U.S.-based insurers wrote risks and obtained reinsurance from a syndicate of reinsurers, for which Republic Insurance was a fronting company. The syndicate obtained retrocessional coverage in the London market through LMX quota share contracts which ran for a number of years. The retrocessional coverage required that the reinsured retain a certain percentage of the risk, which is not an unusual warranty. Claims statements were submitted and paid over several years without dispute, but due to a change in the administration of the retrocessional coverage claims statements were not submitted on the retrocession contracts for about ten years, even though claims had been paid on the underlying coverages. Billings then resumed and a dispute arose. On motions for summary judgment, the trial court held: (1) English law applied to the retrocession contracts since the place of negotiations, contracting, obligations, subject matter, and arbitration situs for the retrocession contracts were primarily focused on London (the fact that the underlying risks were located around the world made that factor of little significance); (2) claims arising during the ten year period of non-billing were barred by the six year English statute of limitation; and (3) later claims were not contested, and were established and owing on an account stated basis. The court found that there was no breach of the retention warranty, even though Republic did not retain the requisite amount of the risk, because the warranty provided for retention by the reinsured, which was defined to be the syndicate rather than the fronting company, and the syndicate did retain the warranted amount of risk. Republic Ins. Co. v. Banco de Seguros del Estado, Case No. 10-C-5039 (USDC N.D. Ill. July 26, 2013).
This post written by Rollie Goss.
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