Analog Devices B.v v Zurich Insurance Company

• Jurisdiction: Ireland
• Judge: FENNELLY J.
• Judgment Date: 24 January 2002
• Neutral Citation: [2002] IESC 1
• Court: Supreme Court
• Docket Number: [S.C. No. 171 of 2001]
• Date: 24 January 2002

ANALOG DEVICES & ORS v. ZURICH INSURANCE CO & ANOR

BETWEEN

ANALOG DEVICES BY ANALOG DEVICES IRELAND LIMITED ANALOG DEVICES RESEARCH AND DEVELOPMENT LIMITED AND ANALOG DEVICES INC

Plaintiffs/Respondents

AND

ZURICH INSURANCE COMPANY AND AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY

Defendants/Respondents

[2002] IESC 1

Chief Justice

Murphy J.

Fennelly J.

171/01

THE SUPREME COURT

Synopsis:

INSURANCE

Practice and procedure

Motion to set aside proceedings - Jurisdiction - Litigation - Insurance claim - Financial loss - Forum non conveniens - Whether service outside jurisdiction should have been ordered - Whether proceedings should be set aside - Rules of the Superior Courts, 1986 Order 11, rules 1 and 5; Order 12, rule 26 ( 171/2001 - Supreme Court - 24/1/02)

Analog Devices B V v Zurich Insurance Company - [2002] 1 IR 272 - [2002] 2 ILRM 366

Facts: The plaintiffs had allegedly sustained serious financial loss as a result of an incident at their plant and submitted insurance claims to the defendants as their insurers. Coverage was denied by the insurers and the present proceedings were initiated. The second named defendant ("American") brought a notice of motion seeking to have the present proceedings set aside. American submitted that the case was not a proper one for the service of a summons outside the jurisdiction or in the alternative that Massachusetts was a more appropriate forum to determine the dispute. Mr. Justice Lavan was satisfied that Ireland was an appropriate forum for the hearing of the action and refused the relief sought. American appealed and submitted that it was not an appropriate party to the action and was not liable under the local policy of insurance. The claim against it was under a distinct and quite separate policy. In addition it was submitted that American had already commenced proceedings in Massachusetts and that virtually all the witnesses were in the United States.

Held by the Supreme Court (Fennelly J delivering judgment) in dismissing the appeal. There was little doubt that American was a proper party to the action against Zurich. The actions against both defendants arose under separate but linked insurance policies covering the same risk of which a virtual identical ground of repudiation had been advanced. To hear the two actions before two different courts was to court the danger of inconsistent decisions. The fact that the policy was issued by American, a US corporation, to Analog Inc., also a US corporation, in the United States was in no way decisive. The definition of the insured included the first three plaintiffs, all of whom were registered in Ireland. Furthermore the placing of the risk, so far as was relevant to the case, was in Ireland. There was a clause which conferred jurisdiction on the Courts in the United States but only at the option of the insured. The insured had not exercised that option. The High Court had correctly exercised its discretion to permit service outside of the jurisdiction on American. The appeal would be dismissed.

Citations:

RSC O.11 r1

SHIPSEY V BRITISH & SOUTH AMERICAN STEAM NAVIGATION 1936 IR 65

RSC O.11 r1(e)(iii)

RSC O.11 r1(h)

RSC O.12 r26

SHORT V IRELAND 1996 IR 188

TROMSO SPAREBANK V BYRNE UNREP SUPREME 15.12.1989 1989/9/2532

INTERNATIONAL COMMERCIAL BANK V INSURANCE CORPORATION OF IRELAND 1989 IR 453

O'TOOLE V IRELAND 1992 ILRM 218

SEACONSAR FAR EAST LTD 1994 1 AC 438

VITKOVICE HORNI A HUTNI TERZSTISTVO V KORNER 1951 AC 869

RSC O.11 r5

MASSEY V HEYNES 1881 21 QBD 330

BRENNAN V AG & WEXFORD CO COUNCIL 1983 ILRM 449

MULTINATIONAL GAS CO V MULTINATIONAL GAS SERVICES 1983 CH 258

SPILIADA MARATIME CORPORATION V CONSULEX LTD 1987 1 AC 460

AMIN RASHEED SHIPPING CORPORATION V KUWAIT INSURANCE CO 1984 AC 50

INTERMETAL GROUP V WORSLADE TRADING 1998 IR 1

DOE V ARMOUR PHARMACEUTICAL CO 1994 3 IR 78

SIM V ROBINOW 1892 19 R 665

DICEY & MORRIS ON THE CONFLICTS OF LAW 13ED 403

SAIPEM SPA V DREDGING VO 2 BV, THE VOLVOX HOLLANDIA 1988 2 LLR 361

INTERNATIONAL COMMERCIAL BANK (ICB) V INSURANCE CORPORATION OF IRELAND (ICI) 1989 IR 453

US FEDERAL RULES OF CIVIL PROCEDURE RULE 13(a)

1 24th day of January, 2002 by FENNELLY J. [Nem diss]

2 The plaintiffs/respondents ("the plaintiffs") had insurance policies with the defendants/respondents ("the defendants") for their computer chip manufacturing plant at Raheen, County Limerick. Losses occurred as a result of an incident at the plant in August 1999. The defendants repudiated liability under two different policies. The present issue concerns service out of the jurisdiction of proceedings brought under the policy issued by the second named defendant appellant ("American Guarantee"). The facts are complex.

