Lexington Ins. Co. v. RLI Ins. Co., No. 19-1426, 2020 U.S. App. LEXIS 2486 (7th Cir. Jan. 27, 2020).
Much has been written about the alleged demise of utmost good faith as a reinsurance doctrine. While not pertinent to the holding, the Seventh Circuit, in this case interpreting the meaning and application of an Aggregate Corridor Deductible (ACD) to an excess policy, mentioned the duty of utmost good faith to support its determination on how it interpreted the ACD. In relying on extrinsic evidence to support the manner in which the ACD should apply, the court discussed a memo describing the basis upon which a reinsurer would provide coverage to the excess insurer. The court stated “[a] bsent evidence to the contrary, we can assume [the cedent] was not lying to [the reinsurer], especially given the duty of ‘utmost good faith’ that governs reinsurance transactions” (citation omitted). Thus, the doctrine of utmost good faith seems alive and well in the Seventh Circuit.