Second Circuit Court Finds That Excess Carrier’s Participation in Settlement May Make Declaratory Judgment Moot

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Lumbermens Mut. Cas. Co.v. RGIS Inventory Specialists, LLC

(2nd Cir., December 11, 2009)


After a district court granted summary judgment against an excess insurer regarding whether it received timely notice of an underlying personal injury claim, the excess carrier appealed to the Second Circuit.  While the appeal was pending, the excess insurer contributed $4.0 million towards settlement of the underlying personal injury claims.  As a result, the named insured and underlying claimants argued the appeal was moot in that the insurer could not recoup the settlement funds it contributed regardless if the court below’s decision was reversed.  The excess insurer, on the other hand, argued that circumstances of the settlement allowed it to recoup the money if it prevailed on the substantive question on the appeal.  Recognizing that the issue of mootness did not arise until after the appeal, the Second Circuit dismissed the appeal, vacated the district court’s decision granting summary judgment against the excess carrier and remanded that the district court consider whether the declaratory action is now moot.


A finding by the court below that the excess insurer’s contribution towards settlement, despite a pending appeal in the Circuit Court, could potentially impact parties’ efforts to resolve underlying actions, while continuing to pursue their rights in a declaratory judgment action.  The Insurance and Reinsurance Report will continue to monitor this case as it develops. 


A copy of the Second Circuit’s decision can be found here


Kim Whistler and Dan Gerber