International Surplus Lines Insurance Co. v. Certain Underwriters & Underwriting Syndicates at Lloyd’s of London

Issue Discussed: Follow the Fortunes / Settlements

Submitted by Cecilia Froelich Moss, Karen C. Baswell

Date Promulgated: September 27, 1994

International Surplus Lines Insurance Co. v. Certain Underwriters & Underwriting Syndicates at Lloyd’s of London, 868 F. Supp. 917 (S.D. Ohio 1994)

Court: United States District Court for the Southern District of Ohio

Issues Decided: Whether the insurer’s decision to treat multiple asbestos claims as arising out of a single occurrence was reasonable based on the state of Ohio law at the time the insurer made its decision.

Factual Background:

The insurer, ISLIC, provided excess coverage to an asbestos manufacturer who faced thousands of asbestos-related claims.  ISLIC’s policies contained a $1 million per-occurrence deductible and defined occurrence as “an accident, event or happening . . . which results . . . in personal injury . . . .  All such personal injury . . . caused by one event or by continuous or repeated exposure to substantially the same conditions shall be deemed to result from one occurrence.” 868 F. Supp. 917, 919 (S.D. Ohio 1994).

ISLIC accepted the policy holder’s determination that all the asbestos-related claims arose out of a single occurrence, namely, the policy holder’s decision to use asbestos in its products.  However, when ISLIC sought to collect from its reinsurers, they refused to pay, claiming that under the policies’ occurrence definition each asbestos claim represented a separate occurrence, with a separate deductible.  ISLIC brought suit, and eventually moved for summary judgment.

Key Holding:

The opinion does not state whether the reinsurance policies at issue contain an express follow-the-fortunes provision.  However, the court noted it was “commonly understood that reinsurers must follow the fortunes of their insured,” and stated that the follow the fortunes doctrine applied to “all reinsurance contracts,” even if not explicitly stated.  868 F. Supp. at 920.  Because the doctrine requires a reinsurer to reimburse its cedent “for payment of the settled claims so long as the payments were made reasonably and in good faith,” the court identified the question before it as whether ISLIC had “acted reasonably and in good faith when it accepted [the policy holder’s] position that the asbestos claims arose from a single occurrence.”  Id. at 921.

The court then examined the state of the law concerning the number of occurrences issue as it existed when ISLIC agreed to the single occurrence position, and found that ISLIC’s coverage decision was reasonable.  Therefore, the court held that ISLIC’s decision was binding on its reinsurers.  Id. at 923.


* Cecilia Froelich Moss is a founding partner of Chaffetz Lindsey LLP, where her practice focuses on representing major insurance companies in reinsurance disputes and in coverage litigation.  Ms. Moss also handles large scale commercial disputes in court and in international arbitration.

* Karen C. Baswell is an associate of Chaffetz Lindsey LLP, focusing on insurance and reinsurance dispute resolution.  Ms. Baswell also has experience representing clients in commercial litigations and international arbitrations.