [1992] 1 SCR 647, at p. 667.

[61] The goal of contract interpretation is to give effect to the intentions of the parties at the time the contract was entered into: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 SCR 494, at para. 45. The court must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances (or known to the parties at the time of formation of the contract): Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633, at para. 47.

[62] The factual matrix against which the contract is to be interpreted consists of objective evidence of the background facts at the time of execution of the contract such as the genesis and aim of the transaction, its background and context, and the market in which the parties were operating. Such evidence deepens the court’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The factual matrix does not include a contracting party’s subjective intentions. See Sattva, at paras. 47 and 57–58.

[63] Words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract and in light of its purpose and commercial context: Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 SCR 69, at para. 64. If there are apparent inconsistencies between different terms of a contract, the court should attempt to find an interpretation which can reasonably give meaning to each of the terms in question. Only if an interpretation giving reasonable consistency to the terms in question cannot be found will the court rule one clause or the other ineffective: BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 SCR 12, at p. 24.

[64] A contract should be interpreted in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity: Ventas, Inc v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at paras. 24 and 45.

Analysis

[65] I start with the wording and structure of the Retrocession Agreement.

[66] On page 2 of the Risk Details Form, the first condition reads (my underlining added):

This reinsurance will follow the terms and conditions of the Original polic(ies) in all respects and will follow the settlements of the Original policy(ies), in each case save insofar as any express term on this reinsurance provides otherwise.

[67] There is no dispute that the Original policy at issue in this case is the Local Policy between Zurich and Vale.

[68] The language on page 2 of the Risk Details Form is clear. Infrassure must follow the settlements of the Local Policy unless “any express term on this reinsurance provides otherwise”.

[69] On page 14 of 15 in the Risk Details Form, Infrassure applied its stamp. It deleted the wording “Notwithstanding slip conditions, all terms, changes, endorsements, policy wording and claims payments to be agreed by Infrassure.” In my view, that deleted language may well have been interpreted to “provide otherwise” and override the follow the settlements clause. However, Infrassure struck that language from its stamp.

[70] I find that this deletion was deliberate and significant. As noted above, Infrassure had originally kept the language in its stamp when it offered to be a direct reinsurer on the Vale Global Program on April 23, 2010. Infrassure deleted that language after Marsh rejected the stamp with the claims agreement language in it. This can be seen both in the resubmitted April 23, 2010 slip and in the Retrocession Agreement itself.

[71] Infrassure submits that it nonetheless had the right to approve any payment of claims under the Retrocession Agreement and was not required to follow any settlements under the Local Policy. Its argument is based on the language in the Subscription Agreement that is included in the Contracts Administration and Advisory Form. Infrassure says that in the stamp on page 14 of the Risk Details Form, it crossed out the words “Subscription Agreement is not applicable to Infrassure”. Accordingly, it submits that the Subscription Agreement is applicable to Infrassure.

[72] Infrassure’s position is that in the Subscription Agreement, Infrassure’s name is filled in (and stamped with Infrassure’s stamp) as the “Slip Leader”. The Slip Leader is listed as one of the “Claims Agreement Parties”. Infrassure then points to language in a separate “Basis of Claims Agreement” section of the Subscription Agreement. The relevant sections are:

The Claims Agreement Parties shall manage the claims in accordance with the terms and conditions of the Original Policy and this Agreement.

In the event of a conflict between the Claims Agreement Parties, the decision of the majority of the Claims Agreement Parties shall be binding on all Claims Agreement Parties.

In the event of a conflict between the Claims Agreement Parties and the Non-Bureau/Overseas (Re)insurers, the decision of the Claims Agreement Parties shall be binding on the Non-Bureau/Overseas (Re)insurers.

[73] I accept Infrassure’s submission that the effect of crossing out the line “Subscription Agreement is not applicable to Infrassure” is to make the Subscription Agreement apply. It is part of the Retrocession Agreement.

