Reconsidering the Reinsured’s Damages and Costs for Late Payment: A Comparative Analysis Between English and American Law

The reinsured (original insurer) would face liability by section 13A of the Insurance Act 2015 in the UK and incur the costs or expenses of investigating and defending against the insured’s valid claims, where the reinsured withholds or delays paying insurance proceeds to the insured. The reinsurer generally would not be held liable for the unreinsured contractual liability and costs unless special requirements are met. The critical points for the reinsured to recover the reimbursement of damages and expenses from the reinsurer are to confirm the reinsurer’s actual participation or intention in refusing to indemnify the original assured timeously or in defending against the insured’s valid claims by way of proving the reinsurer’s compulsion or identifying them as a joint enterprise. The follow-the-settlements clause cannot render the reinsurer liable for the unreinsured liability. It is more reasonable that the policy limits only restrict the sums reinsured but do not cap the unreinsured damages and costs.