Summary
In British Int'l Ins. Co. v. Seguros La Republica, S.A., No. 90 Civ. 2370(JFK), 2001 WL 897180, at *2 (S.D.N.Y. Aug. 8, 2001), the reinsurance certificate provided that the reinsurer was "subject to the same risks... as are or may be assumed, made or adopted by the reinsured."
Summary of this case from Employers Reinsurance v. Mid-Continent Cas. Co.Opinion
90 Civ. 2370 (JFK)
August 8, 2001
RIKER, DANZIG, SCHEREN, HYLAND PERRETTI, Morristown, New Jersey 07962 Of Counsel: Shawn L. Kelly, Esq., Michael R. O'Donnell, Esq. Thomas J. Perry, Esq., For the Plaintiff.
CHADBOURNE PARKE LLP, New York, New York 10112 Of Counsel: Peter N. Hillman, Esq., For the Plaintiff.
LORD, BISSELL BROOK, Chicago, Illinois 60603 Of Counsel: Michael R. Hassan, Esq., Albert E. Fowerbaugh, Esq., Cary B. Samowitz, Esq., New York, New York 10119, For the Defendant.
OPINION AND ORDER
Before the Court is the Plaintiff's motion for summary judgment pursuant to Fed.R.Civ.P. 56. The Plaintiff, British International Insurance Company Limited ("BIIC"), seeks summary judgment on the following two issues: (1) whether the Defendant, Seguros La Republica, S.A. ("SLR"), is liable for declaratory- judgment expenses in connection with the reinsurance certificates at issue in this case; and (2) whether BIIC has adequately shown evidence of a disputed $52,987.22 in damages. For the reasons that follow, the Court grants summary judgment to SLR on the first issue and to BIIC on the second issue.
BACKGROUND
This case comes to this Court on remand from the Second Circuit Court of Appeals. See British Int'l Ins. Co. v. Seguros La Republica. S.A., 212 F.3d 138 (2d Cir. 2000). It involves twenty-six reinsurance certificates (the "Certificates") issued by SLR to BIIC's predecessor-in-interest, the American Centennial Insurance Company ("ACIC"). This Court originally entered a default judgment against SLR in the amount of $11,801,024.98 after SLR refused to post pre-answer security pursuant to New York Insurance Law S 1213(c).
On appeal, the Second Circuit affirmed this Court's judgment in part and vacated it in part. See id. It instructed this Court to consider on remand whether the Certificates covered declaratory-judgment expenses incurred by ACIC in opposing coverage for its insureds. See id. The circuit court ruled that SLR had not waived the issue, notwithstanding its default, because the issue involved a pure question of law. See id. The circuit court also instructed this Court to consider whether BIIC adequately proved $52,987.22 of the claims that ACIC allegedly paid to its insureds. This Court will now consider these two issues in that order.
DISCUSSION
I Summary Judgment Standards
This Court may grant summary judgment only if the moving party is entitled to judgment as a matter of law because there is no genuine dispute as to any material fact. See Silver v. City Univ. of New York, 947 F.2d 1021, 1022 (2d Cir. 1991); Montana v. First Fed. Say. Loan Ass'n, 869 F.2d 100, 103 (2d Cir. 1989); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986); Falls Riverway Realty, Inc. v. Niagara Falls, 754 F.2d 49, 54 (2d Cir. 1985). The role of the Court on such a motion "is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight, 804 F.2d at 11; see also First Fed. Say. Loan Ass'n 869 F.2d at 103 (stating that to resolve a summary judgment motion properly, a court must conclude that there are no genuine issues of material fact, and that all inferences must be drawn in favor of the non-moving party); Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989) (same).
The movant bears the initial burden of informing the Court of the basis for its motion and identifying those portions of the "pleadings, depositions, answers to interrogatories, and admissions to file, together with affidavits, if any," that show the absence of a genuine issue of material fact. Celotex Core. v. Catrett, 477 U.S. 317, 322 (1986). If the movant meets this initial burden, the party opposing the motion must then demonstrate that there exists a genuine dispute as to the material facts. See id.; Silver, 947 F.2d at 1022; Greater Buffalo Press, Inc. v. Federal Reserve Bank, 866 F.2d 38, 42 (2d Cir. 1989).
