Judge Gertner's Decision in Trenwick America Reinsurance Corp. v. IRC, Inc., et al. (D.Mass. 2011)
February 2011
A reinsurance case successfully tried for two weeks by the Budd Larner law firm in the Federal District Court of Massachusetts addresses a number of noteworthy elements. The Firm represented two companies that were retrocedents on a long chain of insurance, reinsurance and retrocessional business involving workers’ compensation. The amount of the claim was approximately $4.1 million, but the court will enter judgment in favor of our clients for an amount in excess of $14 million. The size of the award is based upon the fact that the court found violations of Mass. Gen. Laws C.93A, which was the same unfair business practices statute that was at issue in the notorious Seven Provinces case.
This case represents an important extension of Seven Provinces in the reinsurance context because the judgment is rendered against not only the retrocessionaire on the contract, but also the principal of the company and the company’s affiliate.
The case is also exceptional in the sense that it was based on an oral retrocessional agreement. The written contract was never located, and we were required to prove the material elements of this somewhat complex retrocessional contract, including the follow the settlements provision. The lack of a written contract raised statute of frauds issues that we were also able to overcome.
Due to the fact that a written contract could not be located, there was also an issue in the case as to which one of the plaintiffs was in fact the retrocedent, an unusual situation in any reinsurance case. We were able to convince the court that there was enough evidence to support a finding in the plaintiffs’ favor and that, in any event, one of the plaintiffs had assigned all of its rights to the other for purposes of the proceeding.
