In re Liquidation of Inter-Am. Ins. Co. of Ill.

Issue Discussed: Waiver of Defenses

Submitted by Aluyah I. Imoisili, Claire-Lise Y. Kutlay*

Date Promulgated: March 29, 2002


In re Liquidation of Inter-Am. Ins. Co. of Ill., 768 N.E.2d 182 (Ill. App. Ct. 2002)

Court: Appellate Court of Illinois

Issues Decided: Whether a reinsurer waives its right to avoid payment of claims, based on the insurer’s failure to comply strictly with terms of the reinsurance agreement, by failing to raise the issue at the time of the alleged deficient performance.

Key Holding

The Liquidator of a life insurer filed a petition against its reinsurer to reject certain reinsurance treaties.  The reinsurer contended it owed a reduced amount to the insurer because the insurer failed to comply strictly with terms of the reinsurance agreements that specified a method for the insurer to maintain its life insurance portfolio.  The trial court sided with the insurer, ruling that the reinsurer had waived the argument.

The appeals court affirmed the trial court.  The appeals court held that the reinsurer waived its right to enforce strict compliance with the portfolio maintenance obligations because the reinsurer accepted reinsurance premium payments over an extended period without complaining about, or objecting to, the insurer’s method of portfolio maintenance.

Key Takeaways

A reinsurer may waive its ability to insist on strict compliance with particular terms of a reinsurance agreement by accepting premium payments without timely objecting to the insurer’s deficient compliance with strict terms.


* Aluyah I. Imoisili is a Partner and Claire-Lise Y. Kutlay is an Associate at Greenberg Gross LLP, where they specialize in commercial litigation and arbitration.