Global Reinsurance Corporation of America v. Century Indemnity Co., No. 15-2164 (2d Cir. 2018)

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Justia Opinion Summary

The Second Circuit held that the district court erred in its interpretation of the contracts under the court's prior precedent and therefore, the court vacated the original judgment and remanded to the district court for reconsideration of the contracts employing standard principles of contract interpretation. The appeal stemmed from a dispute between Century and Global over the extent to which Global was obligated to reinsure Century pursuant to certain reinsurance certificates. The court held that the district court's determination that the contract was unambiguous was premised on an erroneous interpretation of New York state law. The court explained that the district court should construe each reinsurance policy solely in light of its language and, to the extent helpful, specific context.

This opinion or order relates to an opinion or order originally issued on December 8, 2016.

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15-2164 Global Reinsurance Corp. of America v. Century Indemnity Co. 29 15 2164 Global Reinsurance Corp. of America v. Century Indemnity Co. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ____________________ August Term, 2015 (Argued: May 5, 2016 Decided: May 9, 2018) Docket No. 15 2164 ____________________ GLOBAL REINSURANCE CORPORATION OF AMERICA, successor in interest to CONSTITUTION REINSURANCE CORPORATION, Plaintiff Counter Defendant Appellee, v. CENTURY INDEMNITY COMPANY, successor in interest to CCI INSURANCE COMPANY, successor in interest to INSURANCE COMPANY OF NORTH AMERICA, Defendant Counter Claimant Appellant. ____________________ Before: POOLER, LIVINGSTON, and CARNEY, Circuit Judges. Appeal from United States District Court for the Southern District of New 30 York (Lorna G. Schofield, J.) entering an order of summary judgment on behalf 31 of Plaintiff Appellee Global Reinsurance Corporation of America. Because we 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 hold that the district court erred in its interpretation of the contracts under our 2 prior precedent, we vacate the original judgment and remand to the district court 3 for reconsideration of the contracts employing standard principles of contract 4 interpretation. 5 ____________________ 6 Daryn E. Rush, (Ellen K. Burrows, on the brief), White and Williams LLP, Philadelphia, PA, for Defendant Counter Claimant Appellant Century Indemnity Company. JONATHAN D. HACKER, O’Melveny & Myers LLP, Washington, D.C., for Defendant Counter Claimant Appellant Century Indemnity Company (on the brief). DAVID L. PITCHFORD, New York, N.Y., for Plaintiff Counter Defendant Appellee Global Reinsurance Corporation of America. David C. Frederick, Ariela M. Migdal, Jeremey S.B. Newman, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, DC, for Plaintiff Counter Defendant Appellee Global Reinsurance Corporation of America (on the brief). 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Vacated and remanded. Peter R. Chaffetz, Steven C. Schwartz, Gretta L. Walters, Chaffetz Lindsey LLP, New York, NY, for Amici Curiae Aon Benfield U.S., Guy Carpenter & Company, LLC, JLT RE (North America) Inc., and Willis Re Inc., in support of 2 Defendant Counter Claimant Appellant Century Indemnity Company (on the brief). 1 2 4 POOLER, Circuit Judge: 5 6 Company and reinsurer Global Reinsurance Corporation of America regarding 7 the amount of reimbursement Global is required to provide Century pursuant to 8 certain reinsurance certificates. Century appeals from entry of an order of 9 summary judgment by the Southern District of New York (Lorna G. Schofield, 3 This appeal stems from a dispute between insurer Century Indemnity 10 J.). The district court granted the motion for Global, holding that “[t]he dollar 11 amount indicated in each of the Certificate Limits is the maximum amount that 12 Global can be obligated to pay for loss and expenses, combined.” Global 13 Reinsurance Corporation of America v. Century Indemnity Company, No. 13 cv 06577, 14 2014 WL 4054260, at *7 (S.D.N.Y. Aug. 15, 2014). 15 16 Reinsurance Corporation of America v. Century Indemnity Company, 843 F.3d 120, 17 122 23 (2d Cir. 2016). We assume the reader’s familiarity with our prior opinion. 