Reinsurance Powerpoint

The“ llo -the rtune ” c
Fo w -Fo s Do trinein
Ins r/Re ure Dis ute
ure ins r p s

B B b Re m nd
y o d o
W mM n
illia s ulle
rre m nd w m m n.c m
d o @ illia s ulle o
84 3 49
0 -78 -6 3

Ove w
rvie
» The“ llo -the
Fo w - » De ns s
fe e
Fortune ” c
s Do trine » Ap lic tio in M s
p a n as
» De lo m nt o
ve p e f To C nte
rt o xt
Do trine
c » C ns e tio fo
o id ra ns r
» Ke Te s
y rm Ins rs ins rs
ure /Re ure
» B s fo
a is r
Ap lic tio
p a n
» W t isg ve d b
ha o rne y
Do trine
c

The“ llo -the rtune ” c
Fo w -Fo s Do trine

» The“ llo -the rtune ” c
Fo w -Fo s Do trine
im o e o there ure thed
p ss n ins r uty:
›To ind m theins r fo p ym nts
e nify ure r a e
ins r m ke p ua to alo ss ttle e
ure a s urs nt s e m nt
und r itso n p lic a lo thes ttle e
e w o y s ng e m nt
is
›M d in Go d Fa
ae o ith
›Re s na le
ao b
›Arg b w
ua ly ithin thete so thep lic
rm f o y

P o eo TheFo w -
urp s f llo -the
Fo rtune Do trine
s c
» Them in ra na o thed c
a tio le f o trineis
›“ fo te theg a o m xim c ve g
to s r o ls f a um o ra e
a s ttle e a to p ve c urts
nd e m nt nd re nt o ,
thro h de novo review of the cedent’s
ug
decision-making process, from
undermining the foundation of the
cedent/ reinsurer relationship”
›Travelers Ins. Co. v. Gerling, 4 F. 3 18
19 d 1,
18 ( 2 . C 2 0 )
8 d ir. 0 5

P o eo TheFo w -
urp s f llo -the
Fortune Do trine
s c
» P o e “ re ure c nno s c nd
urp s : A ins r a t e o
g s theg o fa lia ility
ue s o d ith b
d te ina nsm d b itsre ure , o
e rm tio ae y ins d r
theins dsg o fa d c io to
ure ’ o d ith e is n
w ived fe e to w h it m y b
a e ns s hic a e
entitle ”
d
›Christiana General Ins. v. Great A merican Ins.
9 F. 2 2 9 2 0(2 . C 19 2
79 d 6 , 8 d ir. 9 )

P o eo the“ llo the
urp s f Fo w
Fortune ” c
s Do trine
» “ Do trinep c e w s ful
The c re lud s a te
re a n b are ure o d fe e to
litig tio y ins r f e ns s
und rlyingp lic c ve g in c s s
e o y o ra e a e
w rethec d ins r ha in g o
he e ing ure s o d
fa p idas ttle e
ith a e m nt”
›National Union Ins. v. A merican Re-Ins. Co.
441 F. Supp. 2d. 646, 650 (S.D.N.Y 2006)

P o eo the“ llo -the
urp s f Fo w -
Fortune ” c
s Do trine
» Thep o eisto p s rvethe
urp s re e
ins r/re ure re tio hip a
ure ins r la ns nd
p ve thede novo re wo c im
re nt vie f la s
d te ina nsb re ure a the b
e rm tio y ins rs nd re y
m keins rsle slike to s ttle
a ure s ly e
und rlyingc ve g c im
e o ra e la s
›Int’l Surplus Lines v. Certain Lloyds
Underwriters 8 8F. S p 9 (N.D. Ohio
6 up . 17
19 2
9)

Glo s ry o Ke Te s
s a f y rm
“ rim ry Ins nc ”Ins nc tha
P a ura e : ura e t
p vid stheinitia la r o c ve g ;
ro e l ye f o ra e
“ e sIns nc ”Ins nc tha c ve
Exc s ura e : ura e t o rs
lo s sw n p a la r o c ve g is
s e he rim ry ye f o ra e
e us d
xha te ;
“ ins nc ”Ins nc fo lo s stha
Re ura e : ura e r s e t
p a o e e sins r inc
rim ry r xc s ure urs

