In a recent decision analyzing the follow the fortunes doctrine, a federal district court in Florida held that the doctrine should not be implied in a reinsurance contract. See Employers Reinsurance Corp. v. Laurier Indemnity Co., No. 8:03cv1650 (M.D. Fla. 2006). Employers Reinsurance Corporation ("ERC") reinsured a commercial general and professional liability policy issued by Laurier Indemnity Company ("Laurier") to Extendicare Incorporated ("Extendicare"), a nursing home corporation. Laurier settled a wrongful death suit brought against Extendicare and its subsidiary and sought indemnification from ERC for $1.5 million. ERC refused to pay and Laurier filed suit. Laurier argued that ERC was obligated to follow its fortunes with respect to the Extendicare settlement, despite the fact that the reinsurance contract at issue did not contain a follow the fortunes clause. Laurier contended that the absence of such language constituted an ambiguity in the reinsurance contract and that custom and practice dictated that it should be implied into that agreement.
The court held that it could not "go outside the laws of contract construction and outside the four corners of an unambiguous contract to add a clause that was not bargained for," even though the court acknowledged that there are "benefits and numerous public policy considerations supporting enforcement of the 'follow the fortunes' doctrine in the world of reinsurance."
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