In 2013, Utica Mutual Insurance Company (the cedent) filed a complaint alleging that Century Indemnity Company (the reinsurer) (1) breached two reinsurance certificates executed between the parties covering the years 1973 and 1975 in connection with asbestos liability exposure; (2) owed the unpaid balance of prior billings under the two certificates; (3) violated the duty of utmost good faith and fair dealing; and (4) is obligated to pay certain future billings. Century answered, refusing to acknowledge the existence of a valid 1975 reinsurance certificate, and asserted various affirmative defenses. After two years of discovery, Century amended its answer to assert bad-faith counterclaims against Utica alleging that Utica had been maintaining two sets of record-keeping systems to track asbestos settlements made on behalf of the underlying insured, allegedly part of a larger effort by Utica to conceal the fact it had been over-billing reinsurers, including Century, for these claims.

Utica sought partial summary judgment on various aspects of the litigation, including that (1) Utica's allocation decisions related to the coverage and handling of the asbestos claims against the underlying insured were reasonable and made in good faith, such that the "follow the fortunes" doctrine applied; (2) the 1975 reinsurance certificate is valid and binding on Century; and (3) Century had no right to claw back any sums previously paid to Utica. Century responded with its own dispositive motions. The court denied the parties' motions with respect to most issues, including whether Utica's loss allocation decisions were reasonable and made in good faith. Utica Mut. Ins. Co. v. Century Indem. Co., Case No. 6:13-cv-00995 (USDC N.D.N.Y. Sept. 26, 2018).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.