The United States District Court for the Southern District of New York granted partial summary judgment to plaintiff reinsurer seeking a declaration that the dollar amount stated in the “Reinsurance Acceptance” section of each of nine certificates of reinsurance caps the maximum amount that the reinsurer can be obligated to pay for combined loss and expenses.
The reinsurance certificates at issue in this case contained a “Subject to Clause” stating that the reinsurance was in consideration of the payment of premium and subject to the terms, conditions and amount or limits of liability set forth in the certificate and a “Reinsurance Accepted” section that stated a dollar amount of liability. The court relied upon the plain language of the certificates of reinsurance and the Second Circuit’s binding precedent in Bellefonte Reinsurance Co. v. Aetna Cas. And Sur. Co., 903 F.2d 910, 913 (2d Cir. 1990) and Unigrad Security Ins. Co. v. North River Ins. Co., 4 F.3d 1049, 1070-71 (2d Cir. 1993).
The court noted that the relevant language in the certificates of insurance at issue in this case were nearly identical to the language relied upon by the Second Circuit in Bellefonte and that the Bellefonte and Unigard courts made clear that all other contractual language must be construed in light of the certificate limit because to do otherwise would negate the reinsurance certificate language that the reinsurance is subject to the terms, conditions, and amount of liability set forth in the certificate. The court further noted that if the parties intended to exclude expenses from the total liability cap, the parties could have made that clear in the certificate language.
The court also rejected the defendant’s arguments that the “follow the fortunes” doctrine or the “in addition thereto” language in the reinsurance certificates obligated plaintiff reinsurer to pay for expenses above the certificate limit. The court again relied on Bellefonte, which held that neither the “follow the fortunes” doctrine nor the “in addition thereto” language in the reinsurance certificates exempted defense costs from the clauses limiting the reinsurers’ overall liability under the certificates, as all costs were subject to the express caps on liability set forth in the certificates. Global Reinsurance Corporation of American v. Century Indemnity Company, 1:13-cv-06577-LGS (USDC S.D.N.Y. August 15, 2014).
This post written by Kelly A. Cruz-Brown.
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