North River Insurance Co v ACE American Reinsurance Co - US Court of Appeals (2nd Cir) (Pooler and Parker Ct JJ and Hall DJ) - 15 March 2004

Insurance - Reinsurance - "Follow-the-settlements" doctrine - Whether doctrine applicable to reinsured's settlement allocation where allocation inconsistent with reinsured's pre-settlement analysis

The plaintiff had insured the Owens-Corning Fiberglass Corporation ("Owens-Corning") between 1974 and 1983. The plaintiff's policies covered portions of the second, third, fourth, and fifth excess layers of Owens-Corning's coverage. The second excess layer covered per-occurrence losses between $26 million and $76 million. The plaintiff insured a portion of that second excess layer in each year between 1974 and 1983. The defendant reinsured only portions of the second excess layer policies issued by the plaintiff. The facultative reinsurance contracts between the plaintiff and the defendant each contained a follow-the-settlements provision, providing that the "liability of the Reinsurer ... shall follow that of the Company".