The opposing party may not solely rely on its pleadings, on conclusory factual allegations, or on conjecture as to the facts that discovery might disclose. See Gray v. Darien, 927 F.2d 69, 74 (2d Cir. 1991). Rather, the opposing party must present specific evidence supporting its contention that there is a genuine material issue of fact. See Celotex Corp., 477 U.S. at 324; Twin Lab. Inc. v. Weider Health Fitness, 900 F.2d 566, 568 (2d Cir. 1990); First Fed. Say. Loan Ass'n, 869 F.2d at 103; Knight, 804 F.2d at 12; L L Started Pullets, Inc. v. Gourdine, 762 F.2d 1, 3-4 (2d Cir. 1985).
To show such a "genuine dispute," the opposing party must come forward with enough evidence to allow a reasonable jury to return a verdict in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Cinema North Corp. v. Plaza at Latham Assocs., 867 F.2d 135, 138 (2d Cir. 1989). If "the party opposing summary judgment propounds a reasonable conflicting interpretation of a material disputed fact," then summary judgment must be denied. Schering Corp. v. Home Ins. Co., 712 F.2d 4, 9-10 (2d Cir. 1983). The Court will analyze the parties' cross-motions in accordance with these principles.
II Declaratory-Judgement Expenses
BIIC argues that SLR is liable under the Certificates for declaratory-judgment expenses for three reasons: (1) the language of the Certificates obligates SLR to reimburse BIIC for those expenses; (2) relevant reinsurance customs and practices require that SLR reimburse BIIC for those expenses; and (3) SLR must "follow the fortunes" of BIIC with respect to the declaratory-judgment expenses. The Court disagrees, and therefore grants summary judgment to SLR on this issue.
The Certificates' language does not obligate SLR to reimburse BIIC for ACIC's own declaratory-judgment expenses. The Certificates make no reference to those expenses, or to any expenses. Instead, they state that SLR is "subject to the same risks, valuations, conditions, endorsements (except changes of location), assignments and adjustments as are or may be assumed, made or adopted by the reinsured . . . ." See Perry Cert. Ex. H.
Although none of those terms would appear to include litigation expenses incurred by ACIC itself in opposing coverage to its insureds, BIIC argues that the provision subjecting SLR "to the same risks" as ACIC can be so interpreted. The argument fails, however, because ACIC's underlying insurance policies did not subject ACIC to the "risk" of having to reimburse its own declaratory-judgment expenses.
SLR was only subject to the "risks" that ACIC was itself subject to under its underlying insurance policies. Although such "risks" could include an adverse declaratory judgment, or even the declaratory-judgment expenses incurred by one of ACIC's insureds, see, e.g., North River Ins. Co. v. Cigna Reinsurance Co., 52F.3d 1194 (3d Cir. 1995), they do not include declaratory-judgment expenses incurred by ACIC itself in opposing coverage to its insureds. As a result, SLR is not liable for those expenses.
"In fact, ACIC only agreed to indemnify its own insureds against such expenses under one of the two underlying policies at issue in this case, the Commercial Catastrophic Liability policy. See Def.'s Ex. S at 2. The other policy, ACIC's Commercial Excess Liability policy, excluded such expenses. See Def.'s Ex. R at 2-3.
This Court need not consult relevant trade practices to resolve any ambiguity in the Certificates' terms because those terms are not ambiguous with respect to ACIC's declaratory- judgment expenses. The Massachusetts Supreme Judicial Court has addressed this issue in a similar case, Affiliated FM Insurance Co. v. Constitution Reinsurance Corp., 626 N.E.2d 878 (Mass. 1994). There, however, the reinsurer had agreed to indemnify its reinsured for any "expenses . . . incurred . . . in the investigation and settlement of claims or suits." Id. at 880. The court ruled that it was unclear whether the term "expenses" included the reinsured's declaratory-judgment expenses, and that an examination of the trade usage of the term in that context was required to resolve the issue. Id. at 880-82.
Unlike Affiliated, the provision at issue in this case makes no reference to "expenses." BIIC offers no other specific term, aside from "risk," that is ambiguous with respect to the payment of declaratory-judgment expenses. Although its experts conclude that the language of the Certificates is "exceptionally broad" and, does not "specific[ally] . . . exclud[e] the recovery of declaratory judgment expenses," neither expert indicates which term is so broad as to be ambiguous. See Edwards Cert. ¶ 7; Gilmartin Cert. ¶ 9. Indeed, one of those experts reports that reinsurers began refusing to reimburse declaratory-judgment expenses after 1983 on the grounds that those expenses were not covered under the standard wording of reinsurance contracts. See Edwards Cert. ¶ 6.
