Follow-the-Settlements and Allocation: New York’s High Court Weighs In, by Steven C. Schwartz

[Editor’s note: © 2013 Steven C. Schwartz. Steven C. Schwartz is a partner in the New York office of Locke Lord LLP, where he handles reinsurance disputes and other matters involving the insurance industry. He is the author of Reinsurance Law: An Analytic Approach, a comprehensive treatise published by Law Journal Press.]

On February 7, the New York Court of Appeals decided an important case regarding the scope of a reinsurer’s obligation to follow its cedent’s settlements. For several years, cedents and reinsurers have debated whether follow-the-settlements provisions apply only to the cedent’s settlement with its policyholder, or whether they …