We previously posted on a district court’s dismissal, with prejudice, of an Amended Complaint challenging the propriety of payments to the ceding insurer of the Mariah Re catastrophe bond which exhausted the cat bond’s trust account. The Amended Complaint contended that the payment amount had not been calculated in accordance with the provisions of the cat bond’s documents, and that a lesser amount, which would not have exhausted the trust account, should have been paid instead. The district court found that the documents clearly set forth the process for calculating the payment amount, and that the payment amount had been calculated in accordance with the contractual agreements. It therefore dismissed the case with prejudice. The Court of Appeal, after briefly describing the contractual relationships, simply stated that “[w]e AFFIRM the judgment of the district court for substantially the reasons stated by Judge Sullivan in his opinion of September 30, 2013.” This result demonstrates the importance of clarity in the drafting of cat bond documents, and may help to reduce whatever uncertainty this lawsuit engendered in the cat bond market. Mariah Re Limited v. American Family Mutual Insurance Company, No. 14-4062 (2nd Cir. June 30, 2015).
This post written by Rollie Goss.
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