Recently, in American Home Assurance Co. v. American Re-Insurance Co., No. 602485/06 (N.Y. Sup. Ct. May 27, 2010), the Supreme Court, New York County (Ramos, J.) granted Defendants’ (the reinsurers’) summary judgment motions, finding that Plaintiffs’(the insurers’) claims were not reasonably within the scope of or arguably covered by its underlying policies with Monsanto.  As such, the reinsurers were not bound to follow the settlement.  The court also found that in entering into the settlement with Monsanto, plaintiffs glossed over critical coverage issues, unnecessarily exposing the reinsurers to non-covered claims. Specifically, the court noted that plaintiffs’ policies contained certain exclusions that appeared to provide a valid defense to at least some of the claims covered by the settlement with Monsanto.  Thus, the court further held that the reinsurers did not have to follow the settlement because plaintiffs failed to conduct a reasonable, businesslike investigation of the underlying claims before making its settlement payment to Monsanto.  To review our previous blog post, click here.

On or about July 28, 2010, plaintiffs filed a notice of appeal to the Appellate Division, First Department.  Plaintiffs, according to their pre-argument statement, seek a reversal of the Supreme Court, New York County decision, asserting that:

It was error to dismiss Plaintiffs’ causes of action against Defendant because New York law requires that the Defendant reinsurers follow the good faith settlement that Plaintiffs entered into with their insured.  The IAS Court erred in failing properly to consider the effect of a 1993 settlement with Monsanto on the Anniston losses for which reimbursement was claimed and further in completely ignoring the triable issues of fact created by, inter alia, the expert affidavit submitted by Plaintiffs to the effect that the 1993 agreement is a settlement of the type that is routinely and customarily binding on reinsurers under the doctrine of follow the settlements.

Indeed, this notice of appeal has not been perfected and therefore we will continue to monitor this case for the likely appeal.