[74] However, I do not accept Infrassure’s submission that the wording in the Subscription Agreement confers claims approval rights on Infrassure and overrides the follow the settlements clause. First, the language of the Subscription Agreement does not say that. It does not define “Claims Agreement Parties,” nor does it set out what rights attach to that designation. Infrassure tries to tie it into the language of “Basis of Claims Agreement,” but that language only speaks to how claims are to be “managed” among multiple reinsurers. [4]

[75] The term Claims Agreement Parties is general enough, in my view, that it can refer to anything along the continuum of accepting, investigating, and processing a claim under the Retrocession Agreement. The language does not purport to give rights that would override a clear obligation in the Risk Details Form to follow settlements under the Local Policy between Zurich and Vale.

[76] There was evidence at trial from Dr. Aigner, Mr. Bailey, and Mr. Bachmann on their subjective understanding of the term claims agreement party. In my view, that testimony is not helpful to the analysis. Their evidence was not consistent or clear on exactly what the parameters of a claims agreement party are or what rights attach to that term. Further, whatever their individual understandings may be, the Risk Details Form requires that any exception to the follow the settlements clause be an “express” term. The mere use of the term Claims Agreement Parties in the Subscription Agreement, without more, does not rise to the level of an express term.

[77] Infrassure submits that VIG’s interpretation would ignore the purpose of including the Subscription Agreement in the Retrocession Agreement. Infrassure’s position is that the only reason the Subscription Agreement was included in the Marsh slip was to give Infrassure claims approval rights and relieve it from following any settlements that it did not approve, in accordance with its arrangement with Marsh.

[78] I reject that submission. The only evidence on that issue came from Mr. Bachmann — there was no evidence from Marsh to that effect. Further, Infrassure included the Subscription Agreement when it was first offering to be a direct reinsurer to Zurich. At that time, Infrassure had included the language “Notwithstanding slip conditions, all terms, changes, endorsements, policy wording and claims payments to be agreed by Infrassure” in its stamp. That wording would have been superfluous if the Subscription Agreement had the contractual effect that Infrassure now says it has. Moreover, and critically, Mr. Bailey’s evidence is that Marsh rejected that language in the stamp and Infrassure took it out. [5] I simply do not accept that after deleting that language once it was rejected by Marsh, Infrassure retained claims approval rights through the Subscription Agreement.

[79] This case is distinguishable from the case of Insurance Co of Africa v. Scor (UK) Reinsurance Co Ltd, [1985] 1 Lloyd’s Rep. 312 (C.A. (Civ. Div.)). In that case, there was a follow the settlements clause and a claims cooperation clause. The latter explicitly said that settlements would not be made without the approval of reinsurers. The majority of the Court held, at pp. 331 and 334, that the effect of those two clauses was to require the reinsurers to follow any settlement that they had approved. In the case at bar, the language of the Subscription Agreement does not explicitly require Infrassure’s approval to any settlement under the Local Policy between Vale and Zurich.

[80] Infrassure submits that the terms of the Agreement to Negotiate and the Settlement Agreement support its interpretation of the Retrocession Agreement. I disagree. The Agreement to Negotiate was signed in December 2014 by Vale, Zurich, and certain of the reinsurers and set out the terms on which the negotiations were to proceed. Infrassure relies on the language that permits any party to withdraw from the negotiations. In my view, that agreement merely goes to the conduct of the negotiations. It does not purport to define or alter the legal rights of the parties under their various insurance and reinsurance agreements.

[81] With respect to the Settlement Agreement, Infrassure relies on Appendix “A” that refers to an outstanding and unresolved issue as to whether Zurich was responsible to pay to Vale the proportionate amount of the Settlement represented by VIG/Infrassure’s share. Zurich alleged that there was a “side agreement” between Vale, Marsh, VIG, Infrassure, and Zurich that would have relieved it from paying the VIG/Infrassure share. The Settlement Agreement contained a mechanism for Zurich to satisfy Vale about the side agreement, failing which Zurich had to pay the VIG/Infrassure share. Ultimately, as Mr. Mogartoff testified, no side agreement was located.

