Second Circuit – Reinsurance: Utica Mutual Ins. Co. v. Clearwater Ins. Co.

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United States Court of Appeals for the Second Circuit

Reinsurance

Obligation type – Expense supplemental

Utica Mutual Ins. Co. v. Clearwater Ins. Co.

16-2535(L)

Judges Kearse, Cabranes, and Wesley

Background: The plaintiffs appealed from summary judgment regarding the defendant’s obligations to the plaintiff under five reinsurance policies. The court had ruled that the reinsurance company need not pay expenses beyond the limit of liability in the reinsurance contracts. The court had also ruled that the defendant was obligated to indemnify the plaintiff according to the plaintiff’s reasonable and good-faith settlement of a coverage dispute with its insured.

Ruling: The Second Circuit held that because the defendant’s obligations under the reinsurance contracts follow the plaintiff’s expense-supplemental obligations under the umbrella policies, the defendant’s liability is expense-supplemental. The court vacated and remanded to determine whether the obligation encompasses certain expenses. The Second Circuit also vacated and remanded on the cross-appeal as the plaintiff did not demonstrate its entitlement to a judgment that the defendant was bound to indemnify the plaintiff according to the plaintiff’s settlement with the insured.

William M. Sneed, of Sidley Austin, for the plaintiff-appellant-cross-appellee; David C. Frederick, of Kellogg, Hansen, Todd, Figel & Frederick, for the defendant-appellee-cross-appellant.