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Onebeacon Insurance Co. v. Aviva Insurance Ltd.

United States District Court, Third Circuit

May 17, 2013

ONEBEACON INSURANCE COMPANY, Plaintiff,
v.
AVIVA INSURANCE LIMITED, Defendant.

MEMORANDUM

JAN E. DuBOIS, District Judge.

I. INTRODUCTION

This matter arises out of a dispute over what the parties refer to as a reinsurance contract. Plaintiff OneBeacon Insurance Company provided insurance coverage in the United States to various policyholders, and defendant Aviva Insurance Limited reinsured those liabilities. After defendant refused to cover a large number of claims submitted by plaintiff for various reasons, the instant litigation was filed. Presently before the Court are defendant's Motion for Partial Summary Judgment and plaintiff's Motion for Summary Judgment.

For the reasons stated below, both motions are denied in part and granted in part.

II. BACKGROUND

Although the parties have a complicated and intertwined corporate history, a detailed examination is unnecessary to resolve the pending motions. In brief, defendant's predecessor-in-interest, a British company, ("UK Entity") assumed the risk of insurance policies issued by plaintiff's predecessor-in-interest, an American company ("US Entity"). (Stipulation at §§ 15, 22-23.)

A. Reinsurance Agreement

Around 1997, the UK Entity and the U.S. Entity reaffirmed their agreement, in which the UK Entity "reinsured 100% of the liabilities of the U.S. Entity arising under" the U.S. Entity's insurance policies to Global Risk accounts. (Stip. at §§ 26-27.) That agreement, referred to as the "GA Agreement, " was never memorialized in writing, but the parties agree that it is a valid and binding agreement. (Stip. at §§ 28-29.) The parties exchanged several draft agreements, and although a written version was never executed, the parties have stipulated that the GA Agreement would include certain standard clauses and provisions that are customary in reinsurance contracts. (Stip. at §§ 34-35, 85.) Further, both parties agree that the GA Agreement includes, inter alia, a follow-the-fortunes provision and an errors and omission provision. (Defendant's Supplemental Answers and Objections to the First Set of Interrogatories of OneBeacon at § 3.)

Prior to 2001, "the UK Entity did not precondition payment on any documentation requirements other than the submission of bordereaux[1]which were validated by UK Entity. The U.S. Entity did at time provide information and/or documentation in addition to the bordereaux." (Stip. at § 44.) Starting in 2002, RMI - "an agent for [defendant] with respect to determining the liabilities of [defendant to plaintiff] with respect to" the policies at issue in this case - began to require additional documentation from plaintiff before validating claims for payment. (Stip. at §§ 16, 45, 92-93.) Although plaintiff never provided express verbal or written agreement to this new requirement, it did provide "some of the requested documentation to RMI." (Stip. at §§ 46-47, 98-99.)

B. "Catch-Up" Billings

Prior to 2001, the two parties shared an internal accounting system to make payments. (Stip. at § 51.) Due to mergers and corporate restructuring at the U.S. Entity, after 2001 the U.S. Entity manually billed the UK Entity and payments were made via a direct transfer of money. (Stip. at § 51; Pl. Exhibit K.) Plaintiff contends that after a corporate merger in 1998, certain bills were not fully conveyed to defendant and that this failure was not discovered until 2005. (Pl. Exhibit K.) Defendant contends that plaintiff knew of problems with the billings for such insurance coverage as early as 1998, but did not properly investigate the situation.

In 2005, plaintiff eventually determined that it had failed to bill defendant certain amounts since 1999, and it prepared two "catch-up" billings. The May 2005 billing totaled $2, 337, 346.37. (Def.'s Exhibit 27.) The June 2005 billing totaled $17, 988, 760.79. (Def. Exhibit 28.) Most of the claims in these two "catch-up" billings were new to defendant. (Stip. at § 88.) The two "catch-up" billings were submitted to defendant in July 2005. (Stip. at § 87.)

On July 28, 2006, plaintiff notified defendant that it had more unbilled claims it needed to submit, which had been handled by a third-party. (Stip. at § 89.) This 2006 "catch-up" billing totaled approximately $4, 400, 000 and was submitted in October 2006. (Def. Exhibits 42-43.)

C. Standstill Agreement

In early August 2006, the parties began to negotiate a standstill agreement, whereby the statute of limitations would be tolled in relation to the May and June 2005 "catch-up" billings. (Stip. at § 90; Def. Exhibit 45.) After exchanging drafts, the parties agreed to the following language, in relevant part:

AND WHEREAS: A dispute or potential dispute has arisen between the Parties regarding the Fronting Policies in respect to [plaintiff's] May and June 2005 bordereaux.
IT IS AGREED as follows:... 3. Save as set out in paragraph 5 below, for the purposes of any statutory limitation... which may be applicable to proceedings between the Parties arising out of or relating in any way whatsoever to the Fronting Policies, the Parties agree that from the date hereof until 30 days after termination of this Agreement time shall not be treated as having continued to run for the purposes of any defence or doctrine of time-bar, limitation of action, prescription, laches or delay or any similar defence or doctrine in law or equity under any relevant system of law, in relation to all causes of action which may arise or may already have at any time arisen ...

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