REINSURER NOT OBLIGATED TO COVER D&O CEDANT
An insurance company that provided directors and officers liability to a lottery corporation sought coverage from its reinsurer for an employment litigation judgment entered against the lottery corporation. The reinsurance certificate stated that coverage would not be provided until the insurer’s losses totaled $5 million. The final judgment at issue was $6.7 million, which included $2.4 million in interest. Thus, the issue was whether the $2.4 million in interest was considered a “loss,” which would trigger reinsurance coverage with a final judgment of $6.7 million, or “interest on a judgment,” which would result in a final of judgment of $4.3 million which falls just shy of the $5 million threshold. The court determined that the carefully worded conditions in the reinsurance certificate made it clear that the reinsurer’s obligation to cover a portion of “interest on any judgment” was separate and apart from its obligation to cover losses and granted summary judgment in favor of the reinsurer. Seneca Insurance Co. v. Everest Reinsurance Co., Case No. 11-7846 (USDC S.D.N.Y. Oct. 17, 2013).
This post written by Abigail Kortz.
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