Reinsurance Contract Does Not Contain Implied 'Cut-Through' Clause, Judge Rules

TULSA, Okla. - An insured seeking coverage for asbestos exposure claims cannot collect directly from one of its carrier's reinsurers because the reinsurance contract cannot be reasonably read to contain an implied cut-through clause, an Oklahoma federal judge has ruled. Canal Insurance Co. v. Montello Inc., No. 10-411 (N.D. Okla.).

On Sept. 26, Judge James H. Payne of the U.S. District Court for the Northern District of Oklahoma ruled that the contract's negating clause, which states that no third parties may receive any benefits from the reinsurer, defeats the policyholder's cut-through argument.

Montello, a distributor of products used in …