See supra at 6. The Court notes that BIIC has not submitted evidence of the trade usage of the term risk," or any other term, as it is used in this context. BIIC has offered evidence purporting to show that reinsurers typically reimbursed their reinsureds' declaratory-judgment expenses at the time the Certificates in this case were issued. However, BIIC has not shown that this was due to an industry-wide interpretation of any particular term, such as "risk," that was commonly used in reinsurance certificates at that time.
The Court also finds that the "follow the fortunes" doctrine does not obligate SLR to reimburse BIIC for ACIC's own declaratory-judgment expenses. The "follow the fortunes" doctrine has come to be associated with a reinsurer's duty to refrain from challenging a good-faith settlement that its reinsured concludes on an underlying insurance claim. See Aetna Casualty and Surety Co. v. Home Ins. Co., 882 F. Supp. 1328, 1345-47 (S.D.N.Y. 1995); William C. Hoffman, Common Law of Reinsurance Loss Settlement Clauses: A Comparative Analysis of the Judicial Rule Enforcing the Reinsurer's Contractual Obligation to Indemnify the Reinsured for Settlements, 28 Tort Ins. L.J. 659, 667 (1993).
This Court can find no precedent in the caselaw for extending this doctrine to a reinsured's own declaratory-judgment expenses. Nor does the Court see any need to extend the doctrine to cover those expenses. One of the doctrine's primary purposes is to promote settlement. See North River Ins. Co., 52 F.3d at 1206. An extension of that doctrine to the reimbursement of declaratory-judgment expenses would undermine that purpose, for it would encourage litigation rather than settlement. This Court will refrain from extending the doctrine in that fashion, and instead grants summary judgment to SLR on this issue.
III Proof of 852.987.22 in Claims
The Second Circuit instructed this Court to consider on remand whether there existed adequate proof of $52,987.22 out of $910,630.46 in claims that ACIC allegedly paid to its insureds. Although SLR defaulted in this case, BIIC must still "demonstrate the amount of [its] damages with reasonable certainty." Contemporary Mission, Inc. v. Bonded Mailings. Inc., 671 F.2d 81, 84 (2d Cir. 1982)
BIIC originally presented evidence of its damages at a two-day hearing before Magistrate Judge Leonard Bernikow. See American Centennial Ins. Co. v. Sequros La Republica, No. 90 Civ. 2370 (S.D.N.Y. May 10, 1999). This Court subsequently adopted Magistrate Judge Bernikow's finding that the entire $910,630.46 was evidenced by reinsurance loss advices ("RLAs") submitted by BIIC. See id.
As it turns out, $52,987.22 of that total was evidenced at the hearing only by ACIC's billing statements rather than by any RLAs, copies of checks, check request forms, or other such evidence. As a result, the Second Circuit remanded the issue to this Court for further consideration. See id.
This Court now finds that the billing statements submitted by BIIC at the hearing before Magistrate Judge Bernikow adequately show that ACIC paid the $52,987.22 in claims to its insureds. At that hearing, BIIC offered evidence showing that according to relevant ACIC procedures, ACIC would not have generated either an RLA or a billing statement until after it had paid a claim. See BIIC's 56.1 Stmnt. Ex. A at 105-111.
The Court notes, however, that ACIC's procedures were not immune to human error. At the hearing before Magistrate Judge Bernikow, SLR showed that ACIC had generated RLAs before issuing checks on at least two occasions. See id. at 251-54, 264- 67. Magistrate' Judge Bernikow nevertheless concluded that those two errors were not significant in light of the many occasions on which ACIC had accurately followed its procedures. See American Centennial Ins. Co., No. 90 Civ. 2370 (S.D.N.Y. May 10, 1999).
This Court agrees with Magistrate Judge Bernikow's conclusion that the two errors were insignificant. Moreover, those errors involved RLAs rather than billing statements, and the evidence at issue here involves only billing statements. The Court finds that under these circumstances, BIIC has proven payment of the disputed $52,987.22 with reasonable certainty. The Court therefore grants summary judgment to BIIC on this issue.
CONCLUSION
The Plaintiff's motion for summary judgment is granted in part and denied in part. The Court grants summary judgment to the Defendant on the issue of declaratory-judgment expenses, and to the Plaintiff on the issue of the disputed $52,987.22 in damages. The Court orders this case closed, and directs the Clerk of the Court to remove this case from the Court's active docket.