A New York federal court grants summary judgment to a cedent for breach of contract where reinsurer failed to provide the required collateral.
Many reinsurance arrangements require the posting of collateral. The failure to post collateral is often grounds for a breach of contract claim. In a recent decision, a New York federal court granted summary judgment to the cedent on its claim of breach of contract by the reinsurer when the reinsurer failed to provide the required collateral.
In AmTrust North America, Inc. v. Signify Insurance Ltd., No. 18 Civ. 3779 (ER), 2020 U.S. Dist. LEXIS 129476 (S.D.N.Y. Jul. 22, 2020), the cedent sued the reinsurer for breach of contract for failing to post required collateral. The deal was a form of captive fronting arrangement for workers’ compensation policies. The cedent wrote certain workers’ compensation policies and the reinsurer, a captive of the outsourced human resources company, provided the reinsurance of the policies written by the cedent to the human resources company’s clients. The reinsurer brought several counterclaims, including that the cedent had breached the operative program agreement. We previously discussed an earlier decision in this case in our prior firm’s September 2019 Reinsurance Newsletter, in which the court denied the reinsurer’s motion to dismiss the complaint and granted the cedent’ motion to dismiss several of the reinsurer’s counterclaims.