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Global Reinsurance Corp. of Am. v. Century Indem. Co.

United States District Court for the Southern District of New York

March 2, 2020, Decided; March 2, 2020, Filed

13 Civ. 6577 (LGS)

Opinion

OPINION & ORDER

LORNA G. SCHOFIELD, District Judge:

This is a contract interpretation dispute between Plaintiff Global Reinsurance Corporation of America ("Global") and Defendant Century Indemnity Company ("Century"). Global [*2]  seeks a declaratory judgment that the dollar amount stated in certain facultative reinsurance certificates is the maximum that Global must pay on each reinsurance contract. Century contends that the dollar amount stated in the certificates caps Global's indemnity payments but does not cap Global's obligation to pay defense costs.

For the reasons stated below, the plain and unambiguous meaning of the reinsurance contracts is that the dollar amount stated on the facultative certificates caps indemnity payments and also caps expense payments when there are no losses, but does not cap expense payments when there are losses.

I. PROCEDURAL HISTORY

In 2014, Global's motion for summary judgment on this question was granted. See Glob. Reinsurance Corp. of Am. v. Century Indem. Co., No. 13 Civ. 6577, 2014 U.S. Dist. LEXIS 113793, 2014 WL 4054260 (S.D.N.Y. Aug. 15, 2014) (Global I). The decision relied primarily on Bellefonte Reinsurance Co. v. Aetna Cas. & Sur. Co., 903 F.2d 910 (2d Cir. 1990). Bellefonte affirmed a judgment declaring that reinsurers "[are] not obligated to pay . . . any additional sums for defense costs over and above the limits on liability stated in the reinsurance certificates." Id. at 910. The reinsurance documents in Bellefonte contained substantially similar language to the reinsurance documents here. See Global I, 2014 U.S. Dist. LEXIS 113793, 2014 WL 4054260, at *5 ("Here, the relevant language in Global's Certificates is nearly identical to the language relied [*3]  on by the Second Circuit in Bellefonte"). Global I also relied on Unigard Sec. Ins. Co. v. North River Ins. Co., 4 F.3d 1049 (2d Cir. 1993). In Unigard, the reinsurance insured a portion of the risk assumed by another insurer on underlying insurance policies. Those underlying policies paid expenses above and beyond the limits for loss, which is the same as the underlying Century insurance policies here. In Unigard, the Second Circuit applied Bellefonte to conclude that a reinsurer is "not liable for expenses beyond the stated liability limit in the [c]ertificate." Id. at 1070-71. In this case, Century filed a motion for reconsideration of the grant of summary judgment to Global. The reconsideration motion was denied. See Glob. Reinsurance Corp. of Am. v. Century Indem. Co., No. 13 Civ. 6577, 2015 WL 1782206 (S.D.N.Y. Apr. 15, 2015) (Global II).

On appeal, the Second Circuit cast doubt on the continued force of Bellefonte and Unigard. See Glob. Reinsurance Corp. of Am. v. Century Indem. Co., 843 F.3d 120, 126 (2d Cir. 2016) (Global III) (noting that objections to Bellefonte and Unigard were "worthy of reflection"). Global III emphasized that neither Bellefonte nor Unigard explained why the amount stated on a reinsurance certificate is a liability limit. See id. at 125 ("Significantly [in Bellefonte], although we described the amount stated in the 'Reinsurance Accepted' provision [of the certificate] as an 'explicit limitation on liability,' [Bellefonte, 903 F.2d] at 912, we [*4]  never explained why this was so."); 125 n.6 ("Again, in Unigard, we described the amounts stated in the certificates as 'limits' on liability, though we did not explain why this was so."). Instead of reaching a decision, the panel certified the following question to the New York Court of Appeals: whether New York contract law "impose[s] either a rule of construction, or a strong presumption, that a per occurrence liability cap in a reinsurance contract limits the total reinsurance available under the contract to the amount of the cap regardless of whether the underlying policy is understood to cover expenses." Id. at 122.

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2020 U.S. Dist. LEXIS 36579 *; 2020 WL 995860

GLOBAL REINSURANCE CORPORATION OF AMERICA, Plaintiff, -against- CENTURY INDEMNITY COMPANY, Defendant.

Prior History: Global Reinsurance Corp. of Am. v. Century Indem. Co., 890 F.3d 74, 2018 U.S. App. LEXIS 12121 (2d Cir. N.Y., May 9, 2018)

CORE TERMS

reinsurance, expenses, certificates, layer, Declarations, facultative, terms, losses, cap, sentence, Policies, reinsurance contract, terms and conditions, proportion, insurer, parties, no loss, dollar amount, non-concurrent, concurrency, limits, reinsurance agreement, ambiguous, conditions, coverage, defense costs, limitation of liability, indemnity, Preamble, custom