A Brief Review of Reinsurance Trends in 2020

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Annually for several decades, with the first edition of each year’s reinsurance newsletter published by my various prior firms, we would present a brief review of reinsurance case law trends from the prior year. Because I am no longer with a firm, I now use this Blog to post my comments on reinsurance cases as they catch my eye. Accordingly, I offer you my review of reinsurance cases from 2020 in this space. I hope you find it worthy of your time.

In 2020, the courts addressed numerous arbitration issues, mostly about arbitrability and whether arbitration should be compelled, but also made clear, at least in one federal circuit, that an arbitration summons to a third-party is enforceable.  The courts also addressed questions about interim and final awards, upholding final awards as valid, but recognizing the validity of earlier awards for the issues finally determined.   

2020 also brought us an important follow-the-settlements decision, which focused on the conflict between a follow-the-fortunes provision and a following form provision in a reinsurance contract.  Additionally, the reinsurance information discovery trend continued in 2020, with courts routinely allowing discovery of reinsurance information. 

The split among the federal circuits continued in 2020 on whether state anti-arbitration laws reverse preempt the Federal Arbitration Act under the McCarran-Ferguson Act.  So did the requirement of privity for seeking relief from a reinsurer.


Most reinsurance arbitrations fall under the Federal Arbitration Act (“FAA”).  In the reinsurance context, questions of arbitrability and the powers of the arbitrators arise often.  In 2020, courts continued to emphasize their authority to compel arbitration and to leave many questions of arbitrability to the arbitrators.  Additionally, courts continued to confirm reinsurance arbitration awards, even those with attorney fees.

Arbitrability and Motions to Compel Arbitration

With the proliferation of insurance groups with multiple subsidiaries and affiliates, periodically arbitration demands are made by certain members of an insurance group, even though some of the losses in dispute arose from policies issued by another affiliate.  In these cases, the question arises whether the dispute over the non-demanding affiliate’s losses that fell within the reinsurance treaties is arbitrable. In TIG Insurance Co. v. American Home Assurance Co., No. 18-cv-10183 (VSB), 2020 U.S. Dist. LEXIS 22639 (S.D.N.Y. Feb. 7, 2020), the reinsurer sued the demanding cedents and the affiliated policy issuing company challenging the arbitrability of the losses arising from the policies issued by the non-demanding affiliate.

The court, in granting the ceding companies’ motion to compel arbitration, disagreed with the reinsurer that the issue of whether the non-demanding affiliate’s losses fell within the treaties was not arbitrable. The court stated that the “arbitration clauses are broad enough to encompass the disputes at issue, and the arguments raised by [reinsurer] relate to the interpretation of the underlying contract and must await arbitration.” The court held that, with a broad arbitration clause, there is a presumption that the parties have agreed to submit all disputes to arbitration, “including the present disputes.” As the court put it, the question of whether the cedent’s claims made in the arbitration demands are covered by the treaties, “is one of contract interpretation, not of arbitrability.” The specific question of whether the claims under the policies issued by the non-demanding affiliate came within the treaties was also “one of contract interpretation for the arbitrator to decide.” The dispute about whether the affiliate’s policies fell outside the scope of the treaties was, according to the court, a contractual one that the reinsurer could make to the arbitrators.

Many reinsurance contracts have “Run-off Reinsurer” clauses, which often exempt disputes with run-off reinsurers from the contract’s arbitration clause.  Who determines whether a reinsurer is a run-off reinsurer?  The court or an arbitration panel.  In Builders Insurance v. Maiden Reinsurance N.A., Inc., No. 1:19-cv-02762- SDG, 2020 U.S. Dist. LEXIS 34722 (N.D. Ga. Feb. 26, 2020), the reinsurer moved to compel arbitration. The cedent opposed the motion claiming that arbitration was no longer available to the reinsurer because it was a run-off reinsurer as defined in the reinsurance contracts.  The court first determined that it and not the arbitrators would decide whether the reinsurer was a run-off reinsurer. The evidence, found the court, indicated that the parties did not intend to delegate arbitrability questions concerning the run-off reinsurer article.  After concluding that the parties did not delegate to the arbitrators the issue of whether the reinsurer became a run-off reinsurer, the court held that the reinsurer was not a run-off reinsurer. The court accepted evidence from the reinsurer that it had not ceased underwriting operations, had not transferred its claim-paying authority to an unaffiliated entity, and had not assigned its interests or delegated its obligations to an unaffiliated entity. The court found that the reinsurance contracts did not void the arbitration provisions when a reinsurer is in run-off in the ordinary sense. The court concluded that whether the reinsurer continued to accept new risks was beside the point. The reinsurer had not ceased reinsurance underwriting operations according to the evidence accepted by the court. 

