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Century Indemnity Co. v. Onebeacon Insurance Co.

Superior Court of Pennsylvania

October 17, 2017


         Appeal from the Judgment Entered April 26, 2016 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): July Term, 2012 No. 002928

          BEFORE: OTT, J., RANSOM, J., and FITZGERALD, J. [*]

          OTT, J.

         OneBeacon Insurance Company F/K/A CGU Insurance Company F/K/A General Accident Insurance Company of America (hereinafter "OneBeacon"), appeals from the judgment entered on April 26, 2016, [1] in the Philadelphia County Court of Common Pleas in this action seeking reinsurance[2] coverage for defense expenses. Following a non-jury trial, the court entered judgment against OneBeacon and in favor of Century Indemnity Company, as successor to CCI Insurance Company, as successor to Insurance Company of North America (hereinafter "Century"), in the amount of $4, 772, 520.44, plus prejudgment interest, and in favor of Pacific Employers Insurance Company (hereinafter "PEIC"), in the amount of $2, 426, 478.42, plus prejudgment interest.[3] On appeal, OneBeacon challenges the ruling of the trial court that the reinsurance facultative certificates[4] at issue provided coverage for defense expenses in excess of the liability cap, and that Century/PEIC were entitled to interest on certain proofs of loss issued prior to early 2013. For the reasons below, we affirm.

         The relevant facts and procedural history underlying this appeal are as follows. In 1983, Century's predecessor issued an Excess Blanket Catastrophe Liability Policy to a subsidiary of Formosa Plastics Corporation that provided $25, 000, 000.00 in umbrella liability for covered losses. During the same period, PEIC issued a similar policy to Gould Pumps, Inc.[5] Both of the underlying policies included a "second obligation to provide coverage for defense costs." Trial Court's Findings of Fact and Conclusions of Law, 2/23/2016, at 2. Thereafter, Century's predecessor and PEIC both obtained facultative certificates from OneBeacon's predecessor to reinsure a certain layer of the underlying Formosa and Gould policies. Both the underlying policies and the facultative certificates were renewed the following year; Century's certificate was renewed via an endorsement, and PEIC was issued a new certificate.

         Each of the certificates at issue consists of a double-sided, pre-printed form and contains the identical, relevant, policy language. The front of the certificate names the reinsured, i.e. Century's predecessor or PEIC, and thereafter states: "In consideration of the payment of the premium and subject to the general conditions set forth on the reverse side hereof, the reinsurer does hereby reinsure" the underlying policy. Complaint, 7/23/2012, Exhibit A, Certificate 4513 (hereinafter "Certificate") (emphasis added).[6] After providing information regarding the underlying policy, the certificate includes four sections under the heading, "Details of Reinsurance Afforded." Id. Section I, II, and III list the type of insurance, the underlying policy limits, and the ceding company's retention. See id. Section IV is entitled "Reinsurance Accepted" and provides the reinsurance policy limit for the certificate.[7] Id.

         The back of each certificate lists nine general conditions, three of which are relevant to this appeal:

1. The [Reinsured] Company [Insurance Company of North America] warrants to retain for its own account, subject to Treaty Reinsurance, the amount of liability specified in Section III, and the liability of the Reinsurer [OneBeacon] specified in Section IV shall follow that of the Company and expect as otherwise specifically provided herein, shall be subject in all respects to all the terms and conditions of the Company's policy. The Company shall furnish the
Reinsurer with a copy of its policy and all endorsements thereto which in any manner affect this certificate, and shall make available for inspection and place at the disposal of the Reinsurer at reasonable times any of its records relating to this reinsurance or claims in connection therewith.

* * * *

3. All claims involving this reinsurance, when settled by the Company, shall be binding on the Reinsurer, who shall be bound to pay its proportion of such settlements, and in addition thereto, in the ratio that the Reinsurer's loss payment bears to the Company's gross loss payment, its proportion of expenses, other than Company salaries and office expenses, incurred by the Company in the investigation and settlement of such claims or suits and, with the prior consent of the Reinsurer to trial court proceedings, its proportion of court costs and interest on any judgment or award.[8]

4. Payment of its proportion of loss and expense paid by the Company will be made by the Reinusurer to the Company promptly following receipt of proof of loss.

Id. at 2 (emphasis supplied).

         Both Century and PEIC paid significant amounts in losses to their underlying insureds for asbestos-related claims pursuant to the 1983 and 1984 underlying policies. When OneBeacon failed to promptly pay Century/PEIC under the facultative certificates, the companies jointly filed a breach of contract and declaratory judgment action against OneBeacon on July 23, 2012. While the action was pending, OneBeacon paid Century/PEIC the limits listed in the "Reinsurance Accepted" section of the facultative certificates, but refused to pay any amount above that limit for defense expenses.

