Court Refuses to Apply Follow-the-Fortunes Doctrine Due to Inconsistent Positions Taken by Reinsured

American Home Assurance issued insurance covering environmental pollution at multiple sites, and contended throughout its dispute with its insured that the insured had suffered multiple occurrences at multiple sites, in order to maximize the number of deductibles that would apply. After settling with its insured, American Home filed reinsurance claims based upon the theory that there had been only one occurrence per year at each site, in order to minimize the deductibles on its own reinsurance. Although it prevailed against its reinsurers on that theory at the trial court level, an appellate panel has held that such inconsistent conduct, which it termed “manifest manipulation,” resulted in the follow-the-fortunes provision of the reinsurance agreements not applying, apparently resulting in the complete loss of reinsurance coverage since the losses, as allocated consistently with the position taken with the insureds, were all within the deductibles of the reinsurance agreements. Allstate Insurance Co. v. American Home Assurance Co., No. 602594/03 (NY Sup. Ct. App. Div. June 12, 2007).