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Granite State Ins. Co. v. ACE Am. Reins. Co.

Supreme Court of New York, Appellate Division, First Department

December 27, 2007, Decided; December 27, 2007, Entered

2008, 2009, 2010, 604347/04

Opinion

 [*437]  [**201]   Order, Supreme Court, New York County (Richard B. Lowe III, J.), entered March 2, 2007, which, to the extent appealed  [**202]  from, denied defendant's renewed cross motion for summary judgment dismissing the fourth cause of action, unanimously affirmed, without costs. Appeals from order, same court and Justice, entered December 20, 2006, granting plaintiffs summary judgment on their first, second, third, and fifth causes of action, and judgment entered thereon on December 21, 2006, unanimously withdrawn pursuant to the parties' stipulation dated November 8, 2007.

As pertinent to this appeal, it is undisputed that plaintiffs, subsidiaries of American International Group (collectively known as AIG), issued excess umbrella liability policies to Castle & Cooke, Inc. (later known as Dole Foods Company), and then purchased facultative contracts of reinsurance from defendant, ACE American Reinsurance Company. Pursuant to these policies, ACE agreed to indemnify and promptly reimburse AIG, following receipt  [***2] of proof of loss, an agreed part of any amounts that AIG paid under the insurance policies for which it purchased reinsurance.

In the early 1990's, Castle & Cooke was sued by thousands of its field workers in Central America and the Philippines for injuries allegedly suffered by them as a result of their exposure to the pesticide dibromochloropropane (commonly referred to as DBCP). Castle & Cooke then tendered claims to its insurers. Of the seven policies issued by AIG, ACE reinsured only one, a policy that had been issued by Granite State in 1979. In 1993, AIG, after consulting with counsel, disclaimed coverage based on its belief that the Granite State policy issued to Castle & Cooke did not provide coverage for Castle & Cooke's claim. According to ACE, Castle & Cooke accepted such disclaimer. Castle & Cooke then entered into a future cost agreement (FCA) with certain AIG companies, effective June 1, 1996, setting forth  [*438]  which policies would provide defense and indemnity on the Castle & Cooke claims on an ongoing  [****2] basis.

AIG thereafter realized that it had paid more than the available limits with respect to defense expense and indemnity on one of its National Union policies issued to  [***3] Castle & Cooke, a policy that ACE had not reinsured. Counsel on coverage matters advised AIG by letter dated May 19, 1997 to move its National Union overpayments to the Insurance Company of the State of Pennsylvania, which ACE also did not reinsure. In September 1997, AIG asked coverage counsel to see if it could correct its error by instead charging the overpayments to the Granite State policy that was reinsured by ACE. Then, after AIG asked Castle & Cooke if it would accept payments under the Granite State policy, AIG and Castle & Cooke added an addendum to the FCA, dated April 13, 1998, which provided that AIG had exhausted the applicable limits of its National Union policy and, "to the extent any sums remain unpaid, they shall become the responsibility of Granite State."

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46 A.D.3d 436 *; 849 N.Y.S.2d 201 **; 2007 N.Y. App. Div. LEXIS 13268 ***; 2007 NY Slip Op 10464 ****

 [****1]  Granite State Insurance Company et al., Respondents, v ACE American Reinsurance Company, Fomerly Known as INA Reinsurance Company, Now Known as R &Q Reinsurance, Appellant.

Prior History: Granite State Ins. Co. v. Ace Am. Reinsurance Co., 2007 N.Y. App. Div. LEXIS 5789 (N.Y. App. Div. 1st Dep't, May 8, 2007)

Disposition:  The court affirmed the trial court's judgment.

CORE TERMS

reinsurance, coverage, policies, settlement, insurance company, ex gratia, bad faith, ceding

Insurance Law, Types of Insurance, Reinsurance, Following the Settlements