RSA v Equitas—application of key clauses in reinsurance policies

Insurance & Reinsurance analysis: In this reinsurance claim, RSA sought an indemnity under its reinsurance policy for the damages and defence costs it incurred in the settlement of claims against its underlying insured. This case provides valuable judicial guidance on key clauses in reinsurance policies: excess limits, claims co-operation and Follow Settlement clauses. The Court held that: (i) the applicable excess could only be eroded by indemnity payments and not by defence costs; (ii) the Claims Cooperation clause did not limit the power of RSA to bind Equitas to settlements under the Follow Settlements clause; (iii) RSA had not failed to take ‘all proper and businesslike steps’ in entering into settlement, so Equitas was bound by the Follow Settlements clause; and (iv) RSA was entitled to simple interest from the date of each respective loss.