A federal appeals court on Thursday upheld a ruling in favor of an Allianz unit in a dispute with OneBeacon Insurance Co. regarding an asbestos-related reinsurance agreement.
OneBeacon reinsured one of three excess policies issued by Allianz unit Fireman’s Fund Insurance Co. to Tucson, Arizona-based Asarco Inc., according to the ruling by the Second U.S. Circuit Court of Appeals in New York i Fireman’s Fund Insurance Co. v. OneBeacon Insurance Co., as successor in interest to General Accident Insurance Co. of America.
After developing significant potential liability for asbestos claims, Asarco sought coverage from the Fireman’s Fund under all three excess policies, the ruling said.
Two of Fireman̵7;s Fund’s policies provided Asarco with $20 million in coverage for losses in excess of $30 million in one of two years, while OneBeacon’s reinsurance provided $10 million in coverage for losses in excess of $75 million in one year, with all coverage limits in excess a $3 million self-insured retention.
Fireman’s Fund agreed to pay Asarco $35 million to settle its claims under all three excess policies. It then sought partial reimbursement from OneBeacon under its reinsurance policy.
OneBeacon rejected the claim on the basis that the Fireman’s Fund should have allocated the entire settlement amount to the other two excess policies. The Fireman’s Fund then filed suit against OneBeacon in US District Court in New York, alleging breach of contract.
The District Court ruled in favor of the Firefighters’ Fund, which was upheld by a three-judge panel in the Court of Appeal. The panel agreed with Fireman’s Fund that the other two policies did not have to be exhausted before Fireman’s Fund could seek a portion of the settlement from OneBeacon.
“Because ASARCO’s losses exceeded the tie-in point of the third policy, the Fireman’s Fund could reasonably allocate a portion of the settlement to that policy,” it said, affirming the lower court.
Attorneys in the case did not respond to requests for comment.