In 1990, the Second Circuit in Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co., 903 F.2d 910 (2d Cir. 1990), affirmed a District Court judgment that reinsurers were not obligated to pay additional sums for defense costs over and above the limits of liability specified in a facultative reinsurance certificate. Since then, the Bellefonte rule acted as a de facto cap for both indemnity and expense under a facultative certificate. This issue of ‘limits’ had been hotly contested, and Bellefonte seemed to put it to rest.
BUT NOT SO FAST: After several intervening decisions cast doubt on the continued viability of the Bellefonte rule, the Second Circuit recently ruled that Bellefonte “no longer constitute[s] the law” of the Second Circuit.
