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R&Q Reinsurance Co. v. St. Paul Fire and Marine Insurance Co.

United States District Court, E.D. Pennsylvania

May 12, 2017

R&Q REINSURANCE COMPANY, Plaintiff/Counterclaim Defendant,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant/Counterclaim Plaintiff.

          MEMORANDUM

          Schiller, J.

         St. Paul Fire and Marine Insurance Company (“St. Paul”) insured companies against asbestos claims in the 1980s. R&Q Reinsurance Company (“R&Q”) reinsured St. Paul's insurance policies. R&Q sued St. Paul for declaratory judgment, alleging that St. Paul's egregiously late notice absolved R&Q of payment under the policies and that one of the reinsurance contractual relationships was never legally formed. St. Paul counterclaimed, alleging it did not receive payments from R&Q under the reinsurance policies. Presently before the Court is R&Q's motion for judgment on the pleadings in which R&Q argues that St. Paul did not adequately plead the formation of the contract in its counterclaims. The Court disagrees with R&Q's argument and will deny the motion.

         I. BACKGROUND

         St. Paul insures the Walter E. Campbell Company, Inc. against thousands of asbestos-related injury lawsuits. (Countercls. ¶ 8.) In December 1979, St. Paul and R&Q (through INA Reinsurance Company, R&Q's predecessor in interest) entered into the Facultative Reinsurance Binding Authority Agreement (“BAA”), which established a framework for R&Q to reinsure St. Paul's insurance policies with Campbell. (Am. Answer ¶ 6.) Pursuant to the BAA, R&Q and St. Paul would enter into facultative reinsurance contracts (“FRC”) that reinsured St. Paul's Campbell policies for discrete date ranges. (Id. at 8.) Facultative reinsurance contracts reinsure liability “arising under a particular policy, ” as opposed to treaty reinsurance contracts, which cover an entire type of risk from a particular insurance company. (Countercls. ¶ 11.)

         The BAA covered “commercial umbrella liability” insurance policies issued by St. Paul. (Compl. Ex. A, at 2.) The BAA provided that each cession[1] “shall attach and become effective concurrently with the [St. Paul's] policy.” (Id.) The BAA did not cover certain classes of insurance policies, including “[a]ny policy covering any risks not reported within 90 days of its effective date.” (Id.) St. Paul would inform R&Q of a covered policy with a “cession statement, ” which contained policy limits, effective dates, and other information pertinent to the reinsurance of the policy. (Id. ¶ 3.) R&Q in turn had fifteen days from receipt of the cession statement to terminate coverage of that individual policy. (Id.)

         R&Q's motion for judgment on the pleadings concerns one facultative reinsurance contract, FRC No. 29550, and an underlying Campbell policy, No. 581XD4769 (“*4769”). (Mem. Law Supp. Mot. J. on Pleadings 2.) St. Paul pleaded the existence of FRC No. 29550 and alleged that it reinsured the liability of *4769. (Countercls. ¶ 13.) St. Paul also pleaded the existence of a second pair of contracts, FRC No. 33366 and another Campbell policy, No. 581XD7801 (“*7801”). (Id. ¶¶ 12-13) But, St. Paul did not plead the existence of a cession statement connecting *4769 to FRC No. 29550, nor did St. Paul plead the existence of a cession statement connecting FRC No. 33366 to *7801. (Id.)

         II. STANDARD OF REVIEW

         After the close of pleadings but without delaying trial, “a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Failure to state a claim upon which relief can be granted may be raised in a motion for judgment on the pleadings. Fed.R.Civ.P. 12(h)(2)(B). “When a Rule 12(c) motion alleges [Counterclaim Plaintiff's] failure to state a claim upon which relief can be granted as here, [courts] analyze the motion under the same standard as a Rule 12(b)(6) motion to dismiss.” Ober v. Brown, 105 F. App'x 345, 346 (3d Cir. 2004) (citing Turbe v. Gov't of V.I., 938 F.2d 427, 428 (3d Cir. 1991)). “There is no material difference in the applicable legal standards” between a Rule 12(c) motion for failure to state a claim and a Rule 12(b)(6) motion to dismiss. Spruill v. Gillis, 372 F.2d 218, 223 n.2 (3d Cir. 2004).

         In reviewing a motion for judgment on the pleadings, a district court must accept as true all well-pleaded allegations and draw all reasonable inferences in favor of the nonmoving party. See Powell v. Weiss, 757 F.3d 338, 341 (3d Cir. 2014). A court need not, however, credit “bald assertions” or “legal conclusions” when deciding a motion for judgment on the pleadings. See Anspach ex rel. Anspach v. City of Phila., Dep't of Pub. Health, 503 F.3d 256, 260 (3d Cir. 2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         “Factual allegations [in the counterclaims] must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a motion for judgment on the pleadings, the counterclaims must include “enough facts to state a claim to relief that is plausible on its face.” See Id. at 570. Although the federal rules impose no probability requirement at the pleading stage, the Counterclaim Plaintiff must present “enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s]” of a cause of action. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008).“A claim has facial plausibility when the [Counterclaim Plaintiff] pleads factual content that allows the court to draw the reasonable inference that the [Counterclaim Defendant] is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Simply reciting the elements will not suffice. Id. (holding that pleading labels and conclusions without further factual enhancement will not survive motion to dismiss); see also Phillips, 515 F.3d at 233.

         The Third Circuit Court of Appeals has directed district courts to conduct a two-part analysis when faced with a motion for judgment on the pleadings. First, the legal elements and factual allegations of the claim should be separated, with the well-pleaded facts accepted as true but the legal conclusions disregarded. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Second, the court must make a commonsense determination of whether the facts alleged in the counterclaims are sufficient to show a plausible claim for relief. Id. at 211. If the court can only infer the mere possibility of misconduct, the counterclaims must be dismissed because it has alleged-but has failed to show-that the pleader is entitled to relief. Id.

         III. DISCUSSION

         R&Q contends that St. Paul did not plead the existence of a contractual relationship between FRC No. 29550 and *4769 because St. Paul did not plead the existence of a cession statement connecting the two contracts. In order to state a claim for breach of contract, the plaintiff must first allege “the existence of a contract, including its essential terms.” Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003) (quoting CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999)).[2] However, “[a counter claimant] is not required to attach the subject contract to the [counterclaims] or plead its terms verbatim in order to state a claim.” Jones v. Select Portfolio Servicing, Inc., 2008 U.S. Dist. LEXIS 33284, at *10 (E.D. Pa. Apr. 22, 2008).

         St. Paul adequately pleaded the existence of a contractual relationship between FRC No. 29550 and *4769 despite not attaching either contract to their counterclaims. Attached to R&Q's complaint are the only documents attached to any of the pleadings: the BAA, FRC No. 33366, and the cession statement linking FRC No. 33366 with *7801. (Compl. Ex. A.) St. Paul asserted that “[FRC No. 29550] reinsures liability under [*4769]” and that “[t]he limits of [FRC No. 29550] are identical to the limits of [FRC No. 33366].” (Countercls. ¶ 13.) ...


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