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Pacific Employers Insurance Co. v. Global Reinsurance Corp. of America

April 23, 2010

PACIFIC EMPLOYERS INSURANCE COMPANY, PLAINTIFF,
v.
GLOBAL REINSURANCE CORPORATION OF AMERICA (FORMERLY KNOWN AS CONSTITUTION REINSURANCE CORPORATION), DEFENDANT.



The opinion of the court was delivered by: Robert F. Kelly, Sr. J.

MEMORANDUM

Presently before the Court are Cross-Motions for Judgment on the Pleadings filed by Defendant Global Reinsurance Corporation of America ("Global") and Plaintiff Pacific Employers Insurance Company ("PEIC") as to Count II of Global's Counterclaim for Declaratory Judgment. For the following reasons, Global's Motion is granted and PEIC's Motion is denied.

I. BACKGROUND

The claims in this case relate to a reinsurance contract.*fn1 For the period June 1, 1980 to June 1, 1981, PEIC entered into a facultative reinsurance contract*fn2 ("Facultative Certificate") with Global, Certificate No. 68224, through which Global, as the reinsurer, agreed to reinsure an umbrella commercial liability policy (No. XMO-003649) ("Direct Policy") that PEIC issued to the Buffalo Forge Company ("Buffalo Forge").

The first page of the Facultative Certificate (the "Declarations page") sets forth specific information regarding the reinsurance agreement between PEIC and Global, including the names of the parties, the dollar amount of risk retained by PEIC ($1 million), and the dollar amount of reinsurance accepted by Global. Specifically, "Item 3"and "Item 4" of the Declarations page states:

ITEM 3 - COMPANY [PEIC] RETENTION THE FIRST $1,000,000 SUBJECT TO FACULTATIVE REINSURANCE.

ITEM 4 - REINSURANCE ACCEPTED $1,000,000 ANY ONE OCCURRENCE AND IN THE AGGREGATE WHERE APPLICABLE PART OF $4,000,000 WHICH IS EXCESS OF $1,000,000 WHICH IN TURN IS EXCESS OF UNDERLYING INSURANCE. (Compl., Ex. A at 1.)

The second page of the Facultative Certificate is titled "Reinsuring Agreements and Conditions." Significantly, the preamble on this page states:

In consideration of the payment of the premium, and subject to the terms, conditions and limits of liability set forth herein and in the Declarations made a part thereof, the Reinsurer does hereby reinsure the ceding company named in the Declarations (herein called the Company) in respect of the Company's policy(ies) as follows: (Id. at 2 (emphasis added).) Following this first sentence, the second page of the Facultative Certificate outlines conditions A through L, which in relevant part, provide:

A. . . . The liability of the Reinsurer, as specified in Item 4 of the Declarations, shall follow that of the Company and shall be subject in all respects to all the terms and conditions of the Company's policy except when otherwise specifically provided herein or designated as non-concurrent reinsurance in the Declarations . . . .

E. All loss settlements made by the Company, provided they are within the terms and conditions of this Certificate of Reinsurance, shall be binding on the Reinsurer. Upon receipt of a definitive statement of loss, the Reinsurer shall promptly pay its proportion of such loss as set forth in the Declarations. In addition thereto, the Reinsurer shall pay its proportion of expenses (other than office expenses and payments to any salaried employee) incurred by the Company in the investigation and its proportion of court costs and interest on any judgment or award, in the ratio that the Reinsurer's loss payment bears to the Company's gross loss payment . . . . (Id. (emphasis added).)

At some point after the Facultative Certificate was executed, Buffalo Forge and its corporate successors were named as defendants in numerous asbestos products personal injury lawsuits. PEIC participated in the defense and indemnity of Buffalo Forge pursuant to the Direct Policy.

By September 2009, PEIC's payments on behalf of Buffalo Forge exceeded the $1 million retention on the Facultative Certificate. On or around September 2, 2009, PEIC billed Global pursuant to the Facultative Certificate. Along with the billing, PEIC submitted supporting information and portions of its investigative claim file to Global. In response, Global requested additional documentation to support the billing. According to PEIC, Global has not paid the amounts billed pursuant to the Facultative Certificate. Specifically, at the time of PEIC's Complaint, Global allegedly "owe[d] PEIC $559,072 under the Facultative Certificate for its share of defense and indemnity payments in connection with the underlying asbestos claims against Buffalo Forge." (Compl. ¶ 27.)

PEIC filed its Complaint against Global in this Court on December 18, 2009. Count I of the Complaint alleges breach of contract and Count II seeks declaratory relief for a declaration of its rights under the Facultative Certificate. On February 24, 2010, Global filed its Answer, Affirmative Defenses, and Counterclaim. In Count II of its Counterclaim, Global seeks a declaration that the $1 million limit of liability set forth in the Facultative Certificate is the maximum that PEIC could potentially recover under the Facultative ...


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