In a dispute arising out of reinsurance coverage regarding asbestos litigation spanning several decades, the New York Supreme Court Appellate Division reviewed a decision granting summary judgment to USF&G against reinsurers American Re and Excess Casualty Reinsurance Association. American Re and ECRA argued that USF&G’s bad faith, including an initial denial of its duty to indemnify and defend the asbestos producer tainted the entire case and warranted summary judgment. They further argued that USF&G’s bad faith breached its duty of utmost good faith to them as reinsurers. The court distilled these contentions into a basic issue of fact and a basic issue of law. The question of fact concerned the increase in the retention of the reinsurance treaties to $3 million, which ECRA alleged was agreed to by all parties. The issue of law concerned the application of the follow the fortunes doctrine. As to the issue of fact, the court found that the facts demonstrated that USF&G only increased the retention for certain years, rather than all claims post-1981, as argued by ECRA. On the question of law, the court concluded that the follow the fortunes doctrine required defendants to accept the reinsurance presentation made by USF&G on the asbestos claims. Accordingly, the motion for summary judgment in favor of USF&G was affirmed. One judge dissented, arguing that a triable issue of fact existed regarding USF&G’s alleged bad faith. United States Fidelity & Guaranty Co. v. American Re-Insurance Co., No. 5205 (N.Y. App. Div. Jan. 24, 2012).
This post written by John Black.
See our disclaimer.