[author: Matthew Burrows - Law Clerk]

A New York appellate court affirmed the denial of summary judgment but with modifications. New Hampshire Insurance Company (“New Hampshire”) together with other insurers, settled with Kaiser Aluminum & Chemical Corporation (“Kaiser”) for asbestos personal injury related claims. The settlement allocated 100% of the asbestos liability to New Hampshire and their excess reinsurance carrier, Clearwater Insurance Company (“Clearwater”). New Hampshire sought indemnification from Clearwater pursuant to a reinsurance agreement.

Clearwater challenged the allocation in the settlement arrangement alleging that it forced New Hampshire to bear costs associated with other settled claims including bad faith, which was not covered in the excess policy. Clearwater further alleged that New Hampshire breached its notice and reporting duties under the terms of the reinsurance contract. In the very early stages of discovery, New Hampshire moved for summary judgment, arguing in part that Clearwater was bound by the allocation settlement under reinsurance principles. The trial court denied summary judgment and the appellate court affirmed, finding an allocation decision was not immune from scrutiny. Therefore, New Hampshire’s settlement would be judged on its reasonableness, which at this stage of the litigation was “undeveloped.”

Furthermore, the court found another triable issue as to New Hampshire’s notice to Clearwater on loses sustained by Kaiser. Clearwater alleged that it had been prejudiced by New Hampshire’s late notice resulting in “disadvantageous communication agreements” with its reinsurers. Based on these facts, the appellate court found New Hampshire’s summary judgment motion premature.

New Hampshire Ins. Co. v. Clearwater Ins. Co., No. 12779 (N.Y. App. Div. Mar. 24, 2015).