Metlife Insurance Ltd v RGA Reinsurance Company of Australia Ltd

MetLife Insurance Ltd (MetLife) and RGA Reinsurance Company of Australia Ltd (RGA) were parties to a dispute concerning the interpretation of a reinsurance contract. The primary issue revolved around whether RGA was obliged to follow MetLife's settlement decisions in relation to claims made under an underlying insurance policy. The case came before the Court of Appeal of New South Wales.

The court was required to determine the proper construction of the reinsurance contract, specifically whether a particular clause constituted a condition of the reinsurance cover, an exclusion from it, or merely a qualification on the limits within which the reinsurer was obliged to follow the insurer's settlement decisions. A further question was whether the presumption that reinsurance contracts are "back-to-back" with the underlying insurance policies was displaced by the terms of the contract. The relevance of headings within the contract and the admissibility of retrospectant evidence were also implicitly considered in the court's approach to interpretation.

The Court of Appeal held that the clause in question did not operate as a condition or exclusion, but rather as a qualification on the reinsurer's obligation to follow the insurer's settlements. The court applied established principles of contractual interpretation, emphasising the importance of the text, structure, and purpose of the commercial contract. It found that the heading of the relevant clause, while not determinative, supported the interpretation that it qualified the scope of the reinsurer's obligations rather than creating a condition precedent or exclusion. The court also considered the "back-to-back" presumption, concluding that the specific wording of the contract displaced this presumption in favour of the more nuanced interpretation of the clause.

Leave to appeal was granted, but the appeal was ultimately dismissed. MetLife was ordered to pay RGA's costs.