[82] The Settlement Agreement does not support Infrassure’s interpretation. It simply reflected that there was a dispute between Vale and Zurich as to whether a side agreement existed that would have relieved Zurich from paying the VIG/Infrassure share. It was also consistent with the fact that Mr. Bachmann had walked out of the negotiations and asserted that he was not required to contribute to the Settlement. It did not purport to define or alter the legal rights of the parties under the various agreements.

[83] In summary, I accept VIG’s interpretation of the Retrocession Agreement. Given the explicit language of the follow the settlements clause, the requirement that a contrary term be “express,” the fact that Infrassure deleted express language in its stamp that would otherwise have given it approval rights, and the lack of clear wording in the Subscription Agreement, I find that the follow the settlements clause applies.

[84] Pursuant to the terms of the Retrocession Agreement, Infrassure is required to follow the Settlement of the Vale claim under the Local Policy.

Issue #2 – Is Infrassure Relieved from Following the Settlement?

[85] VIG submits that Infrassure’s obligation to follow the settlement in the Retrocession Agreement is an unqualified one and there is no ability of Infrassure to challenge the settlement on any basis. I do not accept that submission.

[86] While there appears to be no case law in Canada that has interpreted a follow the settlements clause in a reinsurance contract, the U.K. cases provide some guidance. According to Hill v. Mercantile & General Reinsurance Co Plc, [1996] C.L.C. 1247 (H.L. (Eng.)), at p. 1258, the effect of a follow the settlements clause is ultimately an issue of contract interpretation.

[87] In Assicurazioni Generali SPA v. CGU International Insurance Plc, [2004] EWCA Civ 429, [2004] 2 C.L.C. 122, the insurance policy contained an unqualified follow the settlements clause as in the case at bar. [6] Citing Scor, the Court held, at para. 1, that a reinsurer was required to follow the settlements under the terms of that unqualified clause provided that:

• the claim settled by the insurer must fall within coverage “as a matter of law”; and
• the settlement must have been entered into in good faith and through proper and businesslike steps.

[88] A claim falls within coverage as a matter of law if it is covered or is “arguably” covered under the policy: John Birds, Ben Lynch & Simon Milnes, eds, MacGillivray on Insurance Law, 15th ed (London, UK: Sweet & Maxwell, 2022), at ch. 33. The settling insurer does not have to prove that if the insured’s claim was decided by a court, the insured would have succeeded: see Generali, at para. 16, citing Hiscox v. Outhwaite (No. 3), [1991] 2 Lloyd’s Rep. 524, at p. 530:

The reinsurer may well be bound to follow the insurer’s settlement of a claim which arguably, as a matter of law, is within the scope of the original insurance, regardless of whether the court might hold, if the issue was fully argued before it, that as a matter of law the claim would have failed.

[89] The second requirement is that settlements be made in good faith and through proper and businesslike steps. In Generali, the Court uses the term “proper and businesslike” to describe the “steps” taken by the lead insurer in making the settlement. In Scor, the Court referred to the “proper and businesslike steps” taken by the lead insurer “to have the amount of the loss fairly and carefully ascertained” (at p. 322). While the cases provide no explicit definition of what constitutes “proper and businesslike steps,” the court’s focus is on the steps taken by the lead insurer to consider and evaluate the claim and the insured’s losses before making a settlement. The analysis is contextual and depends on the facts of the case.

