Courts have long held that a cedent’s settlement allocation decisions fall within the follow-the-fortunes/follow-the-settlements doctrines. Nevertheless, with the many ways settlements and claims can be allocated to policies and then ceded to applicable reinsurance contracts there are bound to be disagreements that arise. In a recent case involving a cedent’s allocation of asbestos settlements to excess polices, the reinsurer raised various issues why it did not have to respond to the portion of the settlement billed to it, including that the cedent failed to exhaust the underlying excess policies. The case worked its way to the Second Circuit Court of Appeals, no stranger to follow-the-settlements and allocation decisions.Continue reading “Second Circuit Finds for Cedent in Follow-the-Settlements Asbestos Settlements Allocation Dispute”
While it did not happen often, there have been occasions where insurance and reinsurance disputes outside the US looked to the US federal court to assist in discovery of documents or depositions in the US to aide the non-US arbitration. While the federal circuits were split, several circuits permitted the district courts to aide in the non-US arbitration.
In June 2022, the US Supreme Court addressed the issue of whether a non-US arbitration was a proceeding in a foreign or international tribunal so that the district court could aide in that proceeding under 28 U. S. C. §1782(a). Many articles and blog posts have been written about this case and I do not intend to get into the technical details of 1782(a) or the various arguments presented. I do, however, discuss below the ramifications for insurance and reinsurance arbitrations.Continue reading “Using US Federal Courts to Aide in Non-US Arbitrations Dealt a Death Blow By the US Supreme Court”
To sustain a claim against reinsurers there has to be a contractual relationship between the party making the claim and the reinsurers. That is the prevailing rule in all jurisdictions, subject to rare exceptions. Nevertheless, policyholders, when left without a recovery from their insurer, will try to make out a claim directly against their insurer’s reinsurers. Typically, this effort meets with little success as we described in a blog post back in 2020.
Earlier this year, in a complicated credit insurance/reinsurance transaction involving a special purpose vehicle, a policyholder left without an insurance recovery tried again to recover its loss from its insurer’s reinsurers. The result was the same.Continue reading “Without a Contractual Relationship, Claims Against Reinsurers Fail”
The follow-the-settlements doctrine severely limits the ability of a reinsurer to deny coverage to settlement paid by the cedent. But the doctrine is not absolute. As many courts have said, a follow-the-settlements clause does not create coverage where none existed. In a recent case, a New York intermediate appellate court addressed the application of a follow-the-settlements clause to a claim for defense costs paid under umbrella policies for asbestos settlements.Continue reading “New York Appeals Court Holds Follow-the-Settlements Does Not Apply When Coverage Is Beyond the Scope of the Reinsured Policy”
Follow-the-fortunes is a reinsurance concept that often is misconstrued. Some wish to impose it on every reinsurance contract regardless of whether a follow-the-fortunes clause exists. Cedents invoke it to compel payment from their reinsurers. In a recent case, the Eleventh Circuit had an opportunity to weigh in on whether the follow-the-fortunes doctrine should be inferred regardless of the contract wording and whether the terms of the reinsurance contract contained follow-the-fortunes language.Continue reading “Follow-the-Fortunes Rejected By 11th Circuit”
Insurance and reinsurance arbitrations are often governed by the Federal Arbitration Act (“FAA”). Enforcement of arbitration rights under the FAA, however, may take place in either federal or state courts. To proceed in federal court, subject matter jurisdiction must exist. In a recent case, the United States Supreme Court addressed an open question concerning whether subject matter jurisdiction existed on competing applications to vacate and confirm an arbitration award so that the federal district court could hear the dispute.Continue reading “Federal Jurisdiction Matters to Vacate or Confirm an Arbitration Award”
Whether courts will seal reinsurance arbitration documents when the parties come to court for judicial relief has been a significant topic for several years. Most courts refuse to seal arbitration information when motions to vacate or confirm an arbitration award are made. But when the controversy is over whether arbitration should be compelled, sometimes the result is different. In a recent case, the court agreed to seal arbitration-related documents in large part because of the ARIAS U.S. confidentiality agreement.Continue reading “ARIAS US Form Plays Major Role in Court’s Decision to Seal Documents”
Reinsurance disputes sometimes become complicated when the original parties to the reinsurance contract are no longer involved. Enforcing arbitration rights also becomes more complicated when contracts are assigned or where a receiver is involved. Who has the right to compel arbitration and was the arbitration demand properly served are questions that arise. In a recent case, a New York State motion court addressed some of these issues.Continue reading “Compelling Arbitration After Assignment”
COVID-19 has sparked new debates about how insurance losses are identified, categorized, defined and potentially aggregated. This is especially true in the reinsurance context. While in the US, insurance claims for losses sustained under business income and extra expense provisions of commercial property policies have largely been denied leaving little to cede to reinsurers, that is not the case under other lines of business including event cancellation and travel insurance coverages. Moreover, in the United Kingdom and in the EU, business interruption claims have been allowed under certain policy forms, which has led to reinsurance cessions.
My colleague Curtis Leitner asked me to co-author an article with him discussing the possibility of aggregating COVID-19 losses using follow-the-fortunes and related principles. I gladly admit that Curtis did the heavy lifting on this one from an analytical point of view. We published the article in the ARIAS Quarterly, Q1 2022. We hope you enjoy the article.