In a summary judgment posture, a New York state court has rejected a reinsurer's late notice claim, finding that under New York law a reinsurer must prove prejudice due to late notice in order for late notice to constitute a defense to failure to pay claims. The Court found that no evidence of prejudice had been proffered. The Court then enforced a follow the fortunes clause as to the majority of the reinsurance claims at issue, finding that the reinsurer had not developed evidence in extensive discovery that the reinsured had acted fraudulently or in bad faith in paying the claims. The Court denied summary judgment as to claims relating to one underlying insured, based upon limited evidence that suggested possible bad faith in the payment of claims submitted by that party. Granite State Insur. Co. v. Ace American Reinsur. Co., Index No. 604347/04, in the Supreme Court of the State of New York, County of New York (Aug. 4, 2006).
A UK Court has held that a follow the fortunes provision in facultative reinsurance contracts did not apply to without prejudice settlements reached by a reinsured with its insureds, since the clause provided that the reinsurance would “follow in all respects the settlements or other payments of whatsoever nature excluding without prejudice and ex-gratia settlements.” The clear contractual exclusion of without prejudice settlements from the operation of the follow the fortunes clause meant that the reinsured had to prove that the claims payments were appropriate under the underlying insurance. Faraday Capital Ltd. v. Copenhagen Reinsurance Co.,  EWHC 1474,  All ER D 74, 2006 WL 2667603 (Queen's Bench Comm. Ct. May 4, 2006).
The United States Court of Appeals for the Second Circuit has affirmed the District Court's decision with respect to coverage for the September 11 terrorist attacks on the World Trade Center towers. The District Court held that the attack consituted a single occurrence with respect to some of the insurance, and two occurrences with respect to other insurance. , Case No. 04-4500 (2nd Cir. Oct. 18, 2006).
A New Jersey Appellate Court has agreed with arguments made by the Reinsurance Association of America, holding that a court could not, under the authority of New Jersey's Insurer Liquidation Act, adopt a plan that forced reinsurers to pay claims based upon IBNR estimates, and could not abrogate arbitration provisions contained in reinsurance agreements to force that disputes be litigated in the liquidation court. In re Liquidation of Integrity Insurance Company, Case No., C-7022-86, 2006 WL 2795343 (N.J. Super. A.D. Oct. 2, 2006).
A US District Court, which had twice before denied motions to dismiss for lack of personal jurisdiction filed by Equitas Holdings Limited, Equitas Reinsurance Limited and Equitas Limited, has granted a motion to dismiss on the same ground filed by the same entities in a third case seeking arbitration of issues arising out of the denial of reinsurance claims. Employers Insurance Company of Wausau v. Equitas Holdings Limited, Case no. 06-291 (W.D. Wisc. Sept. 12, 2006). The Court found that the factual record before it in the prior cases had not been fully developed, and that it was joining the majority of courts that had ruled on this issue.