[90] These legal principles reflect the tension and competing interests in reinsurance arrangements. On the one hand, a reinsurer that has agreed to follow the settlements should not be entitled to require the lead insurer to prove every element of the insured’s underlying claim before making a payment towards the settlement. Indeed, a follow the settlements clause is designed to relieve the reinsured from having to prove the loss: see Swiss Reinsurance Company v. Camarin Limited, 2015 BCCA 466, 82 B.C.L.R. (5th) 68, at para. 91. On the other hand, the reinsurer must have some ability to challenge a settlement made by the lead insurer that falls outside the bounds of coverage or is entered into without proper and businesslike steps taken to investigate and evaluate the insured’s claim.

Infrassure’s Position

[91] Infrassure takes issue with the Settlement on numerous grounds. First, it submits that exclusions in the Local Policy applied and should have been factored into the Settlement. Second, it submits that Zurich failed to take proper and businesslike steps when it entered into the Settlement without conducting a proper investigation of the Vale claim. Infrassure does not allege that Zurich failed to act in good faith.

[92] Infrassure’s position is that if Zurich had properly investigated and analyzed the Vale claim, it would never have settled for $140 million. It would have settled for a much lower number, one that did not reach the US$50 million attachment point under the VIG/Infrassure policies. It further submits that VIG did not take proper and businesslike steps when it made the payment to Zurich under the Reinsurance Agreement.

Coverage as a Matter of Law

[93] Infrassure does not dispute the grant of coverage under the Local Policy. There is no issue that the Local Policy covers business interruption claims. Infrassure submits, however, that there are two exclusions that limited what Vale was able to claim for its business interruption losses.

[94] The first exclusion is for refractory linings. Section 8.1.14 of the Local Policy excludes business interruption losses during the time to repair refractory linings. The exception to the exclusion is “where the loss or damage is caused by an insured peril external to the furnace”. Insured perils external to the furnace are defined as property other than various specified items including “tap holes for the metal/matte and slag” and “refractory lining that provides containment for the contents of the furnace and the entirety of property within the area so contained”.

[95] Infrassure relies on the evidence of its refractory expert Ruth Engel in support of its position that the damage originated from inside the furnace, not outside. She said that in her opinion, movement of the refractory created a gap in the lining and led to the runout of the molten matte. VIG relies on the evidence of Mr. Kenny, the Vale employee who accessed the scene within hours of the explosion. He testified that the matte that escaped from the tap hole severed the cooling lines. The severed lines released water that caused steam explosions, which occurred outside the furnace and caused the resulting damage. William Penn, an engineering consultant with McLellan and Partners that was retained by Zurich to investigate the Vale claim, noted that there had been no forensic investigation after the tap hole failure.

[96] The evidence before me on the cause of the damage, and whether it was from inside or outside the furnace, was inconclusive. I am satisfied, given the uncertainty of what caused the explosion and where it occurred, that the exception to the exclusion arguably applied. This is consistent with the coverage opinion provided by Blaney McMurtry LLP, Zurich’s coverage counsel (“Blaneys”), in February 2013. The coverage opinion concluded that the refractory exclusion would not apply because Vale would be able to tender evidence that the damage to the refractory lining was from an insured peril external to the furnace.

[97] The second exclusion is with respect to oxidation. Vale claimed losses of $82 million due to elevated gas handling delays (“GHD”) in connection with its mitigation activities. [7] Vale originally claimed that the higher GHD was attributable to ore that had oxidized after Flash Furnace 2 went down. Vale posited that lime concentrate used to counteract the effects of oxidation resulted in elevated GHD in operating Flash Furnace 1. Zurich’s experts doubted that the GHD was the result of oxidized ore. Jorma Tuppurainen from Mineralurgy testified that in his view the elevated GHD was not from ore oxidation. He agreed that there was elevated GHD in operating Flash Furnace 1 but testified that it was most likely as a result of additional dust being dragged into the gas handling system from the furnace itself. [8]

[98] If ore oxidation was not an issue, the exclusion in s. 8.2.3(a) would not have applied. This section contains a perils exclusion for damage resulting from “moths, termites or other insects, vermin, rust or oxidation”. Even if ore oxidation was an issue, s. 8.2.3(a) is subject to the proviso that the exclusion “shall only apply to the part or item immediately affected and shall not apply to subsequent loss, destruction of or damage to the Property Insured occasioned by a peril (not otherwise excluded) resulting from any event or peril referred to in this Exclusion”.

