Ronald S. Gass
Reinsurance and Insurance Arbitrator and Umpire
Reinsurance and Insurance Dispute Resolution Services Consultant

“Follow-the-Settlements"" Doctrine Not Inherent in 1974 Casualty Fac Cert Based on Industry Custom and Practice

In another of a series of rulings by an Ohio federal district court regarding a reinsurance dispute over a 1974 casualty facultative certificate (see my Case Note dated 3/11/02), the court held, following a trial, that (1) in the absence of express “follow-the-settlements” wording, the fac cert in question did not obligate the reinsurer to indemnify the cedent's settlements of claims not covered under the excess general liability policy it issued to Owens Corning, and (2) there was no custom and practice in the reinsurance industry that a reinsurer would be obligated to do so. The court found the fact witness testimony produced at trial inconclusive and rejected the conflicting expert testimony presented by the parties observing that it “falls short” of establishing that the “follow-the-settlements” doctrine was inherent in every 1974 reinsurance contract based on industry custom and practice.

North River Insurance Co. v. Employers Reinsurance Corp., No. C2-00-1221, 2002 U.S. Dist. LEXIS 11711 (S.D. Ohio June 3, 2002).

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