Modified follow the fortunes provision not apply to settlements by reinsured
A UK Court has held that a follow the fortunes provision in facultative reinsurance contracts did not apply to without prejudice settlements reached by a reinsured with its insureds, since the clause provided that the reinsurance would “follow in all respects the settlements or other payments of whatsoever nature excluding without prejudice and ex-gratia settlements.” The clear contractual exclusion of without prejudice settlements from the operation of the follow the fortunes clause meant that the reinsured had to prove that the claims payments were appropriate under the underlying insurance. Faraday Capital Ltd. v. Copenhagen Reinsurance Co., [2006] EWHC 1474, [2006] All ER D 74, 2006 WL 2667603 (Queen's Bench Comm. Ct. May 4, 2006).
