Lloyd's Maritime and Commercial Law Quarterly
COMMON LAW OF REINSURANCE LOSS SETTLEMENT CLAUSES:
A Comparative Analysis of the Judicial Rule Enforcing the Reinsurer’s Contractual Obligation to Indemnify the Reinsured for Settlements
William C. Hoffman*
Full reinsurance clauses have developed from indemnities allowing reinsurers to dispute the amount of a claim into indemnities which permit them to question the honesty or competence of the reinsured.
†
But, independently of such a clause, it is clear, by the French law, that the original assurers must, in a suit brought against the reassurers, establish the same facts as would entitle the assured to recover upon the original policy.
††
I.INTRODUCTION
The reinsurance loss settlement clause has been one of the most difficult points of reinsurance law historically and, in recent years, one of the more frequently litigated. By a loss settlement clause, the reinsurer agrees to be bound by payments that the reinsured may make to an original insured in settlement of liability under
*International legal counsel, Cologne Reinsurance Co., Cologne, Germany.
The following abbreviations are used for the books and cases specified:
Black: Black’s Law Dictionary (5th rev. edn., 1979).
Butler & Merkin: J. Butler and R. Merkin, Reinsurance Law.
Emérigon: Emérigon, Traites des Assurances (2nd edn., 1827).
Gerathewohl: K. Gerathewohl, Ruckersicherung—Grundlagen und Praxis.
Golding’s History: C. Golding, A History of Reinsurance with Sidelights on Insurance (2nd edn., 1931). Golding’s Reinsurance: C. Golding, The Law and Practice of Reinsurance (5th edn., 1987).
Grossmann: M. Grossmann, Ruckversicherung—eine Einfuhrung (2nd edn., 1982).
Merkelbach: R. Merkelbach, Deux Notions classiques du Droit de la Réassurance: le Partage du Sort et le Partage des Actions, 52 Schweiz. Vers. Zeitschr. 282.
Prölss & Martin: Prölss & Martin, Kommentar zum Verischerungsvertragsgesetz (rev. 25th edn., 1992). Staring: G. Staring, Law of Reinsurance (1993).
Strain 1980: H. Kramer, “The Nature of Reinsurance,” in R. Strain (ed.), Reinsurance 12.
Strain 1992: R. Strain (ed.), Reinsurance Contract Wording.
Bellefonte: Bellefonte Reins. Co. v. Aetna Casualty and Surety Co. (1990) 903 F. 2d 910 (2nd Cir.). Boden: Boden v. Hussey
[1988] 1 Lloyd’s Rep. 423.
Charman: Charman v. Guardian Royal Exchange
[1992] 2 Lloyd’s Rep. 607.
Chippendale: Chippendale v. Holt (1895) 73 L.T. 472.
Christiana: Christiana Gen. Ins. Corp. v. North American Reins. Corp. (1990) 452 N.W. 2d 841.
Excess: Excess Ins. Co. v. Matthews
(1925) 23 Ll.L.Rep. 71.
Fireman’s v. Aachen: Fireman’s Fund Ins. Co. v. Aachen & Munich Fire Ins. Co. (1906) 84 P. 253 (Cal.App.).
Fireman’s v. Western: Fireman’s Fund Ins. Co. v. Western Australian Ins. Co. (1927) 138 L.T. 108 (also reported at 28 L.Rep. 243).
Hastie: Hastie v. DePeyster (1805) 3 Caines 190 (N.Y.).
Hiscox: Hiscox v. Outhwaite (No. 3) [1991] 2 Lloyd’s Rep. 524 (also reported at [1991] 1 Re.L.R. 99).
Independence: Independence Ins. Co. v. Republic National Life Ins. Co. (1969) 447 S.W. 2d 462 (Tex. App.).
NACPAC: American Ins. Co. v. North American Co. for Property and Casualty Ins. (1982) 697 F. 2d 79 (2nd Cir.).
ICSNY: Insurance Co. of the State of New York v. Associated Manufactures Mutual Fire Ins. Co. (1902) 74 N.Y.S. 1038 (App. Div.) aff’d (1903) 174 N.Y. 514.
ICSP: Insurance Co. of the State of Pennsylvania v. Grand Union Ins. Co.
[1990] 1 Lloyd’s Rep. 208 (H.K. C.A., aff’g Mortimer, J.).
Marten: Marten v. Steamship Owners’ Underwriting Association Ltd. (1902) 87 L.T. 208.
Mentor: Mentor Ins. (U.K.) Ltd. v. Norges Brankasse (1993) 996 F. 2d 506 (2d Cir.,) (slip op. at 3372). Michigan Millers: Michigan Millers Mutual Ins. Co. v. North American Reins, Corp. (1990) 452 N.W. 2d 841 (Mich. App.).
NYS Marine: New York State Marine Ins. Co. v. Protection Ins. Co. (1841) 18 Fed. Cas. 160 (D. Mass). Peerless: Peerless Ins. Co. v. Inland Mutual Ins. Co. (1958) 251 F. 2d 696 (4th Cir.)
Poole: Western Assurance Co. of Toronto v. Poole [1903] 1 K.B. 376.
Royal v. Caledonian: Royal Ins. Co. of Liverpool, England v. Caledonian Ins. Co. of Edinburgh, Scotland (1920) 187 P. 748 (Cal.).
St. Paul v. Morice: St. Paul Fire & Ins. Co. v. Morice (1906) 22 T.L.R. 449.
SCOR: Insurance Co. of Africa v. SCOR (U.K.) Reins. Co. Ltd.
[1985] 1 Lloyd’s Rep. 312.
Surplus: International Surplus Lines Ins. Co. v. Fireman’s Fund Ins. Co. (1992) No. 88-C-320, 1992 U.S. Dist. Lexis 1022 (31 January 1992) (N.D. III.), aff’d (1993) 998 F. 2d 504 (7th Cir.).
Toomey: Toomey v. Eagle Star Ins. Co. Ltd.
[1993] 1 Lloyd’s Rep. 492.
Unigard: Uniguard Security Ins. Co. v. North River Ins. Co. (1991) 762 F. Supp. 566 (S.D.N.Y.), aff’d in part, 1993 W.L. 347076 (2d Cir.).
U.S. Fire: Insurance Co. of North America v. United States Fire Ins. Co. (1971) 322 N.Y.S. 2d 520, aff’d (1973) 348 N.Y.S. 2d 122.
† SCOR, 326, per Stephenson, L.J.
†† NYS Marine, 160, per Story, J.
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