Glo s ry o Ke Te s
s a f y rm
» “ e e / “ e ingIns r”P a o
C d nt” C d ure : rim ry r
Exc s C rrie tha “e e ” k to
e s a r t c d s ris
re ure
ins r
» “ c tiveRe ura e : Re ura e
Fa ulta ins nc ” ins nc
to c ve s e ificp lic s
o r pc o ie
» “ a Re ura e : Re ura eto
Tre ty ins nc ” ins nc
c ve a p lic sfa
o r ll o ie llingw ithin a
s e ifie c s
p c d la s

Glo s ry o Ke Te s
s a f y rm
» “ c tio : Them nne in w h a
Allo a n” a r hic n
ins r a c te alo sa ro sm le
ure llo a s s c s ultip
la rs ye rso ins nc c ve g
ye / a f ura e o ra e
» “ ingB thtub Allo a n”M tho o
Ris a c tio : e d f
a c tio w relo sisa c te e ua
llo a n he s llo a d q lly
a ro sa p lic sa s m le l o r
c s ll o ie t a e ve ve
d fine tim p rio .
e d e e d

Glo s ry o Te s
s a f rm
» “ a s tio Trig e : M nne to
M nife ta n g r” a r
id ntify d teo lo sb s do
e a f s ae n
m nife ta n o p ic l injury o
a s tio f hys a r
p p rty d m g
ro e a a e
»“oC ntinuo Trig e : M nne to
us g r” a r
id ntify d teo lo sb s do initia
e a f s ae n l
e o urec ntinuingthro h e o
xp s o ug nd f
e o ure
xp s

W n isthe“ llo -the
he Fo w -
Fortune ” c
s Do trineAp lie
p d
» C ntra tua : “ lo ss ttle e b
o c l All s e m nts y
[ins r] p vid dtha the a w
ure ro e t y re ithin
thete sa c nd nso this
rm nd o itio f
C rtific teo Re ura es ll b
e a f ins nc ha e
b ingo the[re ure Thelia ility o
ind n ins r] b f
the[re ure s ll fo wtha o the
ins r] ha llo t f
[ins r]. . . .”
ure
›GerlingP lic
o y

he Fo w -
Fortune ” c
s Do trineAp lie
p d
» C to a Us g : In thea s nc o a
us m nd a e be e f
c ntra tua p vis n, theins r m y
o c l ro io ure a
p s nt e e etha the“ llo -the
re e vid nc t fo w -
fortune ” o trineisinc rp ra dinto
s dc o o te
re ura ec ntra t b s do c to
ins nc o c a e n us m
a us g in theind try
nd a e us
› A merican Ins. v. A merican Reinsurance 2006 Lexis
95801, fn 3(N.D. C l. 2 0 ) c
a 0 6 itingA etna v. Home
Ins. Co. 8 2F. S p 13 8
8 up . 2

he Fo w -
Fortune ” c
s Do trineAp lie
p d
» Implied at Law: Courts have held that the
“follow-the-fortunes” doctrine is not implied in
reinsurance contracts as a matter of law.
» Rather the doctrine applies if expressly
included or included by custom and usage.
» The doctrine could be implied based on course
of dealing of the parties
›A merican Ins. v. A merican Reinsurance 2006 Lexis 95801,
fn 3(N.D. C l. 2 0 ); North River Ins. v. Employers
a 06
Reinsurance Corp. 19 F. S p 2 9 , 9 6 9 0(S
7 up . d 72 8 - 9 .D.
Ohio 2 0 )
02