[99] VIG submits that the exclusion in s. 8.2.3(a) does not apply because the proviso restricts the exclusion to portions of the furnace that may have oxidized, not to elements outside the furnace like ore. VIG also relies on the part of the proviso that states that the exclusion only applies to the part “immediately affected” and not the “subsequent loss” such as the downstream costs of processing oxidized ore. Given the wording of the proviso, I accept that the perils exclusion arguably did not apply. This is consistent with the Blaneys opinion that considered the perils exclusion and concluded that a court would likely construe it against Zurich. Although that opinion was rendered prior to Vale raising the GHD issue, Blaneys’ reasoning was consistent with the interpretation of s. 8.2.3(a) advanced by VIG above.

Proper and Businesslike Steps

[100] The remainder of Infrassure’s arguments about the Settlement relate to whether Zurich took proper and businesslike steps in entering into the Settlement.

[101] The steps taken by Zurich and the Steering Group included:

• investigating and analyzing Vale’s business interruption claim over a period of over three and a half years, from February 2011 to December 2014, through an experienced adjuster whose principal testified at trial (Mr. Alwyn from Cunningham Lindsey);
• retaining numerous forensic and technical experts to ascertain the basis for Vale’s claim and determine whether its business interruption losses could be substantiated. Representatives of these firms testified at trial and explained their processes and methodology. This included LBC and MDD (Phil Turner and Mr. Ebel); Mineralurgy (Peter Munro and Mr. Tuppurainen); McClellan and Partners Ltd. (William Penn); and MacRae Technologies (Allan MacRae). None of those witnesses testified that they required additional time to analyze Vale’s claim before Zurich entered into the Settlement;
• seeking legal counsel on the terms of the Local Policy and whether any exclusions applied. Blaneys provided a formal opinion on coverage for Zurich. The Steering Group retained Blake, Cassels and Graydon LLP as coverage counsel. It received the Blaneys opinion and did not dispute the coverage analysis. The reinsurers (including Infrassure) did not seek a second opinion from any other firm. Further, Mr. Butler testified that Mr. Mogartoff tried to raise these exclusions during the settlement negotiations but was immediately rebuffed by Vale;
• arranging for their experts to participate in hot tub sessions with Vale’s experts in July and September 2014;
• responding as new issues arose and investigating further. For example, after Vale made a claim for GHD and mill losses as costs related to its mitigation activities, Zurich directed Mineralurgy to look at the issues related to that claim. MDD and LBC then used those conclusions in their assessment of the loss in the fall of 2014;
• having MDD and LBC present their forensic calculations to the reinsurers at a meeting in London on November 25, 2014, before the settlement negotiations were scheduled to begin. No reinsurer objected to any of those calculations at the time;
• assessing and recalculating the Vale losses prior to and throughout the settlement negotiations.

[102] Moreover, all of the issues now raised by Infrassure were considered by Zurich and the reinsurers at the time. That includes (i) the amount of time that should be recognized for Vale’s repair of the furnace; (ii) whether a partial rebuild of the furnace was appropriate; (iii) whether Vale was claiming for betterment or upgrades; and (iv) whether Vale’s claim for oxidation/GHD could be supported. Indeed, Mr. Bachmann’s own notes from October 27, 2014 showed that Zurich and the reinsurers were actively considering issues related to upgrades or betterment, length of furnace repair period, past history of the furnace, oxidation, hydration, and procurement of coolers and refractory. Notably, he wrote “realistic number - $150 million”. On cross-examination, he said that one member of the Steering Group had considered that a realistic number but he could not say with certainty who it was.

