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Follow the Settlements and Follow the Fortunes – AIDA Rome 2014

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Follow the Settlements and Follow the Fortunes – AIDA Rome 2014. Danish, Swedish & Norwegian Law. Niels Schiersing, FCIArb , HORTEN. Reinsurance not governed by the Insurance Acts in DK, N and S

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Follow the Settlements and Follow the Fortunes – AIDA Rome 2014

Danish, Swedish & NorwegianLaw

Niels Schiersing, FCIArb, HORTEN

Reinsurance not governed by the Insurance Acts in DK, N and S

Some principles mayapply by analogy (not the provisions whicharedimplemented to protect the insured)

The permissibleextent of construction by analogy is not welldefined (to say the least)

  • Danish, Norwegian & Swedish law: The basic rules
Customs and usages on the relevant international marketsareimportantwhenconstructing the reinsurancecontract:

No case law in DK and S but in N:

Gjensidige v Continental Insurance and others (unpublished): ”This indicatesthat a literalconstructionbeappliedalso under Norwegianlaw …”

ND-1995-447: ”The insurance policy is developed by brokers at the insurancemarket in London … Norwegianpractice must beconsidered to comply with English practice in thisregard” (Direct insurance)

  • Danish, Norwegian & Swedish law:
  • Construction of reinsurance contracts
Cedant and Reinsurerarefree to agreethat the Reinsurershallbebound by a settlement, an award or a judgmentbetween the Insured and the Cedant

”Follow the Fortunes” clauses (US)

”Follow the Settlements” clauses (UK)

  • Danish, (Swedish and Norwegian) law: Contracting
Danish case law:

U1996.906 SC & U 1999.429 SC (Co-assurance)

Case concerningdefective windturbines:

The leadcoulddecide and the otherinsurersobliged to follow (1996)

The principle did not apply to payments made to owners of non-insured windturbines (1999)

Not Ex Gratiapayments …

  • Danish Case Law: Boundby Contract?
U1912.239 SC & U 1922.186 AC (Retrocession)

By implication, the retrocessionaireobliged to follow the decisions by the reinsurer …

The retrocedantwasconsidered to have acted ”prudently and in the interest of all involvedinsurers/reinsurers must, accordingly, bebound by this decision …”

Business Efficacy and Good Faith? RelationalContracts?

  • Danish Case Law: Bound by Implication?
U 2006.2421 SC (Reinsurance)

Cedant: The principle of ”Follow the Fortunes” appliesReinsurer: An implied obligation to ”follow the fortunes” apply in treatyreinsurance

AC: ”The claimant (cedant) has not establishedthat the respondent (reinsurers) as facultativereinsurers has committeditself to let the cedants decision on the matter of insurancecoverage vis-a-vis the insuredbe binding on (the reinsurer)”

SC: Did not opine on the matter

E contrario: Business Efficacy and Good Faith in Treaty Reinsurance?

Good Faith, Business Efficacy and RelationalContracts …

  • Danish Case Law: Boundby Implication?