Reinsurance Focus

ACE Property & Casualty Insurance Company, as successor in interest to Central National Insurance Company of Omaha, sued Global Reinsurance Corporation of America for breach of a facultative reinsurance certificate issued by Global’s predecessor in interest reinsuring a portion of an umbrella policy issued by Central National. Central National’s insured incurred significant asbestos bodily injury claims that Central National and other umbrella insurers settled. ACE brought suit for breach of contract and declaratory judgment after Global refused to honor remittances submitted by Central National under the reinsurance certificate.

Global asserted several defenses to ACE’s claims. First, Global asserted that a substantial part of Central National’s settlement included defense costs where the policy arguably did not cover such costs. Citing the follow-the-fortunes doctrine, the court rejected this defense, holding that Global failed to meet its burden of demonstrating that Central National’s payment of defense costs was not arguably covered by the policy. The court similarly discarded Global’s argument that, under the language of the reinsurance certificate, Global was only required to pay defense costs where an indemnity payment had been made, holding that the reinsurance certificate must be construed in keeping with underlying policy language which included no such restriction. The court refused to accept Global’s argument that an endorsement extending the expiration date of the certificate created a separate $10 million retention limit for Central National. After a bench trial, the court entered judgment in ACE’s favor. ACE Property & Casualty Insurance Co. v. Global Reinsurance Corp. of America, Case No. 11-2838 (USDC E.D. Pa. Mar. 31, 2013).

This post written by Ben Seessel.

See our disclaimer.