(Article from Insurance Law Alert, April 2026)
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Holding
An Illinois appellate court held that genuine issues of material fact existed as to the existence of reinsurance policies, based on the cedent’s secondary evidence. The court also held that the reinsurer was not entitled to summary judgment on its late notice defense. Pohjola Ins. Ltd. v. Cont’l Ins. Co., 2026 IL App (1st) 242294-U.
Background
In 2004, Continental Casualty Co. (“Continental”) was asked by its policyholder to cover asbestos-related bodily injury liabilities under policies issued in the 1980s. In 2007, Continental and the policyholder entered into a defense cost sharing agreement. At that time, Continental searched for reinsurance but found no evidence that such coverage existed. In 2021, however, Continental uncovered internal records suggesting that Pohjola Insurance Ltd. (“Pohjola”), a Finnish insurer, had reinsured the underlying policies. Continental then submitted a notice of loss and reinsurance billing for over $1.8 million to Pohjola. Pohjola disputed liability and raised concerns over late notice. In 2022, Pohjola sued Continental seeking a declaration that Continental had not proven the existence and terms of any reinsurance agreement and that notice was untimely.
To establish the existence of reinsurance, Continental relied on various forms of secondary evidence, including a “reinsurance certificate” setting forth the term, premium and limits; internal communications discussing the reinsurance details; and worksheets and coding sheets reflecting premium processing. Continental also pointed to Pohjola’s historic U.S. business practices, including document destruction policies, to explain the absence of original records. Pohjola argued that this evidence showed, at most, that the parties contemplated entering into a reinsurance agreement, not that any agreement was actually formed. It further contended that Continental had not conducted a sufficiently diligent search for underwriting and reinsurance contract documents and therefore could not rely on secondary evidence.
Following discovery, both parties moved for summary judgment. The trial court granted summary judgment in favor of Pohjola, finding Continental’s evidence insufficient to prove the existence of reinsurance, and did not reach the late notice issue.
Decision
The appellate court reversed, holding that genuine issues of material fact precluded summary judgment on both the existence of reinsurance agreements and the late notice defense.
On the existence issue, the court found that Continental’s secondary evidence could support a reasonable inference that reinsurance agreements existed. The documents reflected essential terms—such as subject, limits and premium—and a factfinder could infer that Continental would not have possessed such documents absent an actual reinsurance placement. At the same time, the court acknowledged that a reasonable factfinder could also conclude that the documents merely reflected negotiations or intent to enter into reinsurance. Because competing inferences could be drawn, the issue was properly reserved for trial.
On the late notice defense, the appellate court identified a conflict between New York and Illinois law. The court explained that, under New York law, a reinsurer must demonstrate actual prejudice—i.e., tangible economic injury—resulting from late notice, whereas Illinois law treats prejudice as only one factor in assessing reasonableness. Applying Illinois choice-of-law rules, the court concluded that New York law governed. The court held that Pohjola failed to establish actual prejudice as a matter of law. Although Pohjola argued that earlier notice would have allowed it to participate in claims handling and potentially reduce defense costs, the court noted that New York courts have rejected similar speculative assertions. Pohjola offered no concrete evidence that earlier involvement would have reduced Continental’s payments. Accordingly, Pohjola was not entitled to summary judgment on its late notice defense.
Comments
This case underscores the challenges in long-tail insurance disputes where original policies or reinsurance agreements may be lost or destroyed. It also reaffirms that, following a diligent search, parties may rely on secondary evidence to prove the existence and terms of historical insurance coverage—and that such evidence may be sufficient to reach a jury, even decades later.