Bermuda Law Blog

Jennifer Haworth
If you are a business owner, you will no doubt be focused largely on your target customers and how best to market and sell your products or services to them, while keeping costs at a minimum, especially in this economic climate. An important piece of advice we give is not to cut corners when it comes to your employees. Well drafted contracts of employment and employee handbooks are critical in safeguarding your business. Money set aside for legal services in this area will be well spent, especially if an issue or dispute arises. In our experience, one of the biggest concerns, especially with small businesses, can be the lack of a written employment contract. This presents difficulty to employers on two levels. First, it is a violation of the Employment Act 2000 (the “Act”) (130 KB PDF) which requires all employers to provide their employees with a Statement of Employment. Second, in the event of a dispute, the lack of clear, written terms leads to “he said, she said” situations, making it more difficult to prove matters one way or the other.

The UK Supreme Court has recently reached a decision regarding the appeals of both Pitt v Holt and Futter v Futter which refer to the nature of the Rule in Re Hastings-Bass deceased 1974. Hastings-Bass was a case that set the precedent whereby discretionary acts by trustees may be set aside if the decisions made had unintended consequences. The unintended consequences were usually unexpected tax liabilities. Historically the Rule has been used to set aside decisions made by trustees who have have accidentally failed to take into account relevant circumstances or where they have taken incorrect professional advice. As a consequence of the Rule the trustees and beneficiaries are re-set into the position they were in before entering the adverse transaction.

Before an insurance company pays out damages following an accident, one’s claim must be particularised fully. Such a claim will typically include all expenses incurred as a result of the accident, which may include damage to property and expenses for transportation. Hardip Singh v Rashed Yaqubi is a 2012 case wherein Mr. Singh sued Mr. Yaqubi for damages arising out of an accident in central London which involved Mr. Singh’s Rolls Royce. Mr. Singh, through his counsel, argued that the hire of the Rolls Royce was reasonable considering the type of work that he was in and the image that he had to maintain, elements of which included the perception of success.

Bermuda is now the epicentre of the catastrophe bond/insurance linked security world. With $7 billion of these securities now listed on the Bermuda Stock Exchange, the island can claim almost half the value of the global market. Catastrophe bonds (also known as cat bonds) are risk linked securities that transfer a specified set of risks from an Insurance company which acts as a sponsor to investors through the issue of cat bonds and the trading in derivatives based on the bond. They were created and first used in the mid 1990’s in the aftermath of Hurricane Andrew and the Northridge earthquake and emerged from a need by insurance companies to alleviate some of the risk they would face if a major catastrophe occurred, which would incur damages that they could not cover by premiums and returns from investment using the premiums that they received. Typically an insurance company issues bonds through an investment bank which are then sold to investors. These bonds are inherently risky and are multi-year deals. If no catastrophe occurs, the insurance company pays a coupon to the investors who make a healthy return generally based on LIBOR plus between 3% and 20%. However if the catastrophe manifests itself the principal paid by the investors to purchase cat bond securities is forgiven and used by the sponsor to pay its claims to policy holders.