General Clauses for All Treaties

by Marilyn J. Laughlin*

     Assume that the terms and conditions of the reinsurance arrangement have been agreed to by the parties, the cover note has been signed by the ceding company (for pro rata coverages) or the reinsured company (for excess of loss), and the placement slip has been signed by the reinsurer. A subsequent legal instrument (referred to in the reinsurance business as a "contract wording") is then drafted to reflect the agreement of the contracting parties. In some instances, written clauses will have been agreed to by the reinsured (henceforth, the company or the insurer) and the reinsurer during negotiations. In other instances, no negotiations are needed because a verbal understanding of intent will have been communicated from each party to the other. Reducing this intent to writing is an exciting challenge for the contract drafter. Not only must the drafter produce a document that captures the intent of the parties when they entered into the arrangement, but the drafter also must portray this same intent to independent third parties who were not involved in the negotiations, such as a judge, an arbitration panel, or a liquidator. Moreover, the document may be interpreted many years later, when those who prepared it are no longer available to answer questions. It is difficult to overemphasize the importance of care in putting the words together in a meaningful and clear fashion.

     At the primary end of the insurance business, policies are printed in large volume for policyholders and usually filed with state insur- ance regulators. Reinsurance contract wordings, however, are produced in manuscript form, individually prepared for each agreement, and usually are not required to be filed with regulators. It stands to reason, however, that certain clauses that have evolved over the years in the reinsurance business should appear in virtually all well-drafted contract wordings. At least the topics of those clauses should appear, in one form or another. These clauses are referred to variously as general, common, standard, or boilerplate. One could mistakenly assume that because such a clause is germane to a well-drafted contract, its wording is identical from one reinsurance agreement to another.

*Assistant Vice President, CNA REINSURANCE GROUP, CNA Plaza, Chicago, Illinois 60685. An autobiography appears at the end of the chapter.

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