Reinsurance Focus

Reliance Insurance Company in Liquidation (the “Liquidator”) petitioned a Pennsylvania state court for a declaratory judgment holding that Aramark Corporation must reimburse certain state guaranty associations (“GAs”) for claims allegedly improperly paid to Aramark and subsequently presented to the Reliance Estate by the GAs for payment. The Liquidator also sought a declaration that Aramark’s claims against the Estate should be given low priority. The gravamen of the dispute is that Aramark purportedly received coverage for the same claims under a contingent liability policy (“CLP”) issued by Inter-Ocean Reinsurance Company, which had been backed by Reliance collateral. The GAs intervened seeking a declaration that Aramark must exhaust the coverage limits under the CLP and reimburse them for claims that were covered by the CLP.

The court dismissed the Liquidator’s claims for lack of standing, finding that it could not sue on the GAs’ behalf, and, further, held that claim priority should be determined through the administrative process before the court gets involved. The Pennsylvania court also held that it lacked jurisdiction to adjudicate the foreign GAs’ claims, but held that the Pennsylvania Workers’ Compensation Security Fund could continue to pursue recovery of claims that were allegedly improperly paid to Aramark. Reliance Ins. Co. in Liquidation v. Aramark Corp., Case No. 5 REL 2008 (Pa. Commw. Ct. Dec. 9, 2011).

This post written by Ben Seessel.

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