Bellefonte Reinsurance Co. v. Aetna Cas. & Sur. Co.

Issue Discussed: DJ Expenses / Costs within or in Addition to Limits

Submitted by Amy Kline*

Date Promulgated: May 18, 1990

Bellefonte Reinsurance Co. v. Aetna Cas. & Sur. Co., 903 F.2d 910 (2d Cir. 1990)

Court:  United States Court of Appeals for the Second Circuit

Issue Decided: Whether reinsurers are obligated to pay defense costs and claim expenses in excess of reinsurance policy limits.

Key Holding

Reinsurers are not liable beyond the stated policy limits. This is the case notwithstanding the follow the fortunes clause, because such as clause “coexist[s] with, rather than supplant[s] the liability cap. Likewise, the “in addition thereto” language “merely outlines the different components of potential liability under the certificate. It does not indicate that either component is not within the overall limitation.” Defense costs are “subject to” the express cap on liability set forth in the certificates.

Key Takeaways

A reinsurer’s liability under a facultative certificate is limited to the stated policy limit; expenses in excess of that limit are not recoverable.

* Amy Kline is a Vice-Chair of the Litigation Department and a Partner in the Insurance Practice Group of Saul Ewing LLP, resident in Philadelphia, Pennsylvania.