With the proliferation of runoff companies, which either take over distressed reinsurers or absorb legacy reinsurance obligations, comes claims by insureds and cedents against those companies and their affiliated administrators for various alleged offenses. For example, claims of tortious interference with contract have been brought against a number of runoff entities and their affiliates.
But claims of tortious interference are very difficult to sustain. In a recent case, an Illinois federal court dismissed tortious interference claims for the second time.
Legacy books of business are often handed over to an agent to run off the business. This handover can happen through a simple third-party administrator contract, via a portfolio transfer or as part as an outright purchase of the legacy company. The legacy transfer process may involve direct business or reinsurance business, and may be in the property and casualty arena or the life and health segment of the industry.
In a recent case, a court was asked to address claims brought by cedents against the reinsurer’s runoff manager for intentional interference with contractual relations and inducing breach of contract when the claims stopped being paid.