W t isGo rne b the“ llo -
ha ve d y Fo w
the rtune ” c
-Fo s Do trine
» TheDo trinea p sto
c p lie :
›Theins r’d c io to s ttle
ure s e is n e ;
›Theins r’w ive o c ve g d fe e ;
ure s a r f o ra e e ns s
›Thea o o s ttle e
m unt f e m nt;
›C im c ve d und r s ttle e
la s o re e e m nt
›Thep s e m nt a c tio o thelo s
o t-s ttle e llo a n f s

ha ve d y Fo w
the rtune ” c
-Fo s Do trine
» De is n to S ttle
c io e :
›Theins r’d c io to s ttleise lua d
ure s e is n e va te
und r thed c
e o trine:
›W sthed c io to s ttlere s na le
a e is n e ao b ?
›W sit m d in g o fa
a a e o d ith?
›North River Insurance v. A CE (North
River II) 3 1 F.3 13 , 14 (2 . C
6 d 4 1 d ir.
20)
04

ha ve d y Fo w
the rtune ” c
-Fo s Do trine
» W ive o c ve g d fe e :
a r f o ra e e ns s
›W sit re s na leund r e tingla ?
a ao b e xis w
›W sit d nein g o fa
a o o d ith?
›W sthew ive a ua ly w
a a r rg b ithin the
a p a lep lic la ua e
p lic b o y ng g ?
›National Union v. A merican Re-Insurance
Co. 4 1 F. S p 6 6(S
4 up . 4 .D.N.Y. 2 0 ) 06

ha ve d y Fo w
the rtune ” c
-Fo s Do trine
» Am unt o S ttle e
o f e m nt
›W sit re s na le
a ao b ?
›W sit in g o fa
a o d ith
›W sit w
a ithin thea p a lep lic
p lic b o y
› See Bellefonte Reinsurance v. Mission
Insurance 9 3F.2 9 (2 . C 19 0
0 d 10 d ir. 9 )
(re ure no lia lefo ins re sc s in
ins rs t b r u r’ o ts
e e so e re sc p o lo sin re ura e
xc s f xp s a n s ins nc
c ntra t)
o c

ha ve d y Fo w
the rtune ” c
-Fo s Do trine
» C im c ve db S ttle e
la s o re y e m nt
› C im s ttle m s b c im c ve db
la s e d u t e la s o re y
und rlyingp lic
e o y
›North River Ins. v. Cigna 5 F.3 119 , 12 6(3
2 d 4 0 d
C 19 5
ir. 9 )
› Ho e r, C urtsa p d c
w ve o p ly o trineto w ive o
a rs f
c rta p lic d fe e a s o eo c ve g
e in o y e ns s nd c p f o ra e
›S eNational Union v. A merican Re-Insurance 4 1 F. S p
e 4 up .
2 6 6(S
d 4 .D.N.Y. 2 0 ) (c im ‘ ua ly’ ithin
0 6 la s a b w rg
p lic ye rsc n b s ttle )
o y a a ee d

ha ve d y Fo w
the rtune ” c
-Fo s Do trine
» C im c ve db S ttle e
la s o re y e m nt
›FutureC im c n b c ve d b
la s a e o re y
s ttle e b tw e ins r a und rlying
e m nt e e n ure nd e
ins d
ure
›Ins. Co. of Penn. v. A ssociated International
9 2F. 2 5 , 5 5( 9 C 19 0
2 d 16 2 th ir. 9 )

De ns sUnd r theFo w
fe e e llo -
the rtune Do trine
-Fo s c
» TheDo trineisinte e to a p to m s
c nd d p ly ot
css
ae:
» “ fo w -fo ne d c
the llo -the rtu s o trines p re uire
im ly q s
p ym nt w rethec d nt’g o fa p ym nt isa
a e he e e s o d ith a e t
le s a ua ly w
a t rg b ithin thes o eo theins nc
cp f ura e
c ve g tha w sre ure . Thiss nd rdis
o ra e t a ins d ta a
purposefully low”
› N ational Union v. American Re-Ins. 441 F.
Supp. 2d 646, 650-651 (S.D .N .Y. 2006)

fe e e llo -
the rtune Do trine
-Fo s c
» Do trined e no a p to s ttle e
c o s t p ly e m nts
tha a
t re
›Fra ule C llus ; M d in B d Fa
ud nt; o ive a e a ith;
›C a a m nife tly o id te so
le rly nd a s uts e rm f
und rlyingp lic
e o y
›Unre s na lea s lf-s rving
a o b nd e e

