The parties to a mass tort insurance coverage dispute have never been the only ones with a significant interest in its outcome. Direct insurers have relied on reinsurers to spread their own risk. In the past, in cases where a reinsurer has a significant amount at stake, it may have influenced an insurer’s behavior in litigation or settlement somewhat invisibly. Recently, however, reinsurers have been stepping into the spotlight and having a significant direct impact on the resolution of disputes with direct insureds.
Many policyholders may not consider that their own insurers, with whom they have purchased millions of dollars of insurance coverage, have attempted to cover their own risk by purchasing reinsurance for that coverage. Should the policyholder enter coverage litigation with its insurer, the actions of the reinsurer (with whom that policyholder never contracted) can often control how the insurer behaves in that litigation, and, more recently, the reinsurer’s own behavior has become an issue in the litigation. Generally, there are three scenarios regarding the reinsurer as it pertains to insurance coverage disputes...
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