Reinsurance Focus

On April 5, 2010, we reported on a federal district court’s decision to decline a magistrate judge’s report and recommendation on defendant TIG Insurance Company’s motion for partial summary judgment. The dispute involved a reinsurance claim made by plaintiff AIU Insurance Company in 2007 after settling litigation brought in 2001 involving the underlying insurance coverage. TIG responded by denying the claim, citing the reinsurance certificates’ prompt notice provision. The court declined the magistrate’s report as premature to the extent it sought rulings that: (1) Illinois law governed its reinsurance coverage dispute with AIU and that, therefore, TIG could deny coverage without showing prejudice from untimely notice; and (2) AIU breached the reinsurance contracts at issue by providing late notice of the 2001 claim.

Upon conclusion of discovery and TIG’s renewal of its motion for summary judgment, the magistrate judge has found again that Illinois law governed the dispute and that, under Illinois law, a reinsurer need not demonstrate prejudice to deny coverage to a reinsured which has failed to comply with a policy provision requiring prompt notice of claims. AIU breached the reinsurance certificates by failing to provide prompt notice, notwithstanding AIU’s contention that TIG had notice of the potential claims from other sources. The magistrate explained, “although notice from third parties can satisfy policy requirements under Illinois law, reinsurers are not charged with notice based merely on receipt of non-specific information that might lead to discovery of a potential claim.” AIU Insurance Co. v. TIG Insurance Co., Case No. 07-7052 (USDC S.D.N.Y. Aug. 16, 2012).

This post written by Michael Wolgin.

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