Jan 24 (Reuters) - A New York appellate court affirmed
a $420.4 million ruling in favor of insurer Travelers Cos,
handing it a victory in one of the longest-running and most
complex asbestos-related litigations in history.
The dispute has to do with the obligations of certain reinsurers to Travelers, which joined in payments of nearly $1
billion to cover asbestos claims against the company Western
MacArthur. Travelers subsequently sought to recover some of its
payments from its reinsurance companies.
Among those reinsurers is the U.S. unit of industry leader
Munich Re and units of the insurer and reinsurer ACE Ltd. A
spokeswoman for Munich Re Americas declined to comment. An ACE
spokesman could not immediately be reached for a comment.
In October 2010 a lower New York court ruled that the
reinsurers were obliged to help cover Travelers. That ruling was
affirmed on appeal on Tuesday.
The Appellate Division, First Department, ruled 4-1 that the
reinsurance companies were bound by a concept known as the
"follow the fortunes doctrine," which holds that reinsurers
share the burdens taken on by the insurance companies with which
they do business.
The appellate court found that the lower court "correctly
determined that the follow-the-fortunes doctrine required
defendants to accept the reinsurance presentation made by
(Travelers unit) USF&G."
A Travelers spokesman could not immediately comment on the
ruling.
The facts behind the case date to 1948, when USF&G first
wrote a liability insurance policy for Western Asbestos Co. By
the late 1970s, people harmed by asbestos began to sue Western
Asbestos' successor company, Western MacArthur, which in 1993
sued USF&G and two other insurers seeking indemnification.
In 2002, the sides reached a settlement, which resulted in
Western MacArthur going into bankruptcy. USF&G then sought
indemnification from its reinsurers.
The one dissenter in Tuesday's ruling was Justice Sheila
Abdus-Salaam, who said there was a genuine dispute as to whether
some of the settlement USF&G reached with Western MacArthur was
subject to the reinsurance treaties.
Besides the length of the litigation, the case is notable
because of the high-profile law firms involved. Travelers was
represented on the appeal by Simpson Thacher & Bartlett, while
Wachtell, Lipton, Rosen & Katz represented Munich Re and Boies,
Schiller & Flexner represented ACE.
The case is United States Fidelity & Guaranty Company vs.
American Re-Insurance Co, New York Supreme Court, Appellate
Division, First Department, No. 604517/02.
For American Re-Insurance Company: Herbert Wachtell of
Wachtell, Lipton, Rosen & Katz.
For Excess Casaulty Reinsurance Association and OneBeacon
America Insurance Company: Kathleen Sullivan of Quinn Emanuel
Urquhart & Sullivan.
For ACE Property & Casualty Company: George Carpinello of
Boies, Schiller & Flexner.
For respondents: Mary Kay Vyskocil of Simpson Thacher &
Bartlett.
(Reporting by Ben Berkowitz; Additional reporting by Jonathan
Stempel)
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