[103] The insurers’ extensive consideration of all issues can also be seen in the negotiation brief prepared by Blaneys for Zurich in advance of the December 2014 settlement negotiations. That brief goes through, in detail, Vale’s position on all issues including the scope of damage (including hydration), local repair or partial rebuild, timeline for repair/rebuild, costs related to Vale’s PMP (planned maintenance period), and quantum of claimed losses (including mill losses and oxidation/GHD). The brief sets out Zurich’s response to Vale’s position on each issue and the strength and weakness of Vale’s and Zurich’s position on each issue.

[104] Zurich and the reinsurers further analyzed Vale’s calculations for GHD and mill losses and did their own adjustments to these numbers when arriving at the settlement figure. They also did their own calculations of the credit for the high grading conducted by Vale as part of its mitigation efforts.

[105] One of the issues that Zurich and the reinsurers struggled with was the number of weeks that should be recognized for Vale’s repair of the furnace. Going into the negotiations, Zurich and its experts took the position that ten weeks was appropriate. Vale was seeking a 20-week repair time.

[106] Mr. Alwyn, Zurich’s insurance adjuster, testified that after the hot tub meetings in July and September 2014, he reported to Zurich and the reinsurers that their own experts considered that an 8–10-week period for localized repair was subject to revision. Mr. Penn (of the McClellan consulting firm, retained by Zurich to assess the repair period) testified that after the hot tub meetings in July and September 2014, he estimated that a ten-week repair was the best case scenario for the insurers. During the course of the pre-negotiation meetings on December 10, 2014, he reminded the reinsurers that his estimate of ten weeks was his absolute best shot. However, in light of Vale’s position that there had been considerable water damage from the run-out incident, he agreed that the repair could take an extra four or five weeks.

[107] Brad Ebel (President of MDD, forensic accountant to the reinsurers) testified that there was a lot of discussion among the insurers about the 10–20-week gap. He testified that the consensus in the group and from the experts was that ten weeks was certainly too short. He testified that “there were a lot of people talking about 13, 14, 15 weeks in the insurer group.” They ultimately settled at an amount that reflected a repair period in the range of 14–15 weeks.

[108] Infrassure relies on the evidence of Ms. Engel (an expert in refractory brick) and John Holecek (an expert on electrical and instrumentation systems) to support its argument that the period of repair for Flash Furnace 2 should have been in the 10–11-week period. Their evidence was of limited assistance to the Court. Ms. Engel has never led a furnace repair project and her expertise is limited to refractory brick failure. Mr. Holecek is not familiar with Inco style furnaces such as Flash Furnace 2. Neither of them were familiar with Ontario Ministry of Labour stop work orders and what would be required to lift them. Neither of them took into account the extent of the water damage in calculating repair times.

[109] Justin Crick, a forensic accountant retained by Infrassure for this litigation, challenged the MDD/LBC loss calculations. I note that while Infrassure now disputes the methodology used by the reinsurers in their calculation of GHD and high grading credits, the reinsurers (including Infrassure) had no issue with these calculations either before or at the time of the settlement negotiations.

[110] In Mr. Crick’s third report, he calculated that Vale’s loss was $59 million. His calculation was based on an 11-week period that, as noted above, was not a certainty. It was also not far off from the $69.9 million best case scenario that MDD calculated for Zurich and the reinsurers if a 10-week period was used.

[111] According to the calculations done by MDD at the time, the insurers’ best case scenario using a 14-week period ranged from $92.2 million (if Vale agreed with all of MDD’s adjustments to its numbers and Zurich paid nothing for GHD) to $133.7 million (if MDD’s calculation of $47.3 of GHD was used instead of the $82 million that Vale claimed). Meanwhile, Vale was claiming $246 million for its business interruption losses. As Mr. Ebel testified, the insurers could only achieve their best case scenarios if one hundred percent of their calculations were accepted because there were issues with all of them. He noted that it was not black and white and that there was still grey in every one of the calculations.