         The case proceeded through discovery. On January 20, 2015, OneBeacon filed a motion for summary judgment. It argued that it had already paid Century/PEIC "$11 million, a sum equal to the total dollar amounts stated as the 'Reinsurance Accepted' in the facultative reinsurance certificates at issue in this case[, ]" and that under authoritative case law, and the unambiguous language of the certificates at issue, it was not obligated to pay defense expenses "in excess of the stated Reinsurance Accepted amount[.]" OneBeacon's Motion for Summary Judgment, 1/20/2015, at ¶¶ 1-2. OneBeacon further argued: (1) Century/PEIC were collaterally estopped from seeking defense costs in excess of the Reinsurance Accepted limits as a result of "prior adverse decisions" rendered against them, and (2) it owed no interest to Century/PEIC on the $11 million previously submitted because it "had no duty to pay either [company] prior to the respective dates of OneBeacon's actual payments." Id. at ¶¶ 3-4. On January 21, 2015, Century/PEIC filed a motion for partial summary judgment on the issue of prejudgment interest.[9]

         The trial court entered two orders disposing of the motions on March 27, 2015: (1) denying OneBeacon's motion for summary judgment, and (2) granting Century/PEIC's motion for partial summary judgment. See Orders, 3/27/2015. With regard to OneBeacon's motion, the trial court determined: (1) the certificates were ambiguous, and, consequently, Century/PEIC could present extrinsic evidence at trial, and (2) Century/PEIC were not collaterally estopped from asserting their claims based on prior decisions. See Trial Court Opinion, 3/27/2015 (OneBeacon's Motion), at 5-8. The court granted Century/PEIC's motion for partial summary judgment, concluding OneBeacon had a duty to pay Century/PEIC promptly following receipt of proof of loss. See Trial Court Opinion, 3/27/2015 (Century/PEIC's Motion), at 4-6. Accordingly, the court found both Century and PEIC were entitled to prejudgment interest, Century in the amount of $275, 760.45 and PEIC in the amount of $152, 071.35. See id. at 6. Judgment was entered on these amounts in favor of Century/PEIC and against OneBeacon on April 9, 2015.

         On April 27, 2015, OneBeacon filed two motions, requesting the trial court amend each of its March 27, 2015, orders to certify them for an interlocutory appeal pursuant to 42 Pa.C.S. § 702(b). The trial court denied OneBeacon's motions to amend on May 21, 2015, and this Court subsequently denied OneBeacon's petition for review. See Century Indemnity Co. et al. v. OneBeacon Insurance Co. et. al., 95 EDM 2015, Order, 7/29/2015. A three-day, non-jury trial commenced on January 11, 2016. On February 23, 2016, the trial court entered an order, accompanied by findings of fact and conclusions of law, finding in favor of Century/PEIC, and against OneBeacon. See Order, 2/23/2016.[10] OneBeacon filed post- trial motions on March 3, 2016, which the trial court denied on March 15, 2016. This timely appeal followed.[11], [12]

         In its first issue, OneBeacon argues the trial court erred in denying its motion for summary judgment and finding the facultative certificates at issue were ambiguous as to whether the "Reinsurance Accepted" amount capped OneBeacon's liability for both losses and defense expenses. See OneBeacon's Brief at 17-32.

         Our review of a trial court's order denying a motion for summary judgment is well-established:

We view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Pennsylvania State University v. County of Centre, 532 Pa. 142, 615 A.2d 303, 304 (1992). Only where there is no genuine issue as to any material fact and it is clear that the moving party is entitled to a judgment as a matter of law will summary judgment be entered. Skipworth v. Lead Industries Ass'n, Inc., 547 Pa. 224, 690 A.2d 169, 171 (1997). Our scope of review of a trial court's order granting or denying summary judgment is plenary, O'Donoghue v. Laurel Savings Ass'n, 556 Pa. 349, 728 A.2d 914, 916 (1999), and our standard of review is clear: the trial court's order will be reversed only where it is established that the court committed an error of law or abused its discretion. Cochran v. GAF Corp., 542 Pa. 210, 666 A.2d 245, 248 (1995).

Pappas v. Asbel, 768 A.2d 1089, 1095 (Pa. 2001), cert. denied sub nom, United States Healthcare Systems of Pennsylvania, Inc. v. Pennsylvania Hosp. Ins. Com., et al., 536 U.S. 938 (2002).

         Here, OneBeacon's argument focuses on an interpretation of the parties' contract, in this case, the facultative certificates.

