Having ruled last year that a pollution exclusion did not preclude a reinsurer’s potential obligation to reimburse a cedant for claims involving auto workers’ respiratory diseases as the result of inhaling fumes from metalworking fluids, Judge Wesley Chin has now granted summary judgment to the cedant in National Union Fire Ins. Co. or Pittsburgh, PA –v- American reinsurance Co. Judge Chin held that American Re had failed to show that there was no evidence to support National Union’s decision to allocate a settlement of these claims to two years based upon dates of “manifestation” nor did National Union have an obligation, after accepting the insured’s allocation that exhausted a primary captive layer, to internally reallocate the losses for purposes of presenting the claim to its reinsurer.

Finally, Judge Chin ruled that American Re had failed to show that the settlement was entered into in bad faith or that National Union’s reluctance to dispute the insured’s advocacy of a “manifestation” trigger and enter into coverage litigation established indifference to the interest of its reinsurer.

Despite the fact that National Union questioned the application of a “manifestation” trigger to cases of this sort under Ohio law, the district court found that the insurer’s failure to do so was justified by the fact that adopting a continuous trigger would trigger additional National Union policies and ultimately increase the insurer’s exposure. The court rejected American Re’s contention that “as a reinsurer it is only required to follow National Union’s insurance fortunes, not its commercial fortunes.”