[112] Ultimately, Zurich entered into the Settlement based on the investigations and assessments it conducted. It sought input from and worked collaboratively with the Steering Group. It engaged qualified experts. It evaluated the risks it faced in litigation. Considering all of the evidence before me, I find that Zurich followed proper and businesslike steps in entering into the Settlement.

[113] Infrassure’s final argument is that VIG failed to take proper and businesslike steps before it paid VIG/Infrassure’s share of the Settlement amount to Zurich. In particular, it submits that VIG should have required Zurich to prove that the Settlement met the double proviso in s. 5.2 of the Zurich conditions that formed part of the Reinsurance Agreement:

Subject to the exceptions in clauses 2 and 3, all loss settlements made by Zurich, provided they are within the terms, conditions and limits of the Original Policies, and within the terms, conditions and limits of this Agreement, shall be binding on [VIG].

[114] In my view, since the Retrocession Agreement requires Infrassure to follow the settlements under the Local Policy, the proper and businesslike standard applies to Zurich entering into the Settlement with Vale under the Local Policy, not the payment by VIG to Zurich under the Reinsurance Agreement. However, in the alternative, I have considered whether VIG took proper and businesslike steps when it made the payment to Zurich under the Reinsurance Agreement.

[115] I disagree with Infrassure’s submissions in this regard. First, the Retrocession Agreement requires that Infrassure follow the Settlement under the Local Policy. It is not conditional on VIG calling on Zurich to prove coverage under the Reinsurance Agreement or on VIG taking any steps under the Reinsurance Agreement. Infrassure’s argument would also impose a higher standard of proof than what is required for an unqualified follow the settlements clause, namely that the settlement “arguably” be covered by the underlying policy.

[116] Second, VIG was faced with a Settlement that was concluded by Zurich after a lengthy period of investigation and adjustment. The Settlement was recommended by the Steering Group, of which Infrassure had been a member since its inception, and that had actively been investigating the Vale claim and reporting to reinsurers over the three-and-a-half-year period. Dr. Aigner understood that over ninety percent of the reinsurers had contributed towards the Settlement.

[117] Faced with this situation, VIG repeatedly sought a detailed explanation from Mr. Bachmann on why Infrassure considered the Settlement to be unreasonable. Mr. Bachmann’s answers were vague. He referred to the Joint Report that analyzed Vale’s loss at $69.9 million (the starting position of the insurers going into the negotiations). He stated that there were coverage and evidence issues listed out in the tables. He stated only that oxidation was not covered. [9] Dr. Aigner testified that he checked the Local Policy and saw the oxidation exclusion but could not figure out how it related to the Joint Report. Dr. Aigner sought more specifics from Mr. Bachmann so that he could raise them with Zurich as a basis to challenge the Settlement. Despite multiple requests from VIG, Infrassure provided none.

[118] In all of the circumstances, I find that VIG took proper and businesslike steps before making the payment to Zurich.

Issue #3 - Damages

[119] VIG seeks damages from Infrassure for breach of contract in the amount of $8,969,760.17.

[120] VIG paid Zurich $8,442,931.00 as its portion of the Settlement under the Reinsurance Agreement. It seeks to recover from Infrassure 99.89% of that amount ($8,433,643.78) pursuant to the Retrocession Agreement. Infrassure does not dispute the quantum of damages with respect to the Settlement.

[121] VIG also paid Zurich loss adjustment costs of $536,116.39. VIG arranged the payment of $409,924.81 in loss adjuster fees on December 1, 2014. VIG also paid $126,781.96 to Zurich in additional loss adjuster fees in April 2016. VIG seeks to recover 99.89% of those amounts from Infrassure, namely $409,473.89 and $126,642.50, for a total of $536,116.39.

