• English Cout Limits Applicability of *Follow the Fortunes* Clause
  • April 11, 2008 | Author: Jessica F. Pardi
  • Law Firm: Morris, Manning & Martin, LLP - Atlanta Office
  • Insurers and their reinsurers are all too familiar with the competing tensions of a "follow the fortunes" clause wherein a reinsurer is prevented from challenging the claim settlement decisions of its cedant. First, there is the interest of the insurer in avoiding duplication of its claims investigation by a reinsurer whose knowledge of the underlying facts and general ability to adjust claims likely is inferior to that of the insurer. This interest often "butts heads" with the desire of the reinsurer to protect its interest in the event of questionable or erroneous settlement practices of the insurer. These opposing interests often evolve into a legal dispute wherein the obligations and standards of the "follow the fortunes" clause are hotly contested. Interestingly, most of the reported opinions on these disputes deal with treaties wherein the reinsurance coverage is "back to back" with the insurance coverage, i.e. they are equal in scope and terms.