Court Construes Disputed Insurance Policy Language And Requires Reinsurer To Follow The Settlements


The case involved two facultative reinsurance contracts, each of which covered excess liability for similar umbrella liability insurance policies, and each of which contained a “follow the settlements” provision. After the insurer agreed to pay a percentage of the insured’s asbestos injury claims and defense expenses, the insurer began billing the reinsurer, but the reinsurer disputed liability. The reinsurer contended that it was not required to pay defense expenses in the same fashion as indemnity for one of the reinsurance certificates, arguing that the underlying insurance policy covered by that certificate lacked a reference to “defense expense” in the policy limit provision.

The court, however, rejected the reinsurer’s argument and entered summary judgment in favor of the insurer, finding that the reinsurer failed to demonstrate that the cedent was seeking coverage beyond the scope of the agreements. “It may be,” the court explained, “that defendant believes that defense expenses should not be included in the settlement because [the policy] does not use the phrase ‘defense expenses’ when defining the total limits of liability. However, … the provision does not affect the type of expenses that are covered, only the amount.” The court also considered two issues raised in later briefing: (1) whether the cedent proved the extent to which it exceeded the retention amounts; and (2) whether the cedent calculated prejudgment interest correctly, but reserved ruling on those issues, pending supplemental briefing. Employers Insurance Co. of Wausau v. R & Q Reinsurance Co., No. 13-cv-709 (USDC W.D. Wisc. May 16, 2014).


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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