THE BACKGROUND

3 The first three plaintiffs are subsidiaries or associated companies of Analog Inc. ("Analog Inc.") which is incorporated under the laws of the Commonwealth of Massachusetts where it also has its principal place of business. The first-named plaintiff is incorporated in the Netherlands and registered on the external register in the State. It carries on business at the plant at Raheen as manufacturer of high performance mixed linear and digital integrated circuits. The second and third-named plaintiffs are incorporated in the State and engage in the research and/or design of integrated circuits at the Raheen plant.

4 There are two policies known respectively as the local policy and the master policy.

5 The local policy was issued by the first-named defendant ("Zurich"), which is a Swiss corporation registered in the State on the external register. The first three plaintiffs are named as the insured. This policy covered, inter alia, collective material damage and business interruption flowing from insured risks at the Raheen plant.

6 The master policy was issued in the United States by American Guarantee to Analog Inc, and its affiliated, subsidiary and associated companies to cover similar risks world wide (with some excepted countries not including Ireland). American Guarantee is incorporated under the laws of the State of New York, has its head office at Schaumberg, Illinois and is the indirect subsidiary of Zurich.

7 On 2nd August 1999, there occurred at the Raheen plant the incident which gave rise to claims under the two policies and to the proceedings with which this appeal is concerned. The plaintiffs claim that incorrect fitters were fitted, during weekend preventive maintenance by a technician, to the hydrochloric acid storage system and that the fitters and "o-rings" which form part of them were damaged as a result of exposure to the acid. This, in turn, caused particles from the filters to become incorporated in a batch of wafers which comprise the integrated circuits. The wafers were rendered unfit for sale and had to be destroyed. The claim, as so far formulated, runs to several million dollars not including business interruption.

8 The two policies contain similar exclusion for perils consisting of errors in processing or manufacture of the products of the insured.

9 Both policies were in force at the date of the incident. Claims were made respectively against Zurich under the local policy and against American Guarantee under the master policy. Both Zurich and American Guarantee have denied liability. They claim that the losses arose from perils excluded by the policies and are thus not covered.

10 The plaintiffs claim that their incident fell squarely within the risks covered by the policies and, timely notice of the claim having been given, the defendants are bound to indemnify the plaintiffs within the respective policy limits.

THE PROCEEDINGS

11 On 20th January 2000, the plaintiffs issued a plenary summons against both defendants claiming a declaration that the defendants are liable under the two policies. The plenary summons, because of the US address of American Guarantee, was marked "not for service outside the jurisdiction without an order of the Court."

12 Before recounting more fully the history of the proceedings in this jurisdiction, I should refer, because American Guarantee relies strongly on it, to an action commenced by it against the plaintiffs on 18th January 2000, in the United States District Court for the District of Massachusetts ("the Massachusetts proceedings"). The Massachusetts proceedings are negative in character. They claim declarations of the non-liability of to American Guarantee to indemnify the plaintiffs under the master policy. In fact, American Guarantee had issued an earlier set of proceedings on 15th October 1999, but had discontinued them.

13 On 31st January 2000 Smith J. Made an order pursuant to Order 11 Rule 1 of the Rules of the Superior Courts ("the Rules") granting liberty to the plaintiffs to serve notice of a concurrent summons on American Guarantee by ordinary post at its address in Schaumberg, Illinois, USA.

14 No question could arise regarding the service of the proceedings on Zurich, which entered an unconditional appearance on 1st February 2000. American Guarantee on 20th April, 2000 entered an appearance under protest for the sole purpose of contesting the jurisdiction of the High Court.

15 At this point, it is appropriate to refer to the grounds under the Rules upon which the plaintiffs sought and obtained leave to effect service out of the jurisdiction. It is regrettable that the order of the High Court did not follow the practice so frequently laid down by the courts of specifying the particular grounds under Order 11 Rule 1 of the Rules under which leave was granted (see Shipsey v British and South American Steam Navigation Company [1936] I.R. 65.) ( "Shipsey"). Nonetheless, it is clear from the grounding affidavit of Mr. Joseph E McDonough, a Vice President of Analog Inc. and director of the other plaintiffs, sworn on 28th January 2000 which provisions of the...