›Hartford A V Columbia Cas. 98
cc. .
F.Supp.2d 251, 258 (D . Conn.); Nat’ l
Union v. A merican Re-Ins. 441 F. Supp. 2d
646, 650 (S.D .N .Y. 2006)

fe e e llo -
the rtune Do trine
-Fo s c
» S nd rdfo De ns sto Do trine
ta a r fe e c :
» “ a Fa re uire a extraordinary
B d ith q s n
showing o ad ing nuo o d ho s
f is e us r is ne t
failureto c rry o ac ntra t. The
a ut o c
s nd rdisno m rene lig nc b
ta a t e g e e ut
g s ne lig nc ”
ro s g e e
›North River Ins. v. Cigna 5 F.3 119 , 12
3 d 4 17
(3 . C 19 5
d ir. 9 )

fe e e llo -
the rtune Do trine
-Fo s c
» B dFa S nd rd C n B M t b
a ith ta a a e e y:
› S w tha theins r d no u ea e e to
ho ing t ure id t s n xp rt
e lua theund rlyingc im
va te e la
› S w tha theins r unre s na ly a c te
ho ing t ure a o b llo a d
a thes ttle e to are ure p lic
ll e m nt ins d o y
› S w ins r inte l d c e tha s g s
ho ing ure rna o um nts t ug e t
a e rt to m nip tethea c tio
n ffo a ula llo a n
›Hartford Cas. v. Columbia 9 F. S p 2 2 1,
8 up . d 5
2 8 (D. C nn.)
5 -9 o

fe e e llo -
the rtune Do trine
-Fo s c
» B dFa De ns :
a ith fe e
›Fa t tha re ure p lic isonly policy to
c t ins d o y
w h s ttle e a c te isno per se
hic e m nt llo a d t
e e eo b d fa
vid nc f a ith
›Nat’l Union v. A merican Re-Ins. 4 1 F.
4
S p 2 6 6 6 3(S
up . d 4 , 5 .D.N.Y 2 0 ) 06

fe e e llo -
the rtune Do trine
-Fo s c
» De ns : Und rlyingS ttle e No
fe e e e m nt t
Within Te so P lic
rm f o y:
›Thisd fe efa “ p ym nt o thec im
e ns ils if a e f la
isarguably within scope o thep lic
f o y
[ins d is ue to [und rlyingins d
ure ] s d e ure ].”
›Re ure m t p vetha s ttle e w s
ins r us ro t e m nt a
“ clearly and manifestly o id s o eo
uts e c p f
there ure ’c ve g ”
ins ds o ra e
›National Union. v. A merican Re-Ins. 441 F.
Supp. 2d 646, 651 (S.D .N .Y 2006)

fe e e llo -
the rtune Do trine
-Fo s c
» De ns : Und rlyingS ttle e No
fe e e e m nt t
Within Te so P lic
rm f o y
›Ins r isp rm d to ta d re
ure e itte ke iffe nt
p s nsvis ins d a re ure
o itio ure nd -ins r
›Ag ins ins d ins r a ue tha c rta
a t ure , ure rg d t e in
c im m nife te b fo p lic p rio ;
la s a s d e re o y e d
›Ag ins re ure ins r a ue tha
a t -ins r, ure rg d t
s m c im m nife te d
a e la s a s d uringp lic o y
p rio
e d

fe e e llo -
the rtune Do trine
-Fo s c
» De ns : Allo a n No Re s na le
fe e c tio t ao b :
›Ins r isp rm d to ta d re
ure e itte ke iffe nt
p s nsvis ins d a re ure
o itio ure nd -ins r
›Ag ins ins d Ins r a ue tha c im
a t ure , ure rg d t la s
w refo m leo c nc s
e r ultip c urre e
›Ag ins re ure Ins r a c te c im
a t ins r, ure llo a d la s
a as leo c nc
s ing c urre e
›Travelers v. Gerling 4 F.3 18 18 (2 .
19 d 1, 6 d
C 20)
ir. 0 5

fe e e llo -
the rtune Do trine
-Fo s c
» De ns s Re s na le s :
fe e : a o b ne s
›C urtsw find a a c tio re s na leif
o ill n llo a n a o b
›It w so o s ve l re s na le
a ne f e ra a o b
a rna s
lte tive ;
›It w sb s d o d p d la o la
a a e n is ute w r w
e tinga tim o a c tio
xis t e f llo a n
›Travelers Ins. v. Gerling 4 F. 3 18 19
19 d 1, 4
(2 . C 2 0 )
d ir. 0 5

