Plaintiffs Trenwick America Reinsurance Corporation and Unum Life Insurance Company of America purchased retrocessional coverage from defendant IRC Re Limited. The retrocession agreements did not contain follow the fortunes or follow the settlements clauses, and after a dispute arose under the agreements, the parties litigated (among other things) whether the follow the fortunes or follow the settlements doctrine applied.

The court found that Massachusetts law, as well as the law of other jurisdictions, was unsettled as to whether the follow the fortunes doctrine was inherent in every reinsurance relationship (even where not expressly provided), and thus could be implied as a matter of law into the retrocession agreements at issue. After hearing expert testimony on the issue, the court agreed that “follow the fortunes” is customary in the reinsurance relationship, and thus governed the parties’ dispute.

Click here to review a copy of the court’s decision, captioned Trenwick American Reinsurance Corp., et al. v. IRC, Inc., et al., No. 07-cv-12160 (D. Mass. 2011).