Employers Reinsurance Corp. v. Mid-Continental Cas. Co.

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

Submitted by Amy Kline*

Date Promulgated: February 17, 2004

Employers Reinsurance Corp. v. Mid-Continental Cas. Co., 358 F.3d 757 (10th Cir. 2004)

Court: United States Court of Appeals for the Tenth Circuit

Issue Decided: Whether fees and expenses that arose from various lawsuits relating to claims of the insured are covered under a reinsurance agreement as “losses” or “claim expenses.”

Key Holding

In a dispute regarding the meaning of the terms “loss” and “claim expenses” in a reinsurance agreement, the Tenth Circuit Court of Appeals held that the agreement was ambiguous as to whether attorneys’ fees and expenses incurred by the underlying insureds in declaratory judgment actions brought by their insurer/the cedent were recoverable as “compensatory damages.” The Court further held that the cedent’s attorneys fees incurred in the declaratory judgment actions were “claim expenses” within the meaning of the agreement, as were the attorneys’ fees incurred by the insureds in defending the underlying tort claims.

Key Takeaways

Depending on how a reinsurance agreements defines losses and expenses, attorney fees and expenses incurred by both the insurer and the underlying insured may be reimbursable when incurred in connection with covered claims or declaratory judgment actions to determine coverage.

* 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.