The “re” part of “reinsurance” is kind of important

This one caught my eye because it’s a novel argument.  Also, a lot of the underlying case happened in Texas, and since I’m originally from Texas (and also a Texas lawyer), I had to share it.  But more enough about me, and more about you.  For purposes of this post, “you” will be the appellant in Weeks Marine v. Am. Steamship.

So, one of your employees gets hit in the head and is diagnosed with a concussion and a cervical sprain.  He comes back to work for a couple of months, but then never comes back.  So you fire him.  He, naturally, sues you, and you defend the claim yourself because that’s what your indemnity policy says you have to do.  The employee demands $850,000 in settlement, you counter with $200,000, and you end up trying the case.  And since you’re in Starr County, Texas–which has a well-deserved reputation as a “judicial hellhole”–you get handed a $3.7 million judgment.  You appeal and lose.

Yeah, it's basically Mexico...

You then seek indemnity from your indemnity carrier (go figure!), but the carrier denies the claim because you didn’t provide timely notice–even though the policy, as I mentioned, gives you the right to defend, investigate, settle, and appeal.  Ordinarily, the “notice-prejudice” rule wouldn’t help you because, up until some legislative changes in 2010, an insurer in New York (where the case against your insurer is pending) didn’t have to show that the lack of notice caused prejudice.  But, if you could argue that your insurer is really more like your reinsurer, then it would have to show how your late notice prejudiced it.  Cute, eh?

Unfortunately for you (and, let’s be honest, nothing in this case has gone your way), the Court doesn’t buy it, and reminds you that reinsurance is an insurance contract between two insurance companies.  And since you’re not an insurer, we’re done here.  Actually, the Court goes on, but you get the point.  Turns out the “re” really does matter.

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About Brian Jones

I represent clients in all aspects of business litigation, but focus my practice on complex litigation and arbitration matters in life, property and casualty, disability, and professional lines insurance and reinsurance. I also represent clients in disputes regarding ERISA, lending, receiverships, securities, commercial leases, real estate disputes, construction, and employment matters. I am the co-chair of the Bose McKinney & Evans Insurance Group. I was named a "Rising Star" in Business Litigation by Super Lawyers in Indiana in 2013 and 2012, and I was also named a 2010 “Rising Star” in Business Litigation in Texas. I am a member of the State Bars of Indiana and Texas, the Defense Research Institute, a former member of the Pro Bono College of the State Bar of Texas, and am licensed to practice before all state courts in Indiana and Texas, as well as all federal courts in Indiana, the Northern, Western, and Southern Districts of Texas, the Northern District of Illinois, and the United States Court of Appeals for the Fifth Circuit. I received my bachelor’s degree, cum laude, in political science and my master’s degree in teaching from Trinity University, where I was elected to Phi Beta Kappa. I received my doctor of jurisprudence degree from the University of Texas School of Law, where I was the Director of Communications for the Legal Research Board and a member of the Phi Delta Phi Honor Society. Before attending law school, I taught high school geography, government and economics in San Antonio, Texas.
This entry was posted in Coverage Defenses, Notice-Prejudice Rule, Reinsurance and tagged , , , , . Bookmark the permalink.

One Response to The “re” part of “reinsurance” is kind of important

  1. Pingback: Again, the “Re” Part of Reinsurance is Important | The Bose Insurance Blog

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