The Second Circuit certified to the New York Court of Appeals the question of whether its 2004 decision (Excess Insurance Co. v. Factory Mutual Insurance Co., 3 N.Y.3d 577 (2004)) imposed
“either a rule of construction, or a strong presumption, that a per occurrence liability cap in a reinsurance contract limits the total insurance available under the contract to the amount of the cap regardless of whether the underlying policy is understood to cover expenses such as, for instance, defense costs?”
Relying on the Second Circuit’s decision in Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co., the SDNY previously determined the limits in the reinsurance certificates capped the reinsurer’s liabilities for both the cedent’s indemnity payments (“losses”) and its defense costs (“expenses”). Courts across the United States have reached different results on this issue.
Noting the potential economic impact of a reversal of Bellefonte and Unigard Security Insurance Co. Inc. v. North River Insurance Co., the panel stated its intention “is to seek the New York Court of Appeals as to whether a consistent rule of construction specifically applicable to reinsurance contracts exists” and that the “interpretation of the certificates at issue here is a question of New York law that the New York Court of Appeals has a greater interest and greater expertise in deciding.”
Global Reinsurance Corp. of Am. v. Century Indem. Co., Docket No. 15-2164-cv (2d Cir. Dec. 8, 2016).
This post written by Nora A. Valenza-Frost.
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