Article
| December 15, 2009
Recent Developments on Follow-the-Fortunes in the United States
A version of this article was published in the Newsletter of the Excess, Surplus Lines and Reinsurance Committee of the American Bar Association’s Section on Tort, Trial and Insurance Practice, Fall 2009.
The core of the reinsurance relationship is that of utmost good faith, with each party relying on the other to perform its obligations under the reinsurance contract. No rule or doctrine exemplifies this principle more than the follow-the-fortunes doctrine.
The follow-the-fortunes doctrine provides generally that a reinsurer must follow the underwriting fortunes of its cedent and, as claims are resolved, is bound by the good faith and businesslike settlements made by its cedent so long as there is no evidence of fraud, collusion with the insured, or bad faith. It is a burden-shifting doctrine that allows the cedent the freedom of making good faith claims handling decisions without the fear of having to relitigate those decisions with its reinsurer.
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This memorandum is intended only as a general discussion of these issues. It is not considered to be legal advice. We would be pleased to provide additional details or advice about specific situations. For additional information on this important topic, please feel free to call upon your Dewey & LeBoeuf relationship partner. No part of this publication may be reproduced, in whole or in part, in any form, without our prior written consent.
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