Top 50+ Reinsurance Cases Every Risk Professional Should Know An Analysis of the Top 50+ Reinsurance Coverage Cases and Their Implications Risk Financing and Captive Resources Discover the IRMI Product that is right for you! Risk Financing Captive Practices and Procedures Choose the right options for funding Learn how to establish a successful your organization’s or your client’s captive insurance company that liability and workers compensation risk. stands the test of time. Captive Wire Captives and the Management of Risk Stay ahead of the latest developments Determine if a captive is feasible, the in the alternative risk transfer market. types of risks a captive can handle, how to manage and operate a captive, and more! Claims Operations Resource Captive Insurance Company Better understand how the claims Reports (CICR) process is handled, controlled, and Optimize your captive ownership or managed to improve your profitability. participation with this go-to resource for news, trends, and actionable strategies. Learn more at: www.captive.com/products Top 50+ Reinsurance Cases Every Risk Professional Should Know AN ANALYSIS OF THE TOP 50+ REINSURANCE COVERAGE CASES AND THEIR IMPLICATIONS Squire Patton Boggs (US) LLP www.squirepattonboggs.com International Risk Management Institute, Inc. www.IRMI.com Mission Statement At IRMI, we will continuously earn our customers’ trust and confidence by empowering them with the best information, practical strategies, and expert advice. The opinions contained herein are those of the authors and are not necessarily held by the authors’ employers or IRMI. This publication does not give legal, accounting, or other professional advice. If such advice is needed, consult with your attorney, accountant, or other qualified adviser. Edited by Bonnie Rogers, ARM ISBN: 978–1–933686–62–2 Copyright 2014, 2020. All Rights Reserved. International Risk Management Institute, Inc. 12222 Merit Drive, Suite 1600 | Dallas, TX 75251 | (972) 960–7693 | www.IRMI.com CONTENTS Top 50+ Reinsurance Cases ........................................ iv Bad Faith, Extracontractual Obligations, and Punitive Damages...................................22 Foreword............................................................................ vi Right of Offset ..........................................................25 About Squire Patton Boggs (US) LLP....................... vii Access to Records/Privilege/Discoverability About IRMI....................................................................... viii of Documents ...................................................27 Authors............................................................................... ix Claims Cooperation/Associating Introduction..................................................................... xii in the Defense...................................................30 Reinsurance Analysis ...................................................... 1 Cut-Through/Direct Right of Action.................32 Introduction to Reinsurance................................. 1 Security.......................................................................34 Contract Interpretation ......................................... 5 Arbitration.................................................................35 The Duty of “Utmost Good Faith” ....................... 8 Honorable Engagement. ......................................41 Follow-the-Fortunes/Settlements.....................11 Insolvency/McCarran Ferguson .........................43 Late Notice................................................................15 Reinsurance Case Summaries ....................................46 Reinsurance Limits of Liability/ Cumulative Case Index.............................................. 102 Additional Costs ..............................................17 Copyright © 2020 International Risk Management iii TOP 50+ REINSURANCE CASES Institute, Inc. Top 50+ Reinsurance Cases Below is a list of the 50+ most interesting, influential, and vital reinsurance coverage cases, in our opinion, with links to the case summaries. These cases and their implications are discussed in the pages that follow. An alphabetical listing of all the cases mentioned in this book is in the Cumulative Case Index. The five new cases added in this revision have an asterisk at the end of the citation. 1. Affiliated FM Ins. Co. v. Constitution Reins. 