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.

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