Cedent Cannot Recoup Defense Costs Beyond Reinsurance Certificates’ Limits, Ill. Appeals Court Rules

CHICAGO — Reinsurance certificates issued to Continental Casualty Co. clearly and unambiguously provided an aggregate policy limit on “reinsurance assumed” which limited the reinsurer's liability under the certificates, an Illinois appeals court has affirmed.

In a Nov. 4 opinion, the Illinois Appellate Court, First District, concluded that Continental is not entitled to recoup defense costs in excess of the certificates’ limits.

MidStates Reinsurance Corp. reinsured Continental under five excess general liability reinsurance certificates. One of the certificates covered a Continental policy issued to RSR Corp., a smelting company. The four remaining certificates reinsured Continental policies issued to Borg-Warner Corp.

RSR …