E. Drew Crowley and Galbraith & Green v‪.‬

The Amalgamated Meat Cutters Union Local 368 Trust (Trust) was created to provide medical benefits to participating Union members and their families. Respondents, Galbraith & Green, Inc. and its President E. Drew Crowley (Crowley), were hired by the Trust as consultant and plan manager. In May, 1976, the Trustees decided to establish a self-funded insurance program to provide the desired benefits, and directed Crowley to obtain reinsurance coverage which would reimburse the Trust for major claims which it might be required to pay. Two types of reinsurance were provided by appellant Lafayette Life Insurance Co. (Lafayette) to the Trust. The first type was aggregate excess reinsurance (aggregate reinsurance) designed to reimburse the Trust when the aggregate net claims exceeded a stated amount during the contract year. The second type was specific excess reinsurance (specific reinsurance) which was designed to reimburse the Trust for any large individual claims it was required to pay. Under the specific reinsurance, the Trust was solely responsible for the first $15,000.00 of any individual claim. Appellant Lafayette would reimburse the Trust for eighty percent (80%) of any claim in excess of $15,000.00 paid by the Trust during the contract year. Both types of reinsurance had an effective date of June 1, 1976. In addition to the reinsurance, the Trust also obtained a group life insurance policy from Lafayette to cover the Union members.