The follow-the-fortunes doctrine, also known as follow the fortunes, is a principle in insurance that requires a reinsurer to reimburse the reinsured for settled claims, provided that the reinsured made the payments in good faith and they were reasonable. Under this rule, the reinsurer is not allowed to challenge the reinsured’s decision to pay a claim that may not have been covered by the original insurance policy.
The follow-the-fortunes doctrine in insurance states that a reinsurer must reimburse the reinsured for their payment of settled claims, as long as the payments were made in good faith and were reasonable. For instance, if a company buys insurance for their property and suffers damage from a storm, the insurance company pays the claim and then seeks reimbursement from the reinsurer. The reinsurer is obligated to reimburse the insurance company as long as the payment was made in good faith and was reasonable. This principle prevents the reinsurer from questioning the insurance company’s decision to pay a claim that may not have been covered under the original insurance policy. It allows the insurance company to act in the best interest of their policyholders without worrying about being second-guessed by the reinsurer.
The Follow-The-Fortunes Doctrine is a legal principle that allows an insurer to rely on the decisions made by its insured in settling claims, even if those decisions turn out to be unfavorable.
Under this doctrine, if an insured makes a reasonable decision in settling a claim, the insurer cannot later challenge that decision, even if it results in a loss for the insurer.
The Follow-The-Fortunes Doctrine is most commonly applied to reinsurance policies, which are insurance policies purchased by insurance companies to protect themselves against large losses. However, it can also be applied to other types of insurance policies in certain circumstances.
In rare cases, an insurer may be able to challenge a settlement made by its insured if it can prove that the insured acted in bad faith or breached its duty of good faith and fair dealing.
No, the Follow-The-Fortunes Doctrine only applies to decisions made by an insured in settling claims. It does not apply to other decisions made by the insured, such as decisions regarding coverage or policy interpretation.
In most cases, the Follow-The-Fortunes Doctrine requires that the insured settle a claim with the knowledge and consent of the insurer. If the insured settles a claim without the insurer’s knowledge or consent, the insurer may be able to challenge the settlement.
Yes, the Follow-The-Fortunes Doctrine can be waived or modified in an insurance policy if the parties explicitly agree to do so. This can be done through specific policy language or through a separate agreement between the insurer and insured.
The Follow-The-Fortunes Doctrine is recognized in many common law jurisdictions, including the United States and the United Kingdom. However, its application may vary depending on the specific laws and regulations of each jurisdiction.
No, the Follow-The-Fortunes Doctrine does not provide blanket protection to insurers. It only applies to losses that arise from the settlement of claims made by the insured. Other types of losses, such as losses resulting from fraud or intentional misconduct, may not be covered.
In certain circumstances, public policy considerations may override the Follow-The-Fortunes Doctrine. For example, if an insured settles a claim that involves illegal or fraudulent activities, a court may refuse to apply the doctrine and allow the insurer to challenge the settlement.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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