Editor, Mealey's Litigation Reports: Reinsurance and Insurance Insolvency

In news from across the pond, the English Court of Appeals recently ruled that a reinsurer is off the hook for contribution toward the settlement of a securities class action.  The reason?  The cedent, according to the court, did not provide the reinsurer with timely notice of the underlying loss.

In AIG Europe [Ireland] Ltd. v Faraday Capital Ltd., the panel of justicies concluded that AIG Europe (Ireland) Ltd. breached the reinsurance contract's claims cooperation clause and as a result, cannot collect from its reinsurer, Faraday Capital Ltd.

The case arises from AIG's $30.5 million settlement of a securities class action brought aginst its insured, Smartforce Corp.  Smartforce was accused by its shareholders of artificially inflating the value of its stock, causing them to lose money.  The shareholders alleged that they had bought their shares at an artificially inflated value and lost money as a result.