RSA v Equitas—application of key clauses in reinsurance policies
Insurance & Reinsurance analysis: The claimant insurers (RSA) sought recovery from the Defendant reinsurer, Equitas Insurance Limited (Equitas) for recovery of damages and defence costs incurred for settlement of bodily injury (asbestos and welding fumes) claims against the underlying insured. The court held the applicable excess under the reinsurance policies could only be eroded by indemnity payments and not by defence costs. On the Claims Cooperation clause, the court held this did not limit the power of the RSA to bind Equitas to settlements pursuant to the Follow Settlements clause. The court found Equitas had not shown that RSA had failed to take ‘all proper and businesslike steps’ in entering into settlement with its insured, so Equitas was bound by the Follow Settlements clause. Finally, RSA was entitled to simple interest from the date of each respective loss. The case provides clarification on the legal principles applicable to each of these four issues, discussed in more detail below, which has wider implications for all policyholders.[161] Written by Sonia Campbell (partner), Josianne El Antoury (special counsel) and Harriet Thurstan (associate) at Covington & Burling LLP.