[122] Infrassure submits that VIG’s claim for $409,473.89 in loss adjuster fees is statute-barred. Marsh requested payment of loss adjuster fees to VIG on November 26, 2014. The evidence is that VIG arranged payment of these fees on December 1, 2014. Infrassure submits that because the claim was issued on December 9, 2014, the claim is outside the two-year period in s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

[123] I am not persuaded by Infrassure’s submission. VIG only requested reimbursement from Infrassure on January 13, 2015. Under insurance policies, the defendant insurer cannot be said to have caused loss to the party seeking indemnification until that party has made a request for indemnification: Federation Insurance Co. of Canada v. Markel Insurance Co. of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, at paras. 24–27.

[124] In this case, VIG did not make the request for reimbursement until January 13, 2015. Since the claim was commenced less than two years after VIG’s request for reimbursement, VIG’s claim for these fees is not statute-barred.

[125] VIG seeks punitive damages. It submits that punitive damages are appropriate where a defendant has conducted itself in a way that represents a marked departure from ordinary standards and offends the court’s sense of decency: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 SCR 595, at para. 36. VIG submits that it is entitled to punitive damages in light of Infrassure’s delay in making the payment it owed under the Retrocession Agreement, particularly in the face of the evidence that supported VIG’s position.

[126] In my view, Infrassure was entitled to have a court determine the issues in this case. In particular, it was entitled to seek an adjudication of whether Infrassure was contractually bound to follow the Settlement under the terms of the Retrocession Agreement. There is insufficient evidence before me to support VIG’s position that Infrassure did so as a deliberate and obstructive attempt to avoid its contractual obligations. I decline to award punitive damages.

Judgment

[127] I grant judgment to VIG in the amount of $8,969,760.17 plus pre-judgment interest.

[128] If the parties are unable to agree on costs, I will receive written submissions (no longer than five pages double spaced, exclusive of bill of costs). VIG’s costs submissions shall be delivered within 15 days and Infrassure’s costs submissions within 15 days thereafter. VIG may file reply submissions of not more than three pages within five days thereafter.

Justice Conway Released: September 21, 2023

Footnotes

[1] All currency references in these Reasons are to Canadian dollars, unless otherwise noted.

[2] Dr. Aigner testified that Mr. Bachmann had not denied coverage and just thought that Zurich had overpaid. Dr. Aigner testified that he thought he could get a proposal in which Infrassure would pay at least the part of the Vale claim that it was admitting and discuss the smaller part of the claim later on.

[3] Even though the stamp says 12.5%, there is no dispute that the VIG/Infrassure layer was 9.89% above the attachment point.

[4] There is also no evidence as to who or what “Non-Bureau/Overseas (Re)insurers” are in the Basis of Claims Agreement section.

[5] I rely on this evidence not for Mr. Bailey’s subjective understanding of the terms of the contract but rather only as factual evidence of what transpired when Infrassure included that language and then removed it.

[6] In that case, the Court was considering the application of the two-part test where the underlying policy and the reinsurance policy were back-to-back, namely the risks covered by the two policies were the same. In this case, there is no suggestion that there was any difference in the coverage for business interruption under the Local Policy, the Reinsurance Agreement, and the Retrocession Agreement. This may not be the case where coverage issues are different as between the underlying policy and the reinsurance policy: see Aegis Electrical And Gas International Services Company Limited v. Continental Casualty Company, [2007] EWHC 1762 (Comm), at paras. 85–106.

[7] Vale also made a claim for oxidized ore under mill losses. However, MDD’s adjusted numbers in its December 10, 2014 spreadsheets did not include anything for oxidation in the category of mill losses.

[8] Vale also asserted that the elevated GHD were from “pushing” Flash Furnace 1 while Flash Furnace 2 was down.

[9] Mr. Bachmann referred to a contentious position between the accountants for Zurich and for the reinsurers. He did not advise Dr. Aigner that MDD and LBC had been instructed to work together and came up with the Joint Report in advance of the settlement negotiations.