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Travelers Casualty & Surety Company v. Gerling Global Reinsurance Corporation of America

United States Court of Appeals for the Second Circuit
419 F.3d 181 (2005)


Facts

Travelers Casualty & Surety Company (Travelers) (plaintiff) provided primary bodily injury and property-damage insurance, and excess insurance to Owens-Corning Fiberglass Corporation (OCF). OCF manufactured asbestos. The primary bodily injury policy distinguished between “products” and “non-products” claims. Each “products” claim had an aggregate limit. Once this limit was reached, the claims would be exhausted. “Non-products” claims were individually subject to a cap. Travelers obtained reinsurance certificates from Gerling Global Reinsurance Corporation of America (Gerling) (defendant) for some of its excess policies with OCF. These certificates contained “follow the fortune” clauses binding Gerling to any settlements Travelers made within the terms and conditions of its policies and the certificates. OCF was sued for asbestos related injuries. OCF categorized these claims as “products” claims. Once OCF exhausted its products coverage, OCF made claims under its “non-products” coverage. Travelers disputed this coverage. OCF and Travelers arbitrated this dispute. Travelers argued that OCF’s claims arose from a single occurrence. OCF argued that each claim was a separate occurrence. OCF and Travelers settled without an agreement about the proper allocation of occurrences. Travelers allocated the majority of the settlement to a single “non-products” claim. After exhausting this claim, Travelers allocated the remaining amount among its excess policies, including those reinsured by Gerling. Gerling refused to pay because, it claimed, the settlement should have been allocated across multiple claims. Travelers sued Gerling for breach of contract. Gerling moved for summary judgment asking the trial court to determine that Gerling was not required to follow Travelers’ theory of allocation. The trial court granted Gerling’s motion, holding that Gerling was not required to reimburse Travelers under the “follow the fortunes” clause. When OCF and Travelers’ settled, Travelers assented to allocation based on OCF’s per occurrence theory. Travelers appealed.

Rule of Law

Issue

Holding and Reasoning (Walker, C.J.)

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