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Simple English definitions for legal terms
follow-the-fortunes doctrine
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A quick definition of follow-the-fortunes doctrine:
The follow-the-fortunes doctrine is a rule in insurance that says a reinsurer must pay back the reinsured for settled claims as long as the reinsured made the payments in good faith and they were reasonable. This means that the reinsurer cannot question the reinsured's decision to pay a claim that may not have been covered under the original insurance policy. It is also known as follow the fortunes.
A more thorough explanation:
The follow-the-fortunes doctrine is a principle in insurance that requires a reinsurer to reimburse the reinsured for their payment of settled claims, as long as the payments were made in good faith and were reasonable.
For example, let's say a company purchases insurance for their property and experiences damage from a storm. The insurance company pays the claim, but then seeks reimbursement from the reinsurer. The reinsurer must 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 make decisions in the best interest of their policyholders without fear of being second-guessed by the reinsurer.