A question that often arises in reinsurance disputes is whether a dispute over assets in a reinsurance trust account comes within the arbitration clause of the reinsurance agreement.  In PB Life & Annuity Co., Ltd. v. Universal Life Insurance Co., No. 20- cv-2284 (LJL) (S.D.N.Y. May 12, 2020), a dispute arose over whether the assets the reinsurer placed in the trust agreement qualified under Puerto Rico law. The cedent moved to compel arbitration and the reinsurer sought an injunction precluding arbitration. In granting the motion to compel and denying the injunction request, the court determined that the reinsurance agreement’s arbitration clause was broad enough to leave to the arbitrators the question of whether disputes under the trust agreement came within the arbitration clause of the reinsurance agreement. The court found that the reinsurance agreement, which contained the binding arbitration clause, remained in effect and that the trust agreement did not amend or replace the reinsurance agreement.  The court also determined that the question of arbitrability should be left to the arbitrators.

In insurance insolvency proceedings, whether a reinsurance dispute may proceed to arbitration often depends on the jurisdiction where the dispute is being held.  In Integrand Assurance. Co. v. Everest Reinsurance Co., No. 19-1111 (DRD), 2020 U.S. Dist. LEXIS 77407 (D.P.R. May 1, 2020), a Puerto Rico federal court denied a cedent’s motion to alter or amend a judgment ordering the parties to proceed to arbitration. In explaining its ruling, the court found that, as a matter of law, a liquidation order issued by the state receivership court could not divest the federal district court of jurisdiction. Second, the McCarran-Ferguson Act did not reverse-preempt the FAA, and, therefore, the court was entitled to enforce the valid arbitration clause included in the reinsurance contracts.

Another question that often arises after an arbitration award is issued is who decides the preclusive effect of the original arbitration award on subsequent proceedings over new reinsurance billings.  In Certain Underwriters at Lloyd’s, London v. Century Indemnity Co., Nos. 18-cv-12041, 19-cv-11056, 2020 U.S. Dist. LEXIS 39242 (D. Mass. Mar. 6, 2020), the cedent demanded arbitration and moved to compel arbitration after a new reinsurance billing was not paid by the reinsurer following an earlier arbitration over a prior billing arising from the same reinsurance contract. The reinsurer moved to enforce the judgment, to enjoin the second arbitration demand, and to dismiss the petition to compel arbitration.

The court found that the preclusive effect of a prior arbitration on a subsequent arbitration is an arbitrable dispute. Here, said the court, the cedent was seeking to determine whether the preclusive scope of the prior arbitration decision encompassed the rebilling that was done without allocating the loss payments under the terms of the settlement agreement. Thus, the court found that the issue was not whether the ceding company was attacking the first arbitration, but whether the original arbitration award precluded arbitration of the rebilling. The court found that nothing in the arbitration award indicated that it was intended to have a prospective effect over new billings or that it foreclosed submitting the reinsurance billings in a new format. 

Powers of the Arbitration Panel and Arbitration Awards

It is the goal of every reinsurance disputes counsel to obtain an award of attorney fees against the opposing party.  The goal is rarely achieved.  But when it is achieved, courts are likely to confirm the award, even if the award of attorney fees is non-contractual.  In Catalina Holdings (Bermuda) Ltd. v. Muriel, No. 18-cv-05642, 2020 U.S. Dist. LEXIS 59812 (N.D. Ill. Apr. 6, 2020), the court stated that courts will enforce an arbitration award so long as it draws its essence from the contract, even if the court believes the arbitrator misconstrued the contract.  The court construed the contractual provision allowing the panel to award costs, but not exemplary damages, as consistent with the arbitrators’ award of attorney fees.  The court noted that the issue of attorney fees was presented to the panel by both parties. Interestingly, the court cited the honorable engagement language as one of the contractual features supporting the interpretation of the word “costs” to include attorney fees.

