STORY FROM: Reinsurance & Arbitration

Insured May Not Proceed Directly Against Reinsurer

NEW YORK - A policyholder may not sue a reinsurer directly to collect on a default judgment rendered against a now-insolvent insurer because the reinsurance contract lacked a "cut-through" clause, the 2nd Circuit U.S. Court of Appeals affirmed Feb. 4. Jurupa Valley Spectrum LLC v. National Indemnity Co., et al., No. 07-3211 (2nd Cir.).

Frontier Insurance Co. issued Jurupa Valley Spectrum LLC surety bonds that were, in turn, reinsured by NICO. In 2002, after the contractor defaulted on the contract covered by the bonds, Jurupa obtained a default judgment from a California state court, which had not been paid because ...

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