August 10th, 2010
Accumulation of Loss, Aggregate Cover, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Allocation, Reinsurance Claims
A. Introduction
Over a year ago we ran a Reinsurance Nuts & Bolts feature entitled “Aggregate Extension Clauses” (here). To our considerable surprise, that article was, and remains, one of our more popular ones.
At the close of the article we said (tongue in cheek): “If you, the reader, have gotten this far, then perhaps you would like to delve into a discussion of ‘Aggregate Extraction Clauses.’ But these clauses – which conjure up some of the more frightening scenes from Marathon Man (1976) – are better left for another day. . . . ” Brace yourselves, for we fear that day has arrived. . . . Continue Reading »
November 20th, 2009
Appellate Practice, Contract Interpretation, New York State Courts, Nuts & Bolts, Nuts & Bolts: Reinsurance
Introduction
In Part I of this two-part post (here) we discussed the background and procedural history of Gulf/Transatlantic and how New York’s Appellate Division, First Department resolved the issues of: (a) the amount of reinsurance accepted by Gerling; and (b) whether the trial court should have granted Gerling’s motion for summary judgment on Gulf’s reformation claim. This Part II covers the remaining three issues whether: (a) the 1998 First Union Policy “attached” to the 1999 Treaty; (b) Gerling reinsured the policies Gulf issued to a subsidiary of the General Electric Company; and (c) Gerling established a question of material fact concerning whether it was entitled to rescind the 1999 Treaty. Continue Reading »
November 17th, 2009
Appellate Practice, Contract Interpretation, New York State Courts, Nuts & Bolts, Nuts & Bolts: Reinsurance, Rescission and Reformation
Introduction
Today we look at a reinsurance case recently decided by the New York Supreme Court, Appellate Division, First Department, New York’s intermediate appellate court for cases originating in New York County (Manhattan) and certain other counties in the New York metropolitan area. We would not characterize Gulf Ins. Co. v Transatlantic Reins. Co., ___ A.D.3d ___, 2009 NY Slip Op. 06788 (1st Dep’t Oct. 1, 2009) (copy here), as a ground-breaker, but it involves a number of interesting issues, including the interpretation and construction of a quota share treaty, course of performance, reformation and rescission.
Substantive reinsurance cases are a relatively rare breed to begin with (especially in recent years), and cases that discuss a broad range of issues in some depth are rarer still. That makes Gulf/Transatlantic worthy of some attention, especially to those interested in learning a few reinsurance law basics. Hat tip to my friend and former colleague James P. Tenney for bringing the case to our attention.
Continue Reading »
June 1st, 2009
Nuts & Bolts, Nuts & Bolts: Reinsurance
Introduction
I remember when I first heard the term “aggregate extension clause.” I was a couple of years out of law school and just getting my feet wet in reinsurance law and practice. Naturally, I had no idea of what an aggregate extension clause was or, for that matter, why someone would want to call something an “aggregate extension clause” in the first place, unless the principal objective was to confuse the reader. I envisioned some densely worded, obtuse, complex and hopelessly confusing provision designed to accomplish some obscure yet important purpose, the relevance of which was surely beyond my ken. I decided that I could read up on the clause, or ask a colleague about it, but I feared that the explanation – written or oral – would be at least as difficult to decipher as the clause itself, and probably more so. So I did my best to avoid even having to think about aggregate extension clauses — let alone deal with them — for as long as possible.
Eventually, of course, I had to face my fears and grapple with the seemingly elusive concept of “aggregate extension.” I quickly learned that my initial assessment was only partly correct: aggregate extension clauses are indeed densely worded, but the purpose of the clause is far more straightforward than I once assumed. Once I learned a little bit about the clause, I realized (or at least thought) that I could impress – or perhaps awe – my less experienced colleagues with it, and might even be able to use it to show my more experienced colleagues that I knew something about reinsurance. While I can’t say I obtained as much mileage out of my newfound knowledge as I expected, I am nevertheless glad that I invested a little time into learning about aggregate extension clauses.
In this Reinsurance Nuts & Bolts post we briefly discuss in very simple and basic terms what an aggregate extension clause is, and what it does. We also provide the reader with an example of some of the operative wording of an aggregate extension clause. Our discussion is not intended to be comprehensive; if anything, it is oversimplified. But it should give the reader a basic understanding of the topic. Continue Reading »
May 18th, 2009
Arbitrability, Authority of Arbitrators, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Arbitration
Introduction
In today’s Nuts & Bolts post we take a brief look at honorable engagement clauses, which are sometimes referred to as “honorable undertaking” clauses. Honorable engagement clauses are, for practical purposes, a species of choice of law clause. Generally, they confer upon arbitration panels a degree of freedom to depart from the strict rules of law and evidence, and to interpret the contract as an honorable engagement rather than literally according to its terms. They are premised on the now arguably outmoded historical concept that a reinsurance contract is more than a contract, but an honorable undertaking, a deal that is closed when the parties shake hands over a cocktail (or three), and one by which the parties are honor-bound to abide. They also recognize that reinsurance is an arcane business with its own peculiar set of customs, practices and norms, and that, if the parties so agree, arbitrators should be reasonably free to apply these norms in deciding a case, even if a court faced with the same facts would or could not.
Honorable engagement clauses are more common in older reinsurance contracts than in those written today. But many reinsurance disputes arise out of long-tail asbestos or environmental claims arising out of decades-old contracts, a great many of which contain these clauses. And the clauses can have some significant implications in those disputes. Continue Reading »