Arbitration panels sometimes issue interim final awards and then final awards.  Does the issuance of an interim final award render the panel functus officio (without further power)?  In Allstate Insurance Co. v. Amerisure Mutual Insurance Co., Nos. 19 C 4341, 19 C 7080, 2020 U.S. Dist. LEXIS 53923 (N.D. Ill. Mar. 25, 2020), the arbitration panel issued an “Interim Final Award,” which denied the cedent’s claims for defense costs in addition to the umbrella policy limits on only one specific facultative certificate.  The panel then issued a “Final Award,” which allowed the cedent to cede defense costs to the reinsurer, but for 5 of the 6 certificates.  A battle over which award should be confirmed as the final award ensued, with the court siding with the “Final Award.” 

In granting the cedent’s petition and denying the reinsurer’s petition, the court held that the Final Award was the final award, not the Interim Final Award, and that the Final Award, although terse, only decided the issues that had not been decided under the Interim Final Award. The court rejected the reinsurer’s argument that the arbitration panel was functus officio after it issued the Interim Final Award. The court stated that it was not reasonable to interpret the panel’s interim award to mean that the panel denied the cedent’s claims to any defense costs, regardless of whether they were within or without the underlying policy limits. The court concluded, that “it is clear that in the Interim Final Award the arbitration panel intended to address only whether [the cedent] could properly seek payment from [the reinsurer] of defense costs in addition to its policy limits, and it was only [the cedent’s] claims to such payments that were denied.”

In a similar vein, parties sometimes claim that the second award supersedes the first award.  In Standard Security Life Insurance Co. of New York v. FCE Benefit Administrators, Inc., No. 19-2336 (7th Cir. Jul. 28, 2020), the district court originally rejected the request to confirm a first award on damages, holding that the request was premature because not all the issues before the arbitration panel had been decided. After the second award was issued, the district court confirmed both awards. On appeal, the losing party argued that the second award superseded the first award and therefore, the damages award was no longer effective.  The court rejected the contention that the phase II award “erased” the phase I award because the phase II award contained the typical phrase: “all other claims for relief by the parties are denied.” The court found that the “all other claims for relief by the parties are denied” phrase only made sense if it referred to the claims that were asserted in phase II, which were termed by the arbitration panel in the phase II award as “newly asserted claims in Phase II of this arbitration.” 

Summons and Subpoena

Whether an arbitration summons is enforceable, was decided by the Second Circuit Court of Appeals in 2020.  In Washington National Insurance Co. v. Obex Group LLC, 958 F. 3d 126 (2d Cir. 2020), the circuit court affirmed the district court’s denial of a motion to dismiss the petition to enforce the summonses and to quash. On the validity of the summons issue, the court noted that the properly issued summons is not rendered invalid by an offer or agreement to produce documents without a hearing. The court also noted that Section 7 of the FAA contains no limit on the number of documents that may be deemed material.  As to venue, an issue that has become controversial in the past, the court found that for purposes of these summonses, the arbitrators were sitting in the Southern District of New York and it did not matter that that arbitrators once sat in the Eastern District of Pennsylvania concerning another summons.  Under this ruling, in the Second Circuit the summons will be enforced if the summons is issued for a hearing in the district where the arbitrators are sitting for purposes of the summons. 


For some time, cedents have had the upper hand in follow-the-settlements disputes.  More recently, however, reinsurers have had success especially where a follow form clause required consideration of the underlying policy terms.  In Utica Mutual Insurance Co. v. Fireman’s Fund Insurance Co., 957 F. 3d 337 (2d Cir. 2020), the court found as a matter of law that the reinsurer was not obligated to the cedent because the losses did not exceed the attachment points for the underlying reinsured umbrella policies.

The dispute involved facultative certificates of reinsurance, which provided that the reinsurer’s liability followed that of the cedent consistent with the terms of the umbrella policies. The umbrella policies provided that the cedent was “liable only for the ultimate net loss resulting from any one occurrence in excess of . . . the amounts of the applicable limits of liability of the underlying insurance as stated in the Schedule of Underlying Insurance Policies.” The schedules included separate provisions for bodily injury claims and property damage claims. Aggregate limits were only provided for the property damage claims. The facultative certificates each had a follow form clause and a follow-the-settlements provision. 

