BILA Seminar The Tohoku Earthquake & Tsunami – Legal Issues

1. Title slide • Located at the start of every presentation • Optionally, may be preceded by purple RPC quote ‘holding slide’ from the sample deck • Click and type main and sub-title in placeholder boxes • Overtype presenter name (NB this is bottom aligned, and expands up for multiple presenters) • Use View->Header and Footer on menu and Footer to manually enter date, which also updates the date in page footers • Uses Title Slide layout • Format guidelines • Title and Subtitle are in sentence case – ONLY the first word of the title and any proper nouns are capitalised • Date is in the following format: 24 July 2011 • Do not abbreviate the month name and only capitalise the first letter of the month • Do not change text size – verbose titles will have less impact and should be edited BILA SeminarThe Tohoku Earthquake & Tsunami – Legal Issues Daniel Saville

2. Overview Japanese Insurance Act Adjustment issues Coverage and exclusions Business interruption Aggregation • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device 1

3. Simple bullets • Remember the top-level of text is the subtitle • The first bulleted level is therefore the second level overall Insurance claims in Japan • Insurance litigation unusual - few reported cases • ADR clauses are common: claims referred to ADR Centres prior to litigation • New Insurance Act: Law Number 56, 6th June 2008 • 保険法 - (平成二十年六月六日法律第五十六号) • Chapter 2 - Damage Insurance Contract • 第二章　損害保険 • Applies to (re)insurance policies subject to Japanese law • Exemptions for marine, aviation, cargo & nuclear 2

4. Simple bullets • Remember the top-level of text is the subtitle • The first bulleted level is therefore the second level overall 第一節　成立 Section 1 Establishment • Article 4: Obligation to notify the Insurer • “When entering into a damage insurance contract, the insurance policy holder … must notify the truth to the insurer of material information relating to the likelihood of damage arising, of which the insurer requests notification...” • Article 28: Insurance can be cancelled due to non disclosure for bad faith or gross negligence • Article 31: Cancellation not retroactive unless damage relates to non-disclosure 3

5. Simple bullets • Remember the top-level of text is the subtitle • The first bulleted level is therefore the second level overall 第三節　保険給付 Section 3 Insurance Payment • Article 13: Occurrence of damage and prevention of the magnification of damage • Article 14: Obligation to give notice of damage - “without delay” • Article 15: Destruction of insured items after insured damage • “Where damage to an insured item has occurred that is covered by the insurance contract, and the insured item is destroyed by an occurrence which is not covered by the insurer thereafter, the insurer is liable to pay … for the damage.” 4

6. 第三節　保険給付Section 3 Insurance Payment Article 18: Calculation of damage (over-insurance) Where agreed value significantly exceeds insurable value, insurable value will apply • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device • Article 19: Partial insurance (under-insurance) • Recognises proportionate insurance • Article 23: Responsibility for costs • Insurer to pay for costs of loss calculation and mitigation • Article 26: Mandatory provisions • “A special agreement which is disadvantageous to the insurance policy holder … is invalid.” 1 February 2011 5

7. Adjustment issues General Insurance Association of Japan (GIAJ) certifying losses under homeowner policies in certain regions from satellite and aerial photographs Life Insurance Association of Japan announced that indemnification provisions will not be applied; established database of missing persons Proper and businesslike adjustment procedures required for reinsurers to follow the settlements No official requirement for Japanese registered loss adjusters, although expected to use GIAJ “Registered Property Loss Appraisers” unless reason otherwise • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device 6

8. Coverage - Earthquake & Tsunami Property all risks policies will cover losses subject to exclusions Policies covering specific insured perils (eg. fire, explosion, landslip) more likely to exclude earthquake Various terms could encompass damage by water: 'tsunami', 'tidal wave', 'inundation from the sea', 'flood’ Sher v Lafayette - Louisiana Supreme Court decision on ‘flood’ exclusion following Hurricane Katrina losses • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device 7

9. Nuclear & Pollution Exclusions Nuclear exclusions drafted broadly - refer to effect rather than source eg. ‘ionising radiation or contamination' Check application of exclusion where concurrent causes: Wayne Tank & Pump Co v Employers’ Liability Assurance Pollution is generally excluded but: • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device • may write back cover eg. for clean-up costs where pollution caused by an otherwise insured peril, or • can extension of cover for pollution/ contamination override nuclear exclusion? 8

10. Business Interruption Overall losses to Japanese economy ~ USD 300 bn Orient Express Hotels v Assicurazioni Generale Policy covered: "loss due to interruption or interference with the Business directly arising from Damage" BI losses shall be adjusted: "to provide for the trend of the Business and for variations in or special circumstances affecting the Business which would have affected the Business… had the Damage not occurred” Insurers entitled to exclude losses which would have been suffered but for damage to hotel • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device 9

11. Contingent Business Interruption Covers loss sustained to Insured's business by reason of one of its suppliers or customers suffering damage at their own premises How remote? – ‘direct supplier’ or ‘any supplier’ Extension of cover for supply chain Physical damage of type insured by policy Territorial limits in direct policy and reinsurances • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device 10

12. Aggregation and Hours clauses • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device • Property policies - direct and reinsurance, commonly provide cover per event • May be limited by an hours clause eg. LPO98a: • “The words ‘loss occurrence’ shall mean all individual losses arising out of and directly occasioned by one catastrophe. However, the duration and extent of any ‘loss occurrence’ so defined shall be limited to: ... • (b) 72 consecutive hours as regards earthquake, seaquake, tidal wave and/or volcanic eruption…” • Intervening causes such as power rationing • Aggregation problematic for CBI losses 11

13. Conclusion • Lead-in bullets • Use the top-level of text as the lead-in text • The first bulleted level is therefore the second level overall • Each point (main bullet) begins with a capital letter then continues in lower case • There should be no more than six bullet points (and fewer if they run longer than one line) • Text must not exceed the bottom margin guide, and must not overlap the ‘swoosh’ device (Re)insurers should be proactive: • understand claim handling procedures and where Act will apply • bring in loss adjusters where appropriate • keep retrocessionaires in the loop to avoid later disputes • investigate far reaching CBI exposures 12