Reinsurance Focus

Insurers sued their reinsurer for breach of certain facultative reinsurance certificates when the reinsurer ceased paying claims made for underlying losses under excess liability coverage for asbestos-related personal injuries. The reinsurer defended its decision to stop paying claims by contending that the insurers violated the reinsurance certificates when they transferred losses to another company; warranties in the reinsurance certificates provided that the insurers would “retain for [their] own account, subject to treaty reinsurance only, if any, the amount specified on the face of” the certificates. The insurers moved to dismiss this defense, arguing that they did not breach the certificates because their transfer of liability constituted a purchase of “treaty reinsurance,” and thus met the stated exception in the warranties. The court rejected the insurers’ argument, holding that “treaty reinsurance is obtained in advance of actual coverage,” and here, it was undisputed that the transfer took place “some 30 years” after the insurer wrote the policies and after the losses occurred. The court also rejected a number of other arguments made by the insurers with respect to other defenses, with two exceptions: (1) that the insurers were correct that the defense of failure to settle promptly was without merit in light of the reinsurer’s duty to follow the settlements of the insurers, and (2) that the reinsurer’s uberrima fides defense was duplicative of the reinsurer’s breach of contract defense, and was therefore due to be dismissed. The court also denied a motion for summary judgment filed by one insurer, which attempted to argue that the reinsurer was liable as a matter of law under the doctrines of waiver and account stated. Granite State Insurance Co. v. Transatlantic Reinsurance Co., Case No. 652506/2012 (N.Y. Sup. Ct. Dec. 23, 2013).

This post written by Michael Wolgin.

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