The case came down to whether the umbrella policies contained aggregate limits because without aggregate limits, the individual bodily injury claims were too small to reach the umbrella policies (and therefore the certificates). The circuit court reversed a judgment after a jury trial, concluding that the reinsurer was liable only if the losses exceeded the limits as stated in the schedules. The court rejected the cedent’s argument that the follow-the-settlements provision bound the reinsurer to the cedent’s claims determination. The court noted that the follow-the-settlements doctrine does not alter the terms or override the language of the reinsurance contract and that the reinsurer cannot be held accountable for an allocation that is contrary to the express language of the reinsurance contract. The court found that the cedent’s reading would essentially render the follow form clause in the certificates and the definition of loss in the umbrella policies meaningless, and “would be contrary to the parties’ express agreement (citation omitted).” The court supported its ruling as consistent with the long line of follow-the-settlements cases that hold “to trigger deference under the follow-the-settlements doctrine, the settlement decision in question must be reasonable and in good faith but must also be within the terms of the reinsured policy” (citations omitted). 

In another follow-the-settlements case involving facultative certificates of reinsurance and underlying umbrella polices, the court granted summary judgment to the cedent based on English law that governed the certificates.  In The Insurance Co. of the State of Pennsylvania v. Equitas Insurance Ltd., No. 17 CV 6850-LTS-SLC (S.D.N.Y. Jul. 16, 2020), the court noted that English law provides a strong presumption of back-to-back coverage.  In other words, a reinsurer’s liability under a proportional facultative certificate generally is co-extensive with the reinsured policy.  Here the issue was whether the “all-sums” approach under Hawaii law (the law of the underlying policies) flowed through to the facultative certificates or whether an exception to the back-to-back presumption under English law applied.  The court rejected the reinsurer’s argument finding, instead, that English law did not require an exception to the back-to-back presumption and that the reinsurer had to pay under the reinsurance contract.

Disputes often arise in the allocation of a settlement to a tower of excess insurance contracts.  On the reinsurance side, facultative reinsurers of upper layer excess policies will challenge a reinsurance cession where they believe that the underlying policies have not been exhausted.  In Fireman’s Fund Insurance Co. v. OneBeacon Insurance Co., No. 14 Civ. 4718 (PGG) (S.D.N.Y. Oct. 19, 2020), the court granted summary judgment to the cedent and directed the reinsurer to pay its share of the settlement. The case came down to what the term “exhaustion” meant in the excess policy and whether the reinsurer was required to follow the cedent’s settlement allocation.  The court held that the term “exhaustion” was ambiguous and that nothing in the policy, including the amendatory endorsement, clearly established that exhaustion required an actual payment up to the underlying policy’s limit of liability. The court concluded that the cedent’s interpretation of the term “exhaustion” was reasonable.  While the court agreed with the reinsurer that the follow-the-settlements doctrine cannot override the language of the underlying policy or the reinsurance contract, because the excess contract was ambiguous as to the meaning of “exhaustion” that principle was irrelevant to the court’s decision. The court nevertheless applied the follow-the-settlements doctrine and held that the reinsurer was bound to accept the cedent’s settlement and allocation.


              Production of Reinsurance Information

Reinsurance information is now regularly requested by plaintiff’s lawyers in underlying coverage disputes.  Courts tend to allow this discovery, although it is sometimes limited to just the reinsurance contracts.  In one case, the court held that insurer was required to produce its reinsurance agreements as part of its initial disclosures.  Lamar Adver. Co. v. Zurich Am. Ins. Co., No. 18-1060, 2020 U.S. Dist. LEXIS 13891 (D. La. Jan. 28, 2020).  The court also ordered production of communication between the insurer and its reinsurers regarding the policyholder’s claims because those communications would contain information relevant to whether the insurer acted in good faith in explaining its reason or granting or denying portions of the claims or otherwise described or explained its handling of the claims.

Similarly, in Mid-State Auto, Inc. v. Harco National Insurance Co., No. 2:19-cv00407, 2020 U.S. Dist. LEXIS 51727 (S.D. W. Va., Mar. 25, 2020), the court ordered the production of reinsurance information reasoning that reinsurance information is relevant where it sheds lights on the insurer’s state of mind in handling claims.  Depositions revealed reports to reinsurers, which the court presumed contained the insurer’s assessment of its claims handling.  Accordingly, the court held that this type of reinsurance information was relevant to establishing whether the insurer acted unreasonably in denying coverage and should be produced.