In interpreting the terms of a contract, the cardinal rule followed by courts is to ascertain the intent of the contracting parties. If the contractual terms are clear and unambiguous on their face, then such terms are deemed to be the best reflection of the intent of the parties. If, however, the contractual terms are ambiguous, then resort to extrinsic evidence to ascertain their meaning is proper. A contract's terms are considered ambiguous "'if they are subject to more than one reasonable interpretation when applied to a particular set of facts.'"

Com. ex rel. Kane v. UPMC, 129 A.3d 441, 463 (Pa. 2015) (internal citations omitted).

         OneBeacon asserts the certificates at issue are unambiguous, and specifically provide that "the dollar amount listed as the 'Reinsurance Accepted' in Section IV on the front page constitutes the maximum amount for which OneBeacon can be liable under the certificate, including for all expenses that can be billed to the reinsurer." OneBeacon's Brief at 17-18 (emphasis added). It insists the trial court's contrary conclusion is based upon the court's misinterpretation of the certificate language, and its non-application of controlling caselaw, in particular the Second Circuit's seminal decision in Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co., 903 F.2d 910 (2nd Cir. 1990).

         Because our research confirms the trial court's conclusion that "this is a case of first impression for Pennsylvania courts, " [13] we begin with an examination of Bellefonte, which is the leading decision concerning whether a reinsurer is obligated to pay defense expenses incurred in the underlying litigation which exceed the "Reinsurance Accepted" limit stated on the facultative certificate.[14]

         The Bellefonte case arose during litigation over the Dalkon Shield intrauterine device. See Bellefonte, supra, 903 F.2d at 911. The manufacturer of the device filed a declaratory judgment action against Aetna, the underlying insurer, seeking a determination that Aetna was required to pay defense costs even if those costs exceeded the liability limits stated in the policies. See id. Subsequently, the parties settled the claim and "Aetna agreed to pay an amount substantially in excess of the cap stated in the policies." Id. Aetna's six reinsurers, however, did not participate in the settlement.

         Thereafter, Aetna asked its reinsurers to pay their proportionate share of the defense costs. The reinsurers filed a declaratory judgment action, requesting the court "limit[] their liability to the amount stated in the reinsurance certificates." Id. The district court granted the reinsurers' motion for summary judgment, holding the "Reinsurance Accepted" amount was an "overall limitation and that the reinsurance certificates were cost-inclusive and capped by that amount." Id. at 912. Aetna then appealed to the Second Circuit, which affirmed the decision of the district court.

         In affirming that decision, the Bellefonte Court first rejected Aetna's claim that the "follow the fortunes" doctrine "obligates a reinsurer to indemnify a reinsured for all of the reinsured's defense expenses and costs, even when those expenses and costs" exceed the "Reinsurance Accepted" amount listed on the certificate. Id. Similar to "General Condition (1)" in the present case, [15] the certificates in Bellefonte included a provision that stated: "The Company warrants to retain for its own account ... the amount of liability specified ... above, and the liability of the Reinsurer specified ... above [i.e., amount of reinsurance accepted] shall follow that of the Company[.]" Id. at 911 (emphasis added). The Second Circuit held the "follow the fortunes" clause did not "render a reinsurer liable for an amount in excess of the bargained-for coverage." Id. at 913. The Court explained:

To read the reinsurance certificates in this case as Aetna suggests-allowing the "follow the fortunes" clause to override the limitation on liability-would strip the limitation clause and other conditions of all meaning; the reinsurer would be obliged merely to reimburse the insurer for any and all funds paid. Such a reading would be contrary to the parties' express agreement and to the settled law of contract interpretation.
The "follow the fortunes" clauses in the certificates are structured so that they coexist with, rather than supplant, the liability cap. To construe the certificates otherwise would effectively eliminate the limitation on the reinsurers' liability to the stated amounts.

Id. (citation omitted).

         Next, the Bellefonte Court also rejected Aetna's argument that the certificates required the reinsurers to pay defense expenses "in addition" to liability limits. Id. Similar to "General Condition (3)" in the present case, [16] the fourth provision in the Aetna certificates stated, in relevant part:

All claims involving this reinsurance, when settled by the Company, shall be binding on the Reinsurer, which shall be bound to pay its proportion of such settlements, and in addition thereto, in the ratio that the Reinsurer's loss payment bears to the Company's gross loss payment, its proportion of expenses ... incurred by the Company in the investigation and settlement of claims or suits...."

Id. at 911 (emphasis supplied). The Bellefonte Court found the "'in addition thereto' provision merely outlines the different components of potential liability under the certificate [and] does not indicate that either component is not within the overall limitation." Id. at 913.

         In doing so, the Bellefonte Court also emphasized the "subject to" clause in the certificates, which made all of the provisions subject to the liability limits. Specifically, the first provision in the Aetna certificates stated, in pertