NO REINSURANCE COVERAGE FOR CEDENT’S EXTRACONTRACTUAL LIABILITY FOR BAD FAITH
USF&G settled underlying asbestos coverage claims for nearly a billion dollars, and looked to its reinsurers for coverage. The reinsurers, including American Re, challenged the claims, and USF&G brought suit. A New York state trial court granted USF&G summary judgment, and the intermediate appellate court affirmed. American Re petitioned to New York’s high court, arguing (1) summary judgment was improper because USF&G improperly calculated its share of the losses; and (2) USF&G improperly attempted to allocate the portion of the underlying settlements attributed to bad faith claims against USF&G to the reinsurers.
As to issue (1), the Court of Appeals affirmed, citing the “follow the settlements” doctrine. As to issue (2), the Court agreed with American Re that summary judgment was improper as to the issue of allocating a portion of the settlements that could reasonably have been attributed to extracontractual bad faith claims against USF&G. It remanded with instructions for the trial court to determine if, and by how much, it should reduce allocation to the reinsurers of any portion of the underlying settlements attributable to USF&G’s settlement of the underlying bad faith claims against it, for which the reinsurers are not responsible. United States Fidelity & Guaranty v. American Re-insurance Co., 2013 NY Slip Op 00784 (N.Y. Feb. 7, 2013).
This post written by John Pitblado.
