In a case involving disputed claims made under “excess of loss” facultative reinsurance certificates, a court recently held that the reinsurer’s liability for “losses” should follow the meaning of “loss” and “expense” in the underlying insurance polices, rather than the meanings of those terms as used in the reinsurance certificates. The dispute surrounded whether the reinsurance covered litigation expenses, in addition to the indemnity paid under the underlying insurance policies. The court analyzed the certificates and determined that the liability of the reinsurer in this case should be determined by the scope of liability provided by the underlying insurance policies. Because the reinsurer “had copies of the underlying insurance polices, or at the very least had access to the underlying insurance policies” the reinsurer could be charged with knowledge of the policies’ terms. The court distinguished reinsurance expressly designated as “non-current,” or reinsurance that limits in the certificates coverage to only specific delineated risks. In that scenario, the court explained, “loss” and “expense” would be determined by the certificate, as opposed to the underlying policies. ACE Property & Casualty Insurance Co. v. R & Q Reinsurance Co., Case No. 11081920 (Pa. Ct. Comm. Pl. May 15, 2012).
This post written by Michael Wolgin.
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