REINSURANCE. Insurance effected by an underwriter upon a subject against cer tain risks, with another underwriter, on the same subject, against all or a part of the same risks, not exceeding the same amount. In the original insurance, he is the insurer ; in the second, the assured. His object in re insurance is to protect himself against the risks which he has assumed. There is no privity of contract between the original as sured and the reinsurer, and the reinsurer is under no liability to such original assured ; 3 Kent 227; New York Cent. Ins. Co. v. Ins. Co., 20 Barb. (N. Y.) 468 ; Philadelphia Ins. Co. v. Ins. Co., 23 Pa. 250; Eagle Ins.
Co. v. Ins. Co., 9 Ind. 443 ; Louisiana Mut. Ins. Co. v. Ins. Co., 13 La. Ann. 246. See Pars. Mari. Ins. 301.
In the absence of any usage to the con trary, and of any specific stipulation in the policy, the original insurer may protect him self by reinsurance to the whole extent of his liability ; Insurance Co. of North America v. Ins. Co., 140 U. S. 565, 11 Sup. Ct. 909, 35 L. Ed. 517.
Reinsurance has been considered as a con tract of indemnity against liability, not for actual loss; 1 Joyce, Ins. § 134. A reinsurer is liable on his policy although the reinsurance is to the whole extent of the original insur er's liability, as such a contract is valid and is not affected by local custom to the con trary ; Insurance Co. of North America v. Ins. Co., 140 U. S. 565, 11 Sup. Ct. 909, 35 L. Ed. 517. He is liable on a parol agree ment to reinsure; Bartlett v. Ins. Co., 77 Ia. 155, 41 N. W. 601; and to the full ex tent of his policy notwithstanding the in solvency of the reinsured ; In re Republic Ins. Co., Fed. Cas. No. 11,705 ; which does not affect the responsibility under it, the contract of reinsurance being totally distinct from the original insurance ; the original in sured has no claim against the reinsurers. The reassured remains solely liable on the original insurance and alone has no claim against the reinsurer. Hence if the original insurer become bankrupt and the assured were paid but a small dividend out of his es tate, the reinsurer is still liable to pay the whole amount of the reinsurance to the trus tee of the original insurer without deducting the dividend and the original assured has no claim in respect of the money so paid ; Consolidated Estate & Fire Ins. Co. of
Baltimore v.' Cashow, 41 Md. 59; Strong v. Ins. Co., 62 Mo. 289, 21 Am. Rep. 417. The extent of the liability of the reinsurer is neither contingent upon the amount paid by the reassured, nor upon any payment what ever by him. When a loss occurred which is covered by the policy of reinsurance, the reassured is entitled to recover from the re insurer not what he has paid, but all that he has become liable to pay by reason of such loss ; Gantt v. Ins. Co., 68 Mo. 503.
Where the insurer reinsured in the name and for the benefit of the original insured, the reinsurer was held liable to the original insured ; 12 N. B. 432. Under an agreement by which the reinsurer agreed to reinsure a life association on all its risks and to as sume all such policies and to pay the holders thereof all such sums as the company might under such policies become liable to pay, the reinsurer was held directly liable to a policy holder of the reinsured ; Glen v. Ins. Co., 56 N. Y. 379. And so where the reinsurer agreed to reinsure all outstanding fire risks of another insurance company and assume all liability under any outstanding policies ; Shoaf v. Ins. Co., 127 N. C. 308, 37 S. E. 451, 80 Am. St. Rep, 804.
The contract is one of indemnity to the reinsured and binds the reinsurer to pay to the reinsured the whole loss sustained in re spect to the subject of the insurance to the extent to which he is insured. It is not nec essary that the reinsured should first pay the loss to the party first insured before pro ceeding against the reinsurer upon his con tract. The liability of the latter Is not af fectdd by the insolvency of the reinsured or its inability to fulfill its own contract with the original insured ; Allemannia Ins. Co. v. Ins. Co., 209 U. S. 332, 28 Sup. Ct. 544, 52 L. Ed. 815, 14 Ann. Cas. 948, citing Hone v. Ins. Co., 1 Saudf. (N. Y.) 137; Con solidated Real Estate & Fire Ins. Co. v. Ca show, 41 Md. 59.
If the contract of reinsurance provides that the insured can sue the reinsurer, it is held in most of the cases that such action will lie; Richards, Ins. Law § 319. As soon as the reinsured company has sustained a loss it may at once bring suit against its 'reinsuring company; (1892) 2 Ch. 423; Gantt v. Ins. Co., 68 Mo. 503.