This dispute centered around a reinsurance contract between Imagine Insurance Company (“Imagine”) and American Superior Insurance Company (“American Superior”). In August of 2004, three months after the effective date of the contract and after only one premium payment, American Superior suffered a major hurricane loss and almost immediately experienced insolvency. A month later, pursuant to a consent order of rehabilitation, the Florida Department of Financial Services (the “Department”) was appointed as the receiver of American Superior. Imagine then gave 30 days’ notice of intent to terminate the contract pursuant to the special terminations provisions and advised that a non-renewal charge was due from American Superior. In December of 2004, the Department was appointed as the receiver for liquidation purposes. Shortly thereafter, in February of 2005, Imagine asserted the right to recover and retain the non-renewal charge. The Department denied this charge was payable and demanded repayment of unearned premium previously deducted by Imagine. The trial court denied Imagine’s motion for summary judgment, granted the Department’s motion for summary judgment, and concluded that Imagine wrongfully retained the premium offset and could not recover the non-renewal charge.
Applying a de novo standard of review, the appellate court analyzed the contract language applicable to the premium offset and determined that the trial court misinterpreted the word “outstanding” as meaning past due. According to the dictionary and in light of the phrase “due for the Contract Year,” the correct meaning was uncollected or paid. Thus, against any loss payments, Imagine would offset the uncollected or unpaid premium installments remaining for the contract year. Next, the appellate court looked to the non-renewal charge language that states: “Should the Reinsurer elect to decline to offer renewal terms as described above, the Reinsurer shall forfeit the Non Renewal Charge.” The trial court had used the language to find that Imagine was not entitled to a non-renewal charge, but the appellate court reasoned that the reference to contract renewal terms “as described above” implicated the contract renewal section, which was not applicable to the case. Furthermore, the plain language of the contract established Imagine’s entitlement to the non-renewal charge. The appellate court thus reversed the summary judgment order and found that Imagine properly offset the remaining premium installments from the loss payment and was entitled to the non-renewal charge. Imagine Insurance Co., Ltd. v. State of Florida ex rel. The Department of Financial Services, Case No. 1D07-6027 (Fla. Dist. Ct. App. December 16, 2008).
This post written by Dan Crisp.