Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."
Century Indemnity Sues Global Reinsurance Over Soured Deal
February 14th, 2013 - Century Indemnity Co. has sued fellow insurer Global Reinsurance Corp. of America in an effort to collect nearly $3 million it says is due it under terms of a reinsurance contract.
In a suit filed in U.S. District Court in New York, the ACE Group unit stated that Global agreed to indemnify Century for payments made pursuant to underlying umbrella policies issued by Century to Yarway Corp.
Century had sold two umbrella liability policies to Yarway. The first covered October 1st, 1978, to October 1st, 1979, with limits of $5 million each occurrence, while the second set a limit of $9 million each occurrence for a policy period of October 1st, 1980, to October 1st, 1981.
Global had in turn issued certificates saying it would reinsure 20 percent of Century’s potential liability under the 1978 policy, and $2 million of the 1980 policy.
Yarway, which manufactures valves, became involved in litigation from employees who claimed exposure to asbestos. Century disputed the claims, but Yarway sued it and in 2012 the two sides settled after Century paid its client $24 million.
Century then billed Global for $2.884 million, which it said was its portion of the reinsurance contract. On January 15th, Global Reinsurance refused to pay, allegedly citing Century’s failure to comply with notice provisions of the certificates.
Century said it gave prompt notice to Global, and has otherwise complied with all terms and conditions of the certificates. So it has asked the court to award it the money it says is due from Global, plus costs and expenses.
Neither insurer was party to the original policies. Century is suing as successor to California Union Insurance Co., while Global is being sued as successor to Constitution Reinsurance Corp.
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