Munich Reins. America, Inc. v. American National Ins. Co.

Issue Discussed: Notice

Submitted by Lawrence S. Greengrass, Ann E. Halden*

Date Promulgated: March 28, 2013

Munich Reins. America, Inc. v. American National Ins. Co., 936 F. Supp. 2d 475 (D.N.J. 2013)

Court: United States District Court, District of New Jersey

Issues Decided: Whether a reinsurer can deny indemnification for claims reported late either under a notice or a sunset provision of a reinsurance contract.

Key Holding

Among other issues, a retrocessionaire argued that it was prejudiced by untimely claim notices because it commuted its reinsurance prior to its reinsured reporting certain claims.  The District Court initially awarded summary judgment to the reinsured and the retrocessionaire requested that the court reconsider its ruling.  Upon reconsideration, the District Court noted that, pursuant to New York law, when a contract expressly requires a reinsured to provide its reinsurer with prompt notice of a claim as a condition precedent to coverage and the reinsured fails to meet that requirement, the reinsurer may deny indemnification whether or not it suffered prejudice as a result of the late notice of the claims.   Where the notice requirement does not specify that prompt notice is a condition precedent to coverage, the reinsurer must generally show prejudice as a result of the late notice.

The contract in question contained both a notice provision, requiring “prompt” notice of claims, and a sunset clause, requiring that “no liability shall attach” for claims not reported within seven years after the agreement expired.  With respect to the late notice claim, the District Court held that because the retrocessionaire had failed to present sufficient evidence of actual economic loss to create an issue of fact as to whether it had been prejudiced in its commutation discussions by the untimely notice of claims, summary judgment on that issue in favor of the reinsured was proper.  With respect to the sunset provision, the court held that the provision created a condition precedent to coverage and therefore coverage was barred for claims reported outside of the seven year period.

Key Takeaways

While New York law requires a reinsurer to show prejudice in the form of economic injury to successfully assert a late notice defense pursuant to a notice provision, if the reinsurance contract specifies that notice within a specified period is a condition precedent to coverage, no showing of prejudice is required.

* Lawrence S. Greengrass is Senior Counsel and Ann E. Halden is Special Counsel at Mound Cotton Wollan and Greengrass LLP, where they specialize in reinsurance litigation and arbitration.