## Facts

- Travelers issued primary, excess, and umbrella general liability policies to Koppers and DuPont.
- Travelers bought catastrophic excess-of-loss reinsurance from Lloyd’s and other foreign reinsurers under treaties covering parts of Travelers’ excess and umbrella exposure.
- The treaties required indemnity for “each and every loss,” defined to include losses arising from one “disaster and/or casualty,” including a “series” of accidents or occurrences traceable to a common origin.
- The treaties included a follow-the-fortunes clause requiring reinsurers to pay their share of Travelers’ good-faith settlements within the scope of the reinsured policies and not fraudulent or in bad faith.
- Koppers and DuPont faced numerous environmental/pollution claims tied to long-term hazardous waste disposal at multiple sites and sought coverage from Travelers.
- Travelers settled coverage disputes with Koppers and with DuPont.
- For reinsurance billing, Travelers treated each insured’s entire settlement as a single “disaster and/or casualty,” aggregating multiple sites and events into one loss to exceed the treaties’ attachment points.
- Reinsurers refused payment, asserting the settlements reflected multiple losses/occurrences and that Travelers’ aggregation misstated the treaties’ limits and loss unit.
- Trial court granted summary judgment to reinsurers; the Appellate Division affirmed; the New York Court of Appeals reviewed.

## Issues

1. Whether the treaty definitions of “each and every loss” and “disaster and/or casualty” permitted Travelers to aggregate multi-site, long-tail environmental liabilities into a single reinsurance loss for each insured.
2. Whether follow-the-fortunes bound reinsurers to Travelers’ aggregation and allocation of the settlements.
3. Whether summary judgment for reinsurers was proper as a matter of law.

## Decision

- The Court of Appeals affirmed summary judgment for the reinsurers.
- The court held the treaties did not permit Travelers to treat the Koppers and DuPont environmental settlements as a single “disaster and/or casualty” loss.
- The court held follow-the-fortunes did not require reinsurers to accept an aggregation approach that conflicted with the treaties’ loss definitions and limits structure.
- Because the dispute turned on contract interpretation, and not disputed material facts, summary judgment was appropriate.

## Legal Principles

- Aggregation in excess-of-loss reinsurance depends on the treaty’s language read in context of the excess-of-loss structure; general similarity in alleged corporate practices over time does not, by itself, convert many distinct events into one covered “loss.”
- A “series” of accidents or occurrences traceable to a common origin requires a sufficiently close causal connection; it does not authorize bundling geographically and temporally separated liabilities across multiple sites into a single loss unit.
- Follow-the-fortunes binds reinsurers to a cedent’s good-faith settlement and claim-handling decisions within the contract, but it does not override treaty limits or compel payment for amounts outside the treaty as properly construed.
- Reinsurers may challenge whether a cedent’s settlement presentation matches the treaty’s defined loss unit and limits, even if the underlying settlements were made in good faith.

## Conclusion

The New York Court of Appeals held that broad aggregation language in excess-of-loss reinsurance treaties did not allow a cedent to combine widespread, long-tail environmental liabilities into a single loss, and that follow-the-fortunes cannot expand reinsurance coverage beyond the treaty’s defined loss unit and limits.


Travelers Casualty & Surety Co. v. Certain Underwriters at Lloyd’s of London, 760 N.E.2d 319 (N.Y. 2001)