As Manhattan state Supreme Court Judge Richard Lowe III would frequently remind United States Fidelity & Guaranty outside counsel Mary Kay Vyskocil and Chet Kronenberg of Simpson Thacher, their client’s fight to recoup reinsurance payments for about half of its $987 million settlement with an asbestos policyholder has been kicking around his docket for quite a long time. Simpson filed the breach of contract suit in 2002, after USF&G’s reinsurers balked at covering their share of USF&G’s 2002 settlement with its policyholder Western Asbestos Co. But facts in the case stretched back all the way to 1948, when USF&G, now part of Travelers, first wrote a policy for Western Asbestos; some of the reinsurance treaties at issue in the case before Lowe were written more than 60 years ago.
For Simpson and Travelers, the judge’s Friday summary judgment opinion (pdf) was well worth the wait. Ruling on cross motions for summary judgment by Travelers and the two defendants — American Re and a reinsurance coalition called the Excess Casualty Reinsurance Association — Lowe found the reinsurance treaties are enforceable, so American Re and ECRA are liable for, in Vyskocil’s words, “every penny” Travelers sought from them. He granted summary judgment of $202 million against American Re and about $60 million against ECRA. With interest, the awards should top $420 million.
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