Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

Even though Lumbermen’s reinsurers rebated over $2 million in premiums to LMC after its reinsurance recoveries consultant alerted it to the fact that a change in the manner in which Kember was booking reinsurance premiums was contrary to procedures recommended by the NAIC, the Seventh Circuit has ruled in Indiana Lumbemens Mut. Ins. Co. v. Reinsurance Results, Inc., No. 07-1283 (7th Cir. January 16, 2008) that the consultant was not entitled to one-third share of the rebated premiums as it was not the result of any “premium and/or claims identified during the course of the review and have not been processed in accordance with the reinsurance contract terms and conditions” as required under its contract. Rather, the Seventh Circuit held that the change had resulted from an adjustment in Lumbermen’s internal accounting procedures and not as the result of any mistake with respect to how the reinsurance claims had been processed. The court also rejected the consultant’s arguments that it should be entitled to some recovery on a theory of quantum meruit.

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The Connecticut Supreme Court has breathed new life into Hartford's efforts to obtain reimbursement from its reinsurers for $1.15 billion that it paid to settle Western McArthur's asbestos claims.  In Hartford Acc. & Ind. Co. v. Ace-American Reinsurance Co., No. SC 17625 (Conn. December 25, 2007), the court declared that a Superior Court judge should not have granted summary judgment to Harford's reinsurers in light of apparent ambiguity with the respect to the terms of the subject treaties.  As a result, the case has been remanded to the trial court to consider extrinsic evidence of the parties' intent.

The ruling is somewhat surprising, as the same court had ruled six years ago in Metropolitan Life that the "cause" test requires that the number of "occurrences" in asbestos litigation be determined by reference to each individual claimant's injuries and not by reference to the insured's failure to warn.   In this case, however, the court distinguished Metropolitan as well as the similar reinsurance holding of the New York Court of Appeals in Travelers v. Lloyd's, finding that the "any one accident" common cause language in the Hartford treaties was "uniquely broad."  The court also appears to have been influenced by the extrinsic evidence presented by Hartford concerning the adoption of this language in the 1970s, wherein it asked for this "any one accident" language in lieu of an aggregate extension clause to permit it to aggregate losses occurring in more than one policy year.  Under the circumstances, the court found that Hartford's position that diverse injuries could be aggregated if they were of the same kind or "meaningfully related" was a "plausible" interpretation of the subject wordings.

Merry Christmas, Hartford!

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