An Amerisure unit can't seek reimbursement from reinsurer Swiss Re for defense costs paid in underlying asbestos litigation against a building material manufacturer, the Sixth Circuit affirmed, saying the issue has already been decided in arbitration proceedings with another reinsurer.

A Michigan federal court correctly found that collateral estoppel precludes Amerisure Mutual Insurance Co. from relitigating the same defense cost issue against Swiss Reinsurance America Corp. that the insurer previously raised and lost in arbitration, a three-judge panel held in an unpublished opinion Tuesday.

"It would be inequitable to allow Amerisure a second bite at the apple simply because it now has a different strategic focus. Parties are bound by the strategy decisions they make in arbitration as well as in litigation," U.S. Circuit Judge Richard Allen Griffin wrote for the court. "The arbitration panel ruled against Amerisure, rejecting all its arguments in support of the defense-cost issue — a decision by which Amerisure is now bound."

The dispute stems from Amerisure's defense of Armstrong International, a manufacturer of building materials that was sued in hundreds of suits alleging it manufactured and sold asbestos-containing products.

According to court filings, Amerisure insured Armstrong under a series of primary and umbrella policies. The insurer paid Armstrong's defense costs under the primary policies and, once they were exhausted, continued to contribute to the company's defense costs in addition to the umbrella policies' limits.

Portions of the umbrella policies at issue, which were in effect from 1979 to 1981, were reinsured by Swiss Re under facultative certificates requiring the reinsurer to cover any liability owed by Amerisure to Armstrong up to the umbrella policies' limits, according to court filings. Swiss Re reimbursed Amerisure up to the limits of $3.5 million but refused to reimburse defense costs that Amerisure paid outside the limits.

Allstate Insurance Co., which reinsured a portion of the same policies that Swiss Re reinsured, also refused to pay any costs outside the umbrella policies' limits and initiated arbitration proceedings against Amerisure to resolve the dispute, according to court filings. The arbitration panel ultimately held in 2019 that the umbrella policies only required Amerisure to pay defense costs within the limits and that Allstate was therefore not liable beyond those limits. The decision was later confirmed in Illinois federal court, at Amerisure's request.

Amerisure filed the current case against Swiss Re in Michigan state court in August 2022. The suit, which was later removed to federal court, asserted that Swiss Re must reimburse the insurer for defense costs it paid in addition to the limits. The court granted summary judgment to Swiss Re in March 2024, holding that Amerisure was collaterally estopped from relitigating the issue.

On appeal, the insurer argued that the umbrella policies' drop-down provision, which says the policy continues as underlying insurance in the event of exhaustion, required it to pay for Armstrong's defense costs above the limits and therefore required Swiss Re to reimburse it for those costs.

The panel found, however, that the provision was necessarily decided against Amerisure.

Even if the arbitration panel overlooked the provision, "Amerisure is not entitled to rejigger its arguments in support of the same issue," Judge Griffin said. "Amerisure's strategic failure to focus on what it now thinks is a stronger argument does not change the fact that the defense-cost issue was raised and actually litigated in arbitration."

Moreover, Amerisure had a full and fair opportunity to litigate the issue in arbitration, the panel said. The judges noted that Amerisure could have moved to vacate the arbitration award but instead moved to confirm because it "was favorable to Amerisure overall."

While there is no mutuality of estoppel where Swiss Re was not party to the arbitration, the panel concluded mutuality is not required because Swiss Re asserted collateral estoppel defensively.

"The motivation behind collateral estoppel — to prevent a party from relitigating issues that it previously lost in other proceedings — applies to this proceeding even though Swiss Re is a new party," Judge Griffin said.

Requiring mutuality would encourage gamesmanship by Amerisure, "who could continue to litigate and arbitrate piecemeal actions with its reinsurers until it obtains a favorable ruling against one of them," the judge added.

The panel also rejected Amerisure's contention that it would be unjust to apply collateral estoppel, saying the insurer's arguments are repetitive and do not hold water.

Representatives of the parties did not immediately respond to requests for comment Wednesday.

U.S. Circuit Judges Karen Nelson Moore, Richard Allen Griffin and Kevin G. Ritz sat on the panel for the Sixth Circuit.

Amerisure is represented by Jeffrey C. Gerish and Briana L. Combs of Plunkett Cooney.

Swiss Re is represented by Mark G. Sheridan of BatesCarey LLP.

The case is Amerisure Mutual Insurance Co. v. Swiss Reinsurance America Corp., case number 24-1492, in the U.S. Court of Appeals for the Sixth Circuit.