Reinsurance Focus

A federal district court granted summary judgment to insurer Lexington Insurance Company because insured Untied Health Care Group failed to comply with the notice provision in United’s insurance contract, prejudicing Lexington. The contract stated that United would give notice as soon as practicable of any claim where United reserved at or above 50% of its SIR of $3 million. United litigated a lawsuit filed in May 2001 for seven years, incurring nearly $20 million in legal fees and settling in May 2008 for $8.5 million. Untied did not notify Lexington of the claim in a distinct communication until April 2008, but argued that quarterly loss run reports in which the claim appeared as one line item was sufficient notice. The court agreed that such reports could constitute notice, but the reports United submitted inaccurately indicated that the claim had been settled within the SIR in 2006. Lexington was prejudiced because it was denied its contractual right to associate in the investigation, defense, or control of the claim. The court, in its order, mistakenly described Lexington as United’s reinsurer. United has moved for reconsideration, arguing that the court’s mistake in this regard materially affects the propriety of the court’s grant of summary judgment to Lexington because an insured should be afforded more protection against forfeiture of benefits than a reinsured. Lexington Insurance Co. v. United Health Group, Inc., Case No. 09-10504 (U.S.D.C. Feb. 15, 2011)

This post written by Ben Seessel.