18 19 upon our decisions in Bellefonte Reinsurance Company v. Aetna Casualty and Surety The facts are set forth in detail in our prior opinion in this case. Global In granting the motion for summary judgment, the district court relied 3 1 Company, 903 F.2d 910 (2d Cir. 1990), and Unigard Security Insurance Company, Inc. 2 v. North River Insurance Company, 4 F.3d 1049 (2d Cir. 1993). In determining that 3 the language in the contracts at issue in Bellefonte was “substantially identical” to 4 the language in the contracts at issue here, the district court determined that 5 Century’s arguments regarding the “follow the fortunes” doctrine and the 6 specific language of the contract, “as well as all of Century’s other arguments, 7 have been made before and rejected by the Second Circuit and the New York 8 Court of Appeals.” Global Reinsurance, 2014 WL 4054260, at *6 *7. 9 In our prior opinion, we addressed the holdings of Bellefonte and Unigard, 10 as well as the New York Court of Appeals decision in Excess Insurance Company v. 11 Factory Mutual Insurance Company, 3 N.Y.3d 577 (2004), which “expand[ed] on 12 our holding[s]” in Bellefonte and Unigard. Global Reinsurance, 843 F.3d at 127 28. 13 We explained that we found it “difficult to understand the Bellefonte court’s 14 conclusion that the reinsurance certificate in that case unambiguously capped the 15 reinsurer’s liability for both loss and expenses.” Id. at 126. We observed that 16 “[e]vidence of industry custom and practice might have shed light” on the 17 language in the contracts. Id. We were also uncertain whether Excess “might 18 fairly be taken to imply a rule of construction governing the interpretation of 4 1 reinsurance policies.” Id. at 128. Given the district court’s reliance on Bellefonte, 2 Unigard, and Excess and our uncertainty regarding the correct interpretation of 3 Excess, we certified the following question to the New York Court of Appeals: Does the decision of the New York Court of Appeals in Excess Insurance Co. v. Factory Mutual Insurance Co., 3 N.Y.3d 577 [789 N.Y.S.2d 461, 822 N.E.2d 768] (2004), impose 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 such as, for instance, defense costs? 4 5 6 7 8 9 10 12 Id. at 128. 13 14 certified question in the negative. Global Reinsurance Corporation of America v. 15 Century Indemnity Company, 30 N.Y.3d 508 (2017). The Court of Appeals held: 11 In an opinion dated December 14, 2017, the Court of Appeals answered the 19 Under New York law generally, and in Excess in particular, there is neither a rule of construction nor a presumption that a per occurrence liability limitation in a reinsurance contract caps all obligations of the reinsurer, such as payments made to reimburse the reinsured’s defense costs. 20 Id. at 512. “Excess did not supersede the ‘standard rules of contract interpretation’ 21 otherwise applicable to facultative reinsurance contracts.” Id. at 518 (internal 22 citation omitted). Because “[r]einsurance contracts are governed by the same 23 principles that govern contracts generally,” id. at 518, courts must “look to the 16 17 18 5 1 language of the policy above all else” in determining its meaning, id. at 519 2 (internal quotation marks omitted). After articulating the proper interpretive 3 methodology for a reviewing court to impose in reviewing a facultative 4 reinsurance contract under New York law, the Court of Appeals explained: The foregoing principles do not permit a court to disregard the precise terminology that the parties used and simply assume, based on its own familiar notions of economic efficiency, that any clause bearing the generic marker of a “limitation on liability” or “reinsurance accepted” clause was intended to be cost inclusive. Therefore, New York law does not impose either a rule, or a presumption, that a limitation on liability clause necessarily caps all obligations owed by a reinsurer, such as defense costs, without regard for the specific language employed therein. 5 6 7 8 9 10 11 12 13 Id. at 519. 14 15 requires us to remand this case to the district court for consideration in the first 16 instance of the contract terms at issue, employing standard principles of contract 17 interpretation. Though reasonable in light of our reasoning in Bellefonte and 18 Unigard, it is now clear that the district court’s determination that the contract 19 was unambiguous was premised on an erroneous interpretation of New York 20 state law. The district court should “construe each reinsurance policy solely in The decision from the Court of Appeals resolves the certified question and 6 1 light of its language and, to the extent helpful, specific context.” Global 2 Reinsurance, 843 F.3d at 128. 3 VACATED and REMANDED. 7