FOLLOW THE FORTUNES DOCTRINE APPLIED TO ALLOCATION OF SETTLEMENT AMOUNT
In a dispute with reinsurers over coverage for the settlement of asbestos-related disputes valued at close to one billion dollars, in which the reinsurance contracts contained a follow the fortunes provision, the reinsurers challenged whether the doctrine applied to the cedent’s decisions in the allocation of the settlement amount, and, if applicable, it could be applied in a summary judgment context to the cedent’s allocation of the settlement. Modifying the decision of the lower court, the Court of Appeals held: (1) the follow the fortunes doctrine applied to the cedent’s allocation of the settlement amount; (2) the doctrine appropriately was applied to sustain the cedent’s allocation of the entire settlement amount to a single policy year, since the applicable trigger of coverage supported such an allocation; and (3) disputed issues of material fact prevented the application of the doctrine in a summary judgment context with respect to challenges to the allocation of the settlement amount to different policies and the value attributable to specific types of claims. United States Fidelity & Guaranty Company v. American Re-Insurance Company3, 2013 WL 451666 (N.Y. Ct. App. 2/7/2013).
This post written by Rollie Goss.
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