RECENT DEVELOPMENTS IN EXCESS, SURPLUS LINES, AND REINSURANCE

Of enormous interest to insureds and insurers alike is the enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007, which extended the federal backstop of insurance for terrorism for another seven years.1 Also of importance was the New York Supreme Court Appellate Division's decision in Allstate Insurance Co. v. American Home Assurance Co.,2 which rejected a ceding reinsurer's effort to allocate losses in one manner for its direct claims while allocating them differently when making its reinsurance claim. .8 The court noted that the quoted language gave American the right, but not the obligation, to participate in the insured's defense.9 In addition to the above-noted provisions, the American excess policy contained a condition entitled "Payment of Expenses": Loss expenses and legal expenses including court costs and interest, if any, which may be incurred by the Insured with the consent of the Company in the adjustment or defense of claims, suits or proceedings shall be borne by the Company and the Insured in the proportion that each party's share of loss bears to the total amount of said loss. There was nothing about the English law of assignment or of contract that was, in the judgment of the court, repugnant to the law of the District of Columbia.368 Lastly, the court rejected defendants' argument that plaintiff's claims arose not under the General Undertaking but rather based upon plaintiff's handling of Lloyd's America Trust Funds under the Lloyd's America Trust Fund Act (LATFA).369 Defendants contended that if the LATFA governed, then the English forum selection clause in the General Undertaking did not apply, and the court must adjudicate fraud-based counterclaims asserted by defendants against Lloyd's.