Is Self-Insurance, Insurance?

Joint insurance funds provide coverage to members and often purchase reinsurance to protect the fund. In a recent case, an issue arose concerning competing insurance policies and coverage provided by a joint insurance fund covering a loss and whether the fund’s purchase of reinsurance triggered the “other insurance” clause in the competing insurer’s policy making the fund the primary insurer.

In National Union Fire Insurance Company of Pittsburg v. Somerset County Joint Insurance Fund, No. 24-196 (ZNQ)(JBD) (D. N.J. Jan. 6, 2025), a joint insurance fund and an auto and excess carrier disputed which policies were primary and which were excess after settling a catastrophic loss. The fund had purchased reinsurance, which reduced its $5 million limit down to $250,000. All policies had “other insurance” clauses. The question was whether the carrier’s “other insurance” clause applied because the fund provided “insurance,” which would make the carrier’s policy excess of the fund’s coverage.

The excess carrier sought discovery of the reinsurance coverage purchased by the fund to demonstrate that the reinsurance policy triggered the “other insurance” clause and that the fund’s exposure over its retention was not self-insurance but was “insurance” because of the reinsurance policy.

In denying the discovery request, the court held that the governing statute and an opinion of the New Jersey Supreme Court made it clear that the discovery sought was not relevant because even when a joint insurance fund obtains reinsurance, it does not convert to providing “insurance,” but continues to allow its members to self-insure. The court also found that the discovery requested was not proportional to the needs of the case given that the carrier had the reinsurance contract and the fund was willing to make a witness available to discuss its risk management plan and operations. The court noted that nothing in its discovery determination precluded the carrier from making its arguments on a substantive motion in the future.

Second Circuit Rules Facultative Certificates Respond On a Cost-Inclusive Basis in Asbestos Dispute

Insurance coverage and reinsurance disputes over asbestos settlements continue to occupy the courts. Many of the reinsurance disputes revolve around how facultative certificates of reinsurance must respond to underlying asbestos settlements involving umbrella policies. The issue typically involves whether the expenses associated with the defense of the underlying claims is recoverable in excess of the underlying policy limits. In a recent case, the Second Circuit issued a fairly long decision on this issue.

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Conflating Insurance with Reinsurance

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To many people, insurance is complicated and reinsurance just makes matters worse. I get that, but it is pretty important that courts deciding insurance and reinsurance issues understand the difference. In a recent New York case, a state court conflated excess of loss insurance with reinsurance. Was the court right?

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Primary Insurer Loses Failure-to-Settle Dispute to Excess Insurer

An interesting thing sometimes happens when a policyholder with a tower of insurance is sued and settlement discussions involve members of the insurance tower. The excess insurers may look to the primary insurer to defend the claim and to run point on the settlement. The primary insurer, where it is clear that the settlement will be well above the primary insurance limits may look to the excess insurers to lead the settlement discussions. But what happens if the case is not settled and the verdict impacts the excess layers? Does an excess insurer have any recourse if the primary insurer failed to settle the case?

In a recent case in the Eleventh Circuit Court of Appeals, the court found in favor of an excess insurer and against the primary insurer on a failure-to-settle dispute.

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Exhaustion Found Ambiguous Causing Reinsurer to Follow the Settlement

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In a recent facultative reinsurance dispute over the payment of an asbestos settlement, a New York federal court found the term “exhaustion” ambiguous and granted summary judgment to the cedent requiring the reinsurer to pay its share of an asbestos settlement.

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When Claims-Made Primary and Occurrence Excess Policies Clash

Decades ago, professional liability policies, like most liability policies, were written on an occurrence basis. If a claim was incurred during the insurance policy period, the policy would respond to the claim regardless of when the claim was made against the defendant and noticed to the insurance company. As we know from environmental and asbestos claims, that can take decades.

Then along came claims-made polices. Under a typical claims-made policy, if a claim is made against the defendant and reported to the insurance company during the policy period, that insurance policy will respond to the claim regardless of when the occurrence took place (as long as the claim occurred after the policy’s retroactive date). If the claim was made after the policy period and , that policy would

In New York, legislative and regulatory efforts to keep medical professionals practicing in New York led to a quirky medical malpractice insurance system where most primary medical malpractice policies were claims-made policies, but New York medical professionals were provided with excess policies written on an occurrence basis.

This leads to a recent case that explored the issues that arise when occurrence-based excess policies sit on top of claims-made primary policies.

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Objectively Reasonable Expectations of the Insured Prevails – Improper Erosion Theory Rejected

Primary and excess insurers periodically clash over whether the underlying claim should have been paid by the primary insurer. But it is pretty unusual for an excess insurer to argue that the underlying claim payment made by other insurers improperly eroded the excess insurer’s attachment point and prematurely triggered the excess coverage for a subsequent claim. The Ninth Circuit Court of Appeals recently addressed the question of whether an excess insurer challenge an underlying insurer’s payment decision.

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