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