*2 As an initial matter, Clearwater's position is correct. However, NU has asserted the follow-the-fortunes doctrine, which requires the reinsurer to pay its reinsured “where the cedent's good-faith payment is at least arguably within the scope of the insurance coverage reinsured,” Mentor Ins. Co. (U.K.) v. Brannkasse, 996 F.2d 506, 517 (2d Cir.1993), and that the reinsurer may not “second guess the good faith liability determinations made by its reinsured.” Christiana Gen. Ins. Corp. v. Great American Ins. Co., 979 F.2d 268, 280 (2d Cir.1992). Clearwater counters that the follow-the-fortunes doctrine does not apply because the settlement payment included payments for claims that were not actually covered by the policies, specifically the consequential damages claims asserted by 3M against A1G. See
American Ins. Co. v. North American Co. for Property & Cas. Ins., 697 F.2d 79, 81 (2d Cir.1982). In support of its position, Clearwater has submitted a redacted copy
of February 8, 2000 letter from the Mound, Cotton & Wollan law firm to A1G regarding settlement with 3M.
The letter advises A1G that 3M was seeking consequential damages “arising out of insurers' failure to make timely payments.”
In addition, Clearwater has submitted a memorandum from AIG's trial counsel in the coverage litigation, Simpson, Thacher & Bartlett, that focuses on the possibility of exposure to “extra-contractual consequential damage claims that 3M alleges exceed $1 billion.”