Greenlight Reinsurance brought suit against Appalachian Underwriters (“AUI”), Appalachian Reinsurance (“App Re”) and Insurance Services Group (“ISG”) alleging it had been shortchanged more than $40,000,000 pursuant to three types of agreements it entered into with the respective defendants (1) a reinsurance agreement between Greenlight and AIU, where AIU acted as managing general agent, and was obliged to refund ceded premium beyond contractually defined amounts based on loss ratios; (2) a similar retrocession agreement with App Re; and (3) a guarantee agreement with ISG. Greenlight claimed that, based on loss ratio thresholds, it was owed a return of premium under the reinsurance and retrocession agreements, and that ISG had guaranteed those payments.

The court analyzed the agreements, and, based on the minimum loss ratios, and the undisputed calculations of ceded premium, held that AUI owed Greenlight $16,986,516 under the reinsurance agreement, and App Re owed Greenlight $24,456,213 under the retrocession agreement. The court held, however, that Greenlight failed to demonstrate that the guarantee from ISG was a guarantee of payment. Rather, the court found that it was a parental guarantee, which required ISG, as a parent corporation, to ensure that its subsidiaries, AIU and App Re, remained solvent, but did not require it to make direct payments on their behalf. The court thus granted summary judgment on Greenlight’s claims against AUI and App Re, but denied summary judgment as to ISG. Greenlight Reinsurance, Ltd. V. Appalachian Underwriters, Inc., Case No. 12-CV-8544 (JPO) (USDC S.D.N.Y. July 28, 2014).