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(Article from Insurance Law Alert, July/August 2021)

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In a dispute relating to several facultative reinsurance contracts issued by Clearwater Insurance Company, a federal jury in New York awarded Utica Mutual Insurance Company approximately $11 million, finding that Utica did not act in bad faith or improperly allocate underlying asbestos settlement payments to the reinsured policies. Utica Mut. Ins. Co. v. Clearwater Ins. Co., No. 6:13-cv-1178 (N.D.N.Y. July 8, 2021). The jury also concluded that the underlying primary policies contained aggregate limits and that Utica had paid up to those limits.

In a prior ruling in this case, the Second Circuit ruled that the reinsurance certificates were expense-supplemental and thus required Clearwater to reimburse Utica for expenses in addition to the stated limit of liability. See October 2018 Alert. In that decision, the Second Circuit also ruled that neither the reinsurance certificates nor certain contracts through which Clearwater participated as part of a pool of reinsurers imposed a follow the settlements obligation. The court therefore concluded that Clearwater’s indemnity obligations must be based on Utica’s proven liability under its umbrella policies.