Reinsurers must pay their share of legal settlements reached by insurers who cede business to them if they are reached in good faith, a federal appeals court has ruled.
Reversing a lower court's decision, the 2nd U.S. Circuit Court of Appeals in New York determined that a reinsurer must abide by a settlement allocation plan established by the primary insurer to deal with a policyholder's claim and cannot dispute a good faith funding arrangement.
The case at issue involved a dispute between reinsurer Gerling Global and Travelers over the funding of a settlement that Travelers reached with Owens-Corning Fiberglass over the insurer's liability for asbestos claims against Owens-Corning.
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