Insurer Against Insurer Bad Faith Disputes: Excess vs. Primary Carriers and Reinsurers vs. Cedents

This CLE webinar will provide a comprehensive overview of the increasing phenomenon, risks, and challenges of bad faith claims between primary and excess insurers and between cedents and reinsurers. The panel will contrast these claims with policyholder bad faith claims, examine the good faith obligations that can arise between insurers, discuss why choice of law is critical, identify fact patterns that generate insurer-on-insurer bad faith disputes, and offer practical guidance for insurers bringing and defending these claims.

Policyholders now have layers and towers of primary and excess (and surplus) policies. The risks covered by these policies have been reinsured. Adjusting, defending, or paying a loss reported by the policyholder triggers complex and cascading rights and duties between insurers up and down the tower. This complexity has contributed to a steady rise in the number of bad faith claims between insurers.

Bad faith claims between primary and excess carriers are predominantly, but not exclusively, asserted by excess carriers against primary carriers. Most jurisdictions hold that these claims are derivative of the insured's rights and enforced through equitable subrogation. In other jurisdictions, however, the excess insurer has its own direct bad faith claim against the primary carrier based on breach of implied duties. Bad faith claims by primary insurers against an excess are much less common and jurisdiction-dependent, but may arise in certain situations.

In the reinsurance context, it is usually the reinsurer that asserts bad faith against the cedent, which owes the reinsurer a duty of utmost good faith for the way the underlying claim is handled. The relationship is ordinarily governed by the "follow the fortunes" doctrine, but questions arise when the reinsurance contract does not include one. Claims going in the other direction are unusual but not unheard of—usually a counterclaim after the reinsurer denies payment or seeks to rescind the contract for what a cedent contends are contrived reasons.

Listen as this experienced panel discusses the bases for bad faith actions between insurers, the typical fact patterns giving rise to claims, and practical guidance for insurers bringing and defending these claims.