Asbestos claims continue to spawn reinsurance disputes over facultative reinsurance coverage of expenses in addition to the limits. What happens when the issue is decided in an arbitration between a ceding insurer and one reinsurer and the ceding insurer raises the same issue against another reinsurer in a subsequent litigation?
Read more: Sixth Circuit Affirms Collateral Estoppel in Favor of ReinsurerIn Amerisure Mutual Insurance Co. v. Swiss Reinsurance America Corp., No. 24-1492 (6th Cir. Nov. 4, 2025) (Not Recommended for Publication), the circuit court affirmed an order of the district court granting a reinsurer’s motion for summary judgment based on collateral estoppel. The dispute was over expenses in addition to the limits for defending asbestos cases against the underlying insured. The ceding insurer issued primary and umbrella policies and reinsured the umbrella policies with the reinsurer under facultative certificates.
The real issue here is the ceding insurer’s prior arbitration with another facultative reinsurer where the arbitration panel in its final award held that the reinsurer did not have to pay expenses outside the limits of the umbrella policies under the facultative certificates. Subsequent to that arbitration the ceding insurer sought judicial confirmation of the award (based on other elements of the award that were favorable to the ceding insurer).
When the ceding insurer brought the underlying action against the second reinsurer arguing the same issue concerning whether the facultative certificate had to pay the umbrella expenses in addition to the limits, the reinsurer countered with a motion for summary judgment for collateral estoppel based on the prior arbitration award that was confirmed in court. The district court agreed and granted the reinsurer summary judgment.
On appeal, the Sixth Circuit affirmed. While the opinion is not recommended for publication and is therefore not precedent, the court provides a clear roadmap for analyzing whether a prior arbitration award in favor of a different reinsurer can support collateral estoppel for a different but similarly situated reinsurer so it is worth the read.
In essence, the court found that all the elements of collateral estoppel or issue preclusion applied and rejected the ceding insurer’s arguments to the contrary. The court found that the main issue being litigated — whether the ceding insurer’s reinsurers must reimburse it for defense costs it paid to its insured over the umbrella limits — was raised and actually litigated in the earlier arbitration. The court found that the arbitration record and award indicate that the umbrella drop-down provision was necessarily decided against the ceding insurer even though it was not expressly mentioned in the award.
The court found that the ceding insurer had the opportunity to fully and fairly litigate the defense cost issue in the arbitration. It noted that the ceding insurer sought to confirm the award and rejected the ceding insurer’s argument that the limited opportunity to “appeal” an arbitration award should preclude collateral estoppel. The court also rejected the ceding insurer’s argument that the “honorable engagement clause” and the difference in how an arbitration is conducted compared to a court proceeding should preclude collateral estoppel. The court noted that the ceding insurer had not shown the arbitration to be unfair or that the decision was unreliable.
The court also rejected the argument that mutuality of estoppel precluded collateral estoppel finding that the ceding insurer’s argumentative posture in both proceedings was the same. The court held that requiring mutuality would encourage gamesmanship.
At bottom the court held that precluding the ceding insurer from relitigating the same issue against the second reinsurer served an essential purpose of the collateral estoppel doctrine, which is to promote judicial economy by preventing needless litigation.
