Question 1

A cedent settles a claim for more than the reinsurer believes it was worth, but the claim was clearly within the original policy and the settlement was reasonable. Must the reinsurer pay its share?

Accepted Answer

Yes — follow the settlements binds it to a reasonable, good-faith decision within the policy's scope — The doctrine exists precisely to bind a reasonable settlement decision, even one the reinsurer would not have made itself.

Question 2

What is the one thing follow the fortunes / follow the settlements can never do?

Accepted Answer

Extend coverage to a loss the original policy never covered — The doctrine is generous about how a covered claim is valued and settled — it cannot manufacture coverage for a loss the underlying policy never insured in the first place.

Follow the Fortunes

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