In a recent facultative reinsurance dispute over the payment of an asbestos settlement, a New York federal court found the term “exhaustion” ambiguous and granted summary judgment to the cedent requiring the reinsurer to pay its share of an asbestos settlement.
In Fireman’s Fund Insurance Co. v. OneBeacon Insurance Co., No. 14 Civ. 4718 (PGG) (S.D.N.Y. Oct. 19, 2020), the cedent had issued several excess insurance policies over three years to a company that was hit with multiple asbestos claims. The reinsurer had issued a certificate of facultative reinsurance for 15% the third excess policy ($20 million xs $75 million xs $3 million SIR). The cedent settled the asbestos claims and allocated the settlement proportionally to each of the excess policies. The cedent then billed the reinsurer for its share of the loss under the third excess policy. The reinsurer refused to pay arguing that the underlying policies had not been exhausted and, therefore, the excess policy was not triggered and the claim against the fac cert was improper.