REINSURER CAN DENY COVERAGE BASED ON INSURER’S LATE NOTICE
AIU brought an action against TIG asserting breach of contract and seeking a declaratory judgment as to coverage under nine certificates of facultative reinsurance issued by TIG’s predecessor in interest in the late 1970s and early 1980s. The parties’ dispute arose in 2007 after AIU sought coverage from TIG regarding a multimillion dollar settlement AIU had reached with its insured Foster Wheeler relating to Foster Wheeler’s exposure to numerous asbestos-related lawsuits. TIG contested coverage under the certificates, arguing that AIU had failed to provide prompt notice of Foster Wheeler’s demand for payment which AIU had received in 2003 but did not report to TIG until early 2007.
AIU contended that New York law applied, under which a reinsurer must demonstrate prejudice due to late notice in order to avoid coverage. TIG argued that prejudice to TIG need not be shown in order for it to deny coverage based on late notice under applicable Illinois law. The court determined that Illinois law applied because the certificates were issued in Illinois and AIU was required to perform under the certificates in Illinois by submitting claims to TIG’s Chicago-based intermediary. The court granted TIG’s motion for summary judgment. AIU Insurance Co. v. TIG Insurance Co., Case No. 07-civ-7052 (USDC S.D.N.Y. Mar. 25, 2013).
This post written by Ben Seessel.
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