Ap lic tio o Do trinein
p a n f c
M s To C nte
a s rt o xt
» Ins r s ttle num ro p nd a
ure e s e us e ing nd
futurec im b s do p a xc s
la s a e n rim ry/e e s
c ve g ;
o ra e
» Ins r a c te c im a ro ss ve l
ure llo a s la s c s e ra
ye rso p a a e e sp lic s
a f rim ry nd xc s o ie
» Ins r b re ure fo re ure
ure ills ins r r ins d
p rtio o p lic s
o n f o ie .

C ns e tio fo Re ure /Ins rs
o id ra ns r ins rs ure

›Do stheDo trinee n a p ?
e c ve p ly
›C ntra tua
o c l?
›Im lie b C to a Us g ?
p d y us m nd a e
›Im lie b C urs o De ling
p d y o e f a ?


›W sthes ttle e a o re s na le
a e m nt m unt a o b ?
›W sthea c tio re s na le
a llo a n a o b ?
›Re s na lea to p nd c im
ao b s e ing la s
›Re s na lea to futurec im
ao b t la s
›W sit re s na leto s ttlethec im tha
a ao b e la s t
w res ttle ?
e e d
›Isthe e e eo b d fa o s lf-
re vid nc f a ith r e
s rvingb ins r?
e y ure


›Isthe e e eo b d fa o s lf-
re vid nc f a ith r e
s rvingb ins r?
e y ure
›C urtslo k a ins r’inte l a lys s
o o t ure s rna na e
o a c tio
f llo a n;
›C urtslo k a inte l d c e fo
o o t rna o um nts r
e e eo m nip tio
vid nc f a ula n;
›Hartford Cas. v. Columbia 9 F. S p 2 2 1, 2 8
8 up . d 5 5 -9
(D. C nn.)
o
›


›o
C urtslo k a w the p rs ns
o t he r e o
m kinga c tio w rea a o
a llo a n e w re f
re ura ec ve g
ins nc o ra e
›Travelers Ins. v. Gerling 4 F. 3 18 19 (2 .
19 d 1, 2 d
C 20)
ir. 0 5


» Lim tio o Evid nc o B dFa
ita ns n e e f a ith:
›“ E’a p a re s . ..o s e ificfa tua
AC s p e l lie . n pc c l
info a n o w h it a g sNo
rm tio n hic lle e rth
Rive re d in itss ttle e ne o tio …
r lie e m nt g tia ns
But it is precisely this kind of intrusive
factual inquiry into the settlement
process that the deference prescribed
by the [doctrine] is designed to
prevent”
North River Ins. v. A (N orth River II) 361
CE


» S nd rdfo a p
ta a r p lyingd c
o trine“
is
p oe
urp s fully lo ”
w
›National Union v. A merican Re-Ins. 441 F. Supp.
2d 646, 650-651 (S.D .N .Y. 2006)
» Proof of bad faith/ collusion requires
“extraordinary showing of a disingenuous
or dishonest failure to follow the contract”
›Travelers Ins. v. Gerling 4 F. 3 18 19 (2 . C
19 d 1, 1 d ir.
20)
05


» C ns e tio
o id ra ns
›P -J g e Inte s o unp id c im
re ud m nt re t n a la .
›National Union v. A merican Re-Ins. 441 F. Supp.
2d 646, 655 (S.D .N .Y. 2006)

C nc io
o lus n
» “ llo -the rtune ” a p a le
Fo w -Fo s if p lic b :
›Isd fe ntia to ins r’
e re l ure s
›S ttle e De is ns
e m nt c io
›Allo a n o lo s
c tio f s
› C nta hig hurd sfo re ure
o in h le r ins rs
se
e kingto c lle es ttle e d c io
ha ng e m nt e is ns
a a c tio o lo s
nd llo a n f s .

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