Reinsurance Focus

In this long-running legal saga surrounding the liquidation of Midland Insurance Company (“Midland”), the Superintendent of Insurance, Midland’s reinsurers, and certain major policyholders stipulated to a case management order for determining the issue of whether New York substantive law controlled the interpretation of the Midland insurance policies at issue or whether the New York choice-of-law test must be conducted for each policy to determine the applicable substantive law. The trial court granted the policyholders’ motion for partial summary judgment, declaring that a choice-of-law review for each policyholder must be undertaken. This appeal followed. The New York appellate court first recounted its 1990 decision involving Midland and another policyholder where the choice-of-law issue was not litigated but the court stated that New York substantive law applied so that Midland’s creditors would receive equal treatment. The appellate court then reversed the trial court’s order for the following reasons: (1) the application of New York law in the prior case is binding on the trial court under the doctrine of stare decisis; (2) the “law of the case” precluded the policyholders from re-litigating an issue decided in an ongoing proceeding, finding that the policyholders in this case had identical interests with the policyholder in the 1990 case; and (3) that public policy required the equal treatment of all creditors in a liquidation proceeding. Finally, the court granted the intervening reinsurers’ cross motion, declaring that New York substantive law controlled the interpretation of the Midland insurance policies. In re Liquidation of Midland Ins. Co., 2010 NY Slip Op 00209 (N.Y. App. Div. Jan. 12, 2010).

This post written by Dan Crisp.