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New Jersey guaranty fund and the New York insurance commissioner each
claimed proceeds of reinsurance treaties issued on an insolvent insurer, the
commissioner, rather than the guaranty fund, was entitled to receive the
reinsurance proceeds.
Zurich‐American Ins. Co. v. Mead Reins. Corp., 161 A.D.2d 403, 555 N.Y.S.2d 333
(1st Dep't). Defendant Mead Reinsurance Corporation's policy provided that it
would apply in excess of reduced underlying insurance, provided that such
reduction was solely the result of "accidents or occurrences happening after
the inception date of this policy." After the underlying insurer, Ambassador
Insurance Company, was declared insolvent, Zurich‐American brought an
action against Mead, claiming that the reinsurer's coverage dropped down
after the underlying carrier's insolvency. The Court granted summary
judgment in favor of Mead, holding that the basis for the reduction in the
underlying coverage ‐‐ Ambassador's insolvency ‐‐ was not the result of
"accidents or occurrences happening after the inception of the policy."
Ohio
Covington v. Ohio Gen. Ins. Co., 99 Ohio St. 3d 117 (Ohio 2003). A reinsurance
company entered into reinsurance contracts with UCM. The reinsurance
company became insolvent and was liquidated. During the liquidation, UCM
filed claims against the reinsurance company’s estate seeking reinsurance
benefits. The Ohio Supreme Court stated that an insurance company seeking
reinsurance benefits qualifies as a Class 5 creditor during the liquidation of a
reinsurance company.
Stickel v. Excess Ins. Co., 136 Ohio St. 49 (Ohio 1939). Interpreting the liability of
a reinsurance company under a reinsurance contract, the Ohio Supreme Court
explained that a reinsurer’s liability must be determined by the terms of the
reinsurance contract. When a reinsurance contract explains that the reinsurer
will not be liable unless there has been an actual payment of a loss by the
reinsured, the payment of that loss is a prerequisite to the liability of the
reinsurer.
Pennsylvania
Foster v. Berwind Corp. Civil Action No. 90‐0857, 1991 U.S. Dist LEXIS 1988 (E.D.
Pa. 2/13/91). Pennsylvania District Court applied Pennsylvania choice of law
rules and Pennsylvania law to govern an action brought by the Pennsylvania
Commissioner of Insurance to pierce the corporate veil of a defunct Bermuda
subsidiary (Norad) and hold the defendant liable for reinsurance loss claims of
the insolvent Mutual Fire, Marine & Inland Island Co. The court held that
Pennsylvania's interest in investigating the claims of its domiciliaries against its
own corporations outweighed Bermuda's interest in regulating its reinsurance
industry where the subsidiary is "exempt" (does not do business).
Koken v. One Beacon Ins. Co., 911 A.2d 1021 (Pa. Commw. Ct. 2006). The
defendant argued that if it could prove it had a third party beneficiary
relationship it was entitled to a direct claim against its insolvent reinsurer’s
retrocessionaires for losses it had in three separate insurance programs. The
court stated “where a reinsurer: (1) underwrote the insurance policy in question;
(2) undertook 100% of the risk from an insolvent fronting insurer; (3) retained
final authority to negotiate and settle all claims on behalf of the fronting insurer;
and (4) reimbursed the fronting insurer for all payments made under the policy,
the policyholder was determined to be a third party beneficiary to the
reinsurance contract and could proceed directly against the reinsurer upon the
primary insurer’s insolvency.” Id. at 1033.
Price v. Pennsylvania Prop. and Cas. Ins. Guar. Ass’n, 2002 Pa. Super. 74, 795 A.2d
407 (2002). As individual plaintiffs, parents sought compensation for their
daughter’s incurred medical expenses in a negligence action. Doctors’ insurer
was declared insolvent and the Pennsylvania Property and Casualty Insurance