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Insurance Co. of North America v. United States Fire Ins. Co.

Supreme Court of New York, Special Term, New York County

June 15, 1971

No Number in Original

Opinion

 [*8]   [**521]  Plaintiff moves for summary judgment and defendant cross-moves for summary judgment. They are respectively insurer and reinsurer. The suit is to recover $ 189,448.66 on a contract of reinsurance.

An open marine cargo policy was issued by the plaintiff to the assured, Transammonia, Inc., covering shipments of anhydrous ammonia, a fertilizer, while in transit from U. S. gulf ports to the United Kingdom. A policy of reinsurance was issued by the defendant to the plaintiff. On August 11, 1969 the fertilizer cargo was destroyed by hurricane "Camille".

 [**522]  The instant motion, involving an application of the so-called "follow-the-fortune" clause in the insurance business is, according to the uncontradicted statement of the plaintiff, one of first impression.

Neither plaintiff nor defendant could present any authority regarding the history of the use of the term "follow-the-fortune"  [***4]  and the court, after an independent search, similarly was unable to find such authority. Both plaintiff and defendant  [*9]  agree, however, that ] "follow-the-fortune" is a term commonly used in reinsurance, meaning that the reinsurer follows the fortune of its reinsured and that the precursor of this term was the phrase "to pay as may be paid".

The cargo had been shipped in bulk from interior United States ports to Gulfport, Mississippi. At Gulfport, the cargo was to be bagged prior to loading for overseas transport.

The president of Transammonia, in his examination before trial, reveals that the bagging of the goods was neither necessary nor incidental to their further transportation. He testified that the cargo could have been loaded on board the vessel and shipped overseas in bulk and that the only reason it was not was because of Transammonia's contracts with the purchaser which called for bagging. He said such cargo, if it had not been destroyed, would have remained at Gulfport for bagging possibly for a period of time up to several months.

The defendant issued a specific policy of reinsurance to the extent of 25% of the risk. ] A specific policy reinsures one policy [***5]  only as contrasted to a treaty type of insurance which reinsures all or a stated percentage of policies which the reinsured may issue. The reinsurance contracts in the instant case included the so-called "follow-the-fortune" or "pay as may be paid" clause reading in part as follows: "This reinsurance is subject to such risks, valuations and conditions, usual or unusual as are or may be taken or granted by the Reassured, including any alterations, amendments or extensions to which the Reassured may hereafter agree without notice to the Reassurers, and to pay as may be paid by the Reassured, liable or not liable".

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67 Misc. 2d 7 *; 322 N.Y.S.2d 520 **; 1971 N.Y. Misc. LEXIS 1536 ***

Insurance Company of North America, Plaintiff, v. United States Fire Insurance Company, Defendant

Disposition:  [***1]  Accordingly, the defendant's motion for summary judgment is granted and the plaintiff's is denied.

CORE TERMS

reinsurance, bagging, cargo, insured, follow-the-fortune, Reassured, transit, binders

Insurance Law, Types of Insurance, Reinsurance, Following the Settlements, Facultative & Treaty Reinsurance, General Overview, Claim, Contract & Practice Issues, Policy Interpretation, Ordinary & Usual Meanings