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You are here: Home / Arbitration / Court Decisions / Follow the Fortunes Doctrine / Northern District of New York Declines to Imply a Follow-the-Fortunes or Follow-the-Settlements Obligation in Reinsurance Certificate

Northern District of New York Declines to Imply a Follow-the-Fortunes or Follow-the-Settlements Obligation in Reinsurance Certificate

May 16, 2019 by Nora Valenza-Frost

After a ten-day bench trial involving ten fact witnesses and five expert witnesses, the Northern District of New York found that certain facultative certificates did not implicitly contain follow-the-settlements or follow-the-fortunes provisions. Utica Mutual Insurance Co. was permitted to present evidence at trial as to whether the doctrines were, at the time the parties agreed to the certificates, so “fixed and invariable in the reinsurance industry as to be part of the Certificates.” We previously wrote about the court’s decision to permit such evidence here.

Utica presented three expert witnesses who testified that follow-the-settlements and follow-the-fortunes doctrines were “industry-wide concepts that did not need to be stated in reinsurance certificates to apply” but “acknowledged that not all reinsurers included these provisions” in their certificates — as was the case here. The court determined that Utica “failed to prove that follow the fortunes or follow the settlements were so ‘fixed and invariable’ in the facultative reinsurance industry as to warrant importing them into” the subject certificate.

As a result, Utica had to prove that the loss was specifically caused by a risk covered in the reinsurance contract. The court concluded that Utica did not meet that burden, and Munich Reinsurance America Inc. was not obligated to pay loss expenses incurred in investigating, adjusting, and litigating claims supplemental to the liability limits.

Munich Reinsurance Am., Inc. v. Utica Mut. Ins. Co., No. 6:13-cv-00743 (N.D.N.Y. Mar. 29, 2019)

Filed Under: Follow the Fortunes Doctrine, Reinsurance Claims

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