But in another case, the court held that information beyond the reinsurance contracts were too far removed from the case to order production.  Idahoan Foods, LLC v. Allied World Assur. Co. (US), Inc., No, 4:18-cv-00273-DCN, 2020 U.S. Dist. LEXIS 7243 (D. Id. Apr. 22, 2020).  There is little reason, the court held, “to involve another party [the reinsurer] that had essentially an ‘arms-length’ transaction with [the insurer].”


While reinsurance arbitrations are confidential, using the courts to confirm or vacate an arbitration award has in many cases led to the arbitration award—and sometimes other arbitration information—being unsealed and made public.  This trend continued in 2020.  In Pennsylvania National Casualty Insurance Group v. New England Reinsurance Corp., Nos. 20-1635 and 20-1872 (3rd Cir. Dec. 24, 2020) (Not Precedential), the circuit court affirmed a district court order unsealing a reinsurance arbitration award. In this case, the cedent withdrew its petition to confirm the award after the parties settled, but another reinsurer intervened and sought access to the award. Initially, the district court denied the intervenor’s application to unseal the award, but the Third Circuit reversed and remanded the case back to the district court to consider whether the award should be unsealed under a common-law-right-of-access analysis. Pennsylvania Nat’l Mut. Cas. Ins. Co. v. New England Reinsurance Corp., 794 F. App’x 213, 215–16 (3d Cir. Dec. 6, 2019). On remand, the district court unsealed the award based on the common-law-right-of-access analysis and the circuit court affirmed.  The court found that if the award (or any document) finds its way into the court clerk’s office, it becomes a judicial record and is subject to public access.  Neither the district court nor the circuit court was convinced of a specific harm or clearly defined injury to the cedent by the unsealing of the award, which would have allowed the award to remain sealed.


The federal circuits are split on whether a state anti-arbitration law can reverse preempt the FAA and preclude arbitration even if the reinsurance contract has an arbitration clause.  That split became further evident in 2020. 

In Washington Cities Insurance Authority v. Ironshore Indemnity, Inc., No. 2:19-cv-0054-RAJ, 2020 U.S. Dist. LEXIS 39633 (W.D. Wash. Mar. 6, 2020), the court denied a motion to compel arbitration because of Washington’s anti-arbitration statute, RCW § 48.18.200.  The court concluded that RCW § 48.18.200 reverse preempted Chapter I of the FAA under the McCarran-Ferguson Act and that reinsurance came within the definition of insurance.

But in another case, the court granted the motion to compel arbitration and ruled that the Arkansas anti-arbitration law did not reverse preempt the New York Convention or Chapter II of the FAA.  J.B. Hunt Trans. Inc. v. Steadfast Ins. Co., No. 5:20-CV-5049 (W.D. Ark. Jul. 1, 2020).  The court ultimately found more convincing the arguments that McCarran-Ferguson does not apply to the New York Convention or Chapter II of the FAA.  The court agreed with the 4th Circuit that Congress did not intend McCarran-Ferguson to permit state law to vitiate international agreements entered by the US. The court also agreed with those other courts that found Article II, Section 3 of the New York Convention to be self-executing. This same issue is before the Ninth Circuit and ultimately will need to be resolved by the US Supreme Court.


It is very rare that an action by a policyholder or claimant against a reinsurer is sustained.  That is because neither are in privity of contract with the reinsurer.  The cases in 2020 were consistent with this trend.  In City of Florida City, vs. Public Risk Management of Florida, Nos. 3D18-2175 & 3D19-0983, 2020 Fla. App. LEXIS 10391 (Fla. App. 3rd Dist. Jul. 22, 2020), a Florida appeals court affirmed summary judgment in favor of a reinsurer and dismissed the reinsurer from the lawsuit for lack of privity. The court found that summary judgment in favor of the reinsurer was “soundly substantiated in both fact and law.” The court cited case law and statutory language under Florida’s Insurance Code to support the concept of contractual privity. See 624.610(9), Fla. Stat. (“No person, other than the ceding insurer, has any rights against the reinsurer which are not specifically set forth in the contract of reinsurance or in a specific written, signed agreement between the reinsurer and the person”).

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