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Pacific Employers Insurance Company v. Global Reinsurance Corporation of America (Formerly Known As

April 18, 2011

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 a Motion to Strike ("Motion to Strike") filed by Plaintiff/Counterclaim Defendant Pacific Employers Insurance Company ("PEIC"), an Opposition to PEIC's Motion to Strike ("Global's Opposition") filed by Defendants/Counterclaim Plaintiff Global Reinsurance Corporation of America ("Global"), and a Reply Memorandum of Law in Further Support of [PEIC]'s Motion to Strike ("Reply Memorandum") filed by PEIC.

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").

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 sought 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 Certificate in connection with the asbestos litigation liabilities. On February 25, 2010, PEIC filed its Answer to Global's Counterclaim.

On February 26, 2010, Global filed a Motion for Judgment on the Pleadings regarding Count II of its Counterclaim. On March 19, 2010, PEIC filed a Response in Opposition to Global's Motion and a Cross-Motion for Judgment on the Pleadings regarding Count II of Global's Counterclaim. Specifically, PEIC requested that the Court find that as a matter of law Global is obligated for up to $1 million of loss and, in addition thereto, a pro rata share of expenses pursuant to the language of the Facultative Certificate. On April 2, 2010, Global filed a Response to PEIC's Cross-Motion for Judgment on the Pleadings. On April 8, 2010, PEIC filed a Reply. On April 23, 2010, we ruled that expenses are subject to the $1 million limit stated in the "Reinsurance Accepted" section of the of the Facultative Certificate. On May 7, 2010, PEIC submitted a Motion for Consideration or in the Alternative, for Certification of a Final Order Pursuant to Federal Rule of Civil Procedure 54(b) or, in the Alternative to Certify [our] April 23, 2010 Order for Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b). We denied that Motion on June 9, 2010.

The events giving rise to the instant Motion to Strike stem from statements made during a dispute over discovery, which began in October of 2010. On October 22, 2010, PEIC filed a Motion to Compel Global to respond to several interrogatories, document requests, and deposition requests. The requests most relevant to this Motion are PEIC's Motion to Compel Global to respond to Plaintiff's Interrogatory No. 7,*fn3 Plaintiff's Document Request No. 22,*fn4 and PEIC's Motion to Compel Global to respond to the topics outlined in Paragraph 4 of Plaintiff's Notice of Deposition to Global.*fn5

On November 5, 2010, Global filed a Response in Opposition to PEIC's Motion to Compel asserting that it no longer intended to pursue the claim that it was prejudiced by late notice. In rendering our decision, we relied on Global's representation and we denied as moot PEIC's Motion to Compel regarding Plaintiff's Interrogatory No. 7, Plaintiff's Document Request No. 22, and the topics outlined in paragraph 4 of Plaintiff's Notice of Deposition to Global on November 12, 2010. In light of our April 23, 2010 ruling declaring that expenses are included in the $1 million policy limit, we also denied as moot PEIC's Motion to Compel regarding Document Request No. 18*fn6 and Document Request No. 20.*fn7

On December 22, 2010, PEIC filed a Motion to Strike Paragraphs 39, 57 and 68-72 of Global's Answer, Affirmative Defenses, and Counterclaim contending that those paragraphs were no longer relevant based on representations made by Global that it was no longer planning to pursue its claim that PEIC's late notice prejudiced Global. (Pl.'s Mem. in Support of Mot. to Strike at 1.) Paragraph 39 pertains to Global's Affirmative Defenses and states: "Plaintiff breached its duty of utmost good faith that it owed to Global." (Answer ¶ 39.) Paragraph 57 relates to Global's Counterclaim against PEIC for declaratory judgment that PEIC breached the notice provision of the Facultative Certificate (Count II) and states:

In the seven year time period that PEIC was aware of the underlying asbestos liabilities but did not notify Global of such liabilities, Global commuted some of its recessional coverage. Global would be unable to recover any of its recessional coverage in connection with underlying asbestos liabilities in the event that Global is obligated to pay any amounts for these liabilities to PEIC under the Facultative Certificate. (Answer ¶ 57.) Paragraphs 68-72 comprise Count III of Global's Counterclaim seeking declaratory relief regarding the parties' rights and obligations under the Facultative Certificate. Id. at ¶¶ 68-72. Global "disputes that it owes amounts billed, and to be billed, by PEIC per the terms, conditions and definitions of the Facultative Certificate." Id. at ¶ 69 Furthermore, Global seeks a judicial determination that:

PEIC is not entitled to recover under the Facultative Certificate for any cession to Global in connection with PEIC's defense and indemnity payments in connection with the underlying asbestos liabilities, to the extent that:

a. any billing to global is inconsistent with the excess of loss nature of the reinsurance provided by ...


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