Trial Court Denies Post-Trial Motions in Asbestos Reinsurance Saga Involving Claims That Reinsurer Failed to “Follow the Fortunes” and Adopt Cedent’s Allocations of Losses

We previously posted about the yearslong reinsurance dispute between Utica Mutual Insurance Co. (the cedent) and Century Indemnity Co. (the reinsurer), involving Utica’s claims that Century breached two reinsurance certificates covering the years 1973 and 1975 in connection with asbestos liability exposure, and Century’s counterclaim that Utica had, in bad faith, maintained a separate record-keeping system for reinsurance allocation purposes to allegedly over-bill Century for its losses. Last fall, after a trial, the jury agreed that Utica’s allocation decisions were reasonable and made in good faith. The court entered judgment in favor of Utica in the amount of $6,257,889.02.

The court has now denied Century’s motion to reduce the prejudgment interest awarded to Utica and has denied Century’s motions for judgment as a matter of law or for a new trial. Regarding the award of prejudgment interest, Century argued that the court erroneously calculated interest from the date Utica sent its first billing to Century, instead of calculating interest incrementally from each ensuing date that Utica submitted billings to Century. The court equivocated on the merits of Century’s argument, but ultimately rejected Century’s argument because it was never made to the jury, and because the jury had made the contrary finding that the two reinsurance claims at issue accrued on the initial dates that Utica submitted the claims to Century.

Regarding the motions for judgment as a matter of law or for a new trial, Century argued that Utica’s allocation of losses pre- and post-settlement with its underlying insured were inconsistent and therefore objectively unreasonable as a matter of law. The court, however, rejected that argument, ruling that evidence supported the jury’s finding that Utica’s allocations were consistent pre- and post-settlement with the underlying insured, and that even if they were not, the law does not deem inconsistent allocations per se unreasonable as a matter of law. Century also argued that evidence did not support the jury’s award of damages for Utica’s recovery of reinsurance claims that included defense costs. Century contended that there was never a formal endorsement of the reinsurance agreement permitting that recovery. The court was not persuaded, however, finding that evidence supported the jury’s finding on this issue, including testimony that showed that “certain reinsurance principles … including the follow-the-fortunes provision, made formal modification [of the agreement] unnecessary under [the] circumstances.”

Utica Mutual Insurance Co. v. Century Indemnity Co., No. 6:13-cv-00995 (N.D.N.Y. Dec. 3, 2020).