13. Christiania Gen. Ins. Co. v. Great Am. Ins. Co., Corp., 416 Mass. 839, 626 N.E.2d 878 (1994) 979 F.2d 268 (2d Cir. 1992) 2. Ainsworth v. General Reins. Corp., 751 F.2d 14. Commercial Union Ins. Co. v. Seven Provinces 962 (8th Cir. 1985) Ins. Co., 217 F.3d 33 (1st Cir. 2000) 3. Allendale Mut. Ins. Co. v. Excess Ins. Co., 992 F. 15. Commercial Union Ins. Co. v. Swiss Reins. Am. Supp. 271 (S.D.N.Y. 1997) Corp., 413 F.3d 121 (1st Cir. 2005) 4. Allstate Ins. Co. v. American Home Assur., 43 16. Compagnie De Reassurance D’Ile De Fr. v. A.D.3d 113, 837 N.Y.S.2d 138 (1st Dep’t 2007), New Eng. Reins. Corp., 57 F.3d 56 (1st Cir. 1995) leave to appeal denied, 10 N.Y.2d 711, 890 17. Continental Cas. Co. v. Northwestern Nat’l Ins. N.E.2d 246 (2008) Co., 427 F.3d 1038 (7th Cir. 2005) 5. American Ins. Co. v. North Am. Co. for Prop. & 18. Continental Cas. Co. v. Stronghold Ins. Co., 77 Cas. Ins., 697 F.2d 79 (2d Cir. 1982) F.3d 16 (2d Cir. 1996) 6. Asociación de Garantía v. Commonwealth Ins. 19. Corcoran v. Ardra Ins. Co., 77 N.Y.2d 225, 567 Co., 114 D.P.R. 166 (P.R. 1983) N.E.2d 969, 566 N.Y.S.2d 575 (1990) 7. Banco de Seguros del Estado v. Mutual 20. Employers Ins. of Wausau v. National Union Marine Office Inc., 344 F.3d 255 (2d Cir. 2003) Fire Ins. Co. of Pittsburgh, 933 F.2d 1481 (9th 8. Bellefonte Reins. Co. v. Aetna Cas. & Sur. Co., Cir. 1991) 903 F.2d 910 (2d Cir. 1990) 21. Excess Ins. Co. v. Factory Mut. Ins. Co., 3 N.Y.3d 577, 822 N.E.2d 768, 789 N.Y.S.2d 461 (2004) 9. British Int’l Ins. Co. Ltd. v. Seguros La Republica, S.A., 212 F.3d 138 (2d Cir. 2000) 22. Fidelity & Deposit Co. v. Pink, 302 U.S. 224 (1937) 10. British Int’l Ins. Co. Ltd. v. Seguros La 23. Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of Republica, S.A., 342 F.3d 78 (2d Cir. 2003) N.Y., 284 F.R.D. 132 (S.D.N.Y. 2012) 11. Century Indem. Co. v. Certain Underwriters at 24. First State Ins. Co. v. National Cas. Co., 781 F.3d Lloyd’s of London, 584 F.2d 513 (3d Cir. 2009) 7 (1st Cir. 2015)* 12. Certain Underwriting Members of Lloyds of 25. Fortress Re, Inc. v. Central Nat’l Ins. Co., 766 London v. Florida, 892 F.3d 501 (2d Cir. 2018)* F.2d 163 (4th Cir. 1985) iv 26. General Reins. Corp. v. Southern Sur. Co., 27 41. Pacific Reins. Mgmt. Corp. v. Ohio Reins. F.2d 265 (8th Cir. 1928) Corp., 935 F.2d 1019 (9th Cir. 1991) 27. General Re Life Corp. v. Lincoln Nat’l Life Ins. 42. Peerless Ins. Co. v. Inland Mut. Ins. Co., 251 Co., 909 F.3d 544 (2d Cir. 2018)* F.2d 696 (4th Cir. 1958) 28. Global Reins. Corp. of Am. v. Century Indem. 43. Pink v. American Sur. Co., 283 N.Y. 290, 28 Co., 30 N.Y.3d 508, 69 N.Y.S.3d 207, 91 N.E.3d N.E.2d 842 (1940) 1186 (N.Y. 2017)* 44. Quackenbush v. Allstate Ins. Co., 121 F.3d 1372 29. Great Am. Ins. Co. v. Fireman’s Fund Ins. Co., (9th Cir. 1997) 481 F.2d 948 (2d Cir. 1973) 45. Scandinavian Reins. Co. v. St. Paul Fire & 30. In re Midland Ins. Co., 79 N.Y.2d 253, 590 N.E.2d Marine Ins. Co., 668 F.3d 60 (2d Cir. 2012) 1186, 582 N.Y.S.2d 58 (1992) 46. Skandia Am. Reins. Corp. v. Schenck, 441 F. 31. In re Pritchard & Baird, Inc., 8 B.R. 265 (D.N.J. Supp. 715 (S.D.N.Y. 1977) 1980), affirmed without opinion, 673 F.2d 1299 (3d Cir. 1981) 47. Sphere Drake Ins. Ltd. v. Clarendon Nat’l Ins. Co., 263 F.3d 26 (2d Cir. 2001) 32. International Surplus Lines Ins. Co. v. Fire- man’s Fund Ins. Co., 998 F.2d 504 (7th Cir. 48. Sumitomo Marine & Fire Ins. Co. v. Cologne 1993) Reins. Co. of Am., 75 N.Y.2d 295, 552 N.E.2d 139, 552 N.Y.S.2d 891 (1990) 33. Jefferson Ins. Co. v. Fortress Re, Inc., 616 F. Supp. 874 (S.D.N.Y. 1984) 49. Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485 (1883) 34. Jurupa Valley Spectrum LLC v. National Indem. Co., 555 F.3d 87 (2d Cir. 2009) 50. Travelers Cas. & Sur. Co. v. Certain Underwrit- ers at Lloyd’s of London, 96 N.Y.2d 583, 760 35. Keehn v. Excess Ins. Co., 129 F.2d 503 (7th Cir. N.E.2d 319, 734 N.Y.S.2d 531 (2001) 1942) 51. Trustmark Ins. Co. v. John Hancock Life Ins. 36. Knickerbocker Agency, Inc. v. Holz, 4 N.Y.2d Co., 631 F.3d 869 (7th Cir. 2011) 245, 149 N.E.2d 885, 173 N.Y.S.2d 602 (1958) 52. Unigard Sec. Ins. Co. v. North River Ins. Co., 37. Michigan Mut. Ins. Co. v. Unigard Sec. Ins. Co., 79 N.Y.2d 576, 594 N.E.2d 571, 584 N.Y.S.2d 290 44 F.3d 826 (9th Cir. 1995) (1992) 38. Michigan Nat’l Bank-Oakland v. American 53. Unigard Sec. Ins. Co. v. North River Ins. Co., 4 Centennial Ins. Co., 89 N.Y.2d 94, 674 N.E.2d F.3d 1049 (2d Cir. 1993) 313, 651 N.Y.S.2d 383 (1996) 54. U.S. Fid. & Guar. Co. v. American Re-Ins. Co., 39. North River Ins. Co. v. ACE Am. Reins. Co., 361 20 N.Y.3d 407, 985 N.E.2d 876, 962 N.Y.S.2d 566 F.3d 134 (2d Cir. 2004) (2013) 40. North River Ins. Co. v. CIGNA Reins. Co., 52 55. Utica Mut. Ins. Co. v. Clearwater Ins. Co., 906 F.3d 1194 (3d Cir. 1995) F.3d 12 (2d Cir. 2018)* v Foreword or more than 40 years, International Risk decisions. (Please read the Introduction on Management Institute, Inc. (IRMI), has page xii to learn how the authors went about Fbeen a premier provider of risk manage- compiling the list.) ment and insurance information to corpora- tions, law firms, government, and the insur- We invite you to explore other free resources as ance industry.