Tall Tree Insurance Company ("Tall Tree") issued two excess liability insurance policies to Hewlett-Packard Company ("HP"). HP was subsequently sued by multiple claimants in a group of lawsuits known as the "Starter Cartridge Suits." Munich Reinsurance America, Inc. f/k/a American Re-Insurance Company ("Munich Re") reinsured the excess policies issued by Tall Tree to HP. See The Tall Tree Ins. Co. v. Munich Reinsurance America, Inc. f/k/a American Re-Insurance Co., No. C-08-1060 (MMC) (July 29, 2008, N.D. Cal.).

Tall Tree filed a declaratory judgment action in the United States District Court for the Northern District of California seeking, among other things, a declaration that Munich Re was required to reimburse Tall Tree for amounts it purportedly was liable to HP for under the excess policies, including interest. Munich Re moved for judgment on the pleadings on the basis that Tall Tree failed to demonstrate that an actual controversy existed, because Tall Tree’s liability for the Starter Cartridge Suits was not yet determined.

The court granted Munich Re’s motion, finding that Tall Tree’s action was premature because it had yet to pay any claims related to the Starter Cartridge Suits, nor was it otherwise obligated to pay such claims at that time. As such, there was no actual controversy between Tall Tree and Munich Re and the court lacked jurisdiction to grant the relief sought. Moreover, the court noted that, under the follow the fortunes doctrine, a reinsurer is only obligated to reimburse a cedent for actual, not theoretical, claim payments and settlements. Therefore, Munich Re was not obligated to reimburse Tall Tree for its alleged exposure related to the Starter Cartridge Suits. Click here to review a copy of the court's decision.