Part II of a Two-Part Post
Introduction
In Part I we discussed the controversy surrounding the House of Lords decision in Lexington Insurance Co. v. AGF Insurance Co. [2009] UKHL 40. The House ruled that two proportional facultative reinsurers were not obligated to indemnify the cedent for their share of the entire amount of a judgment a Washington State court rendered against the cedent in an environmental coverage action. The judgment, which was based on Pennsylvania law, rendered the cedent liable under the policy jointly and severally for property damage caused by environmental contamination that occurred before, during and after the three-year policy period. The House ruled that the reinsurers could be held liable only for their respective shares of the loss that occurred during the three-year term of the reinsurance contract (which was concurrent with that of the cedent’s policy), not their shares of the total amount of loss for which the Washington judgment held the cedent liable under the reinsured policy.
In this Part II we briefly summarize the pertinent background of the case, walk the reader through the House’s reasoning and offer a few parting thoughts. Continue Reading »
