Reinsurer May Not Challenge Cedent's Allocation Method, State Judge Rules

BOSTON - The "follow the fortunes" doctrine prevents a reinsurer from denying coverage for the settlement of asbestos claims based upon the cedent's decision to allocate the losses using the "bathtub methodology," a Massachusetts state judge has ruled. Lexington Insurance Co. v. Clearwater Insurance Co., No. 09-0234 (Mass. Super. Ct., Suffolk Cty.).

On July 26, Suffolk County Superior Court Judge Janet L. Sanders found that the cedent's allocation decision was not unreasonable or made in bad faith and therefore cannot be challenged.

Dresser Industries was named as a defendant in hundreds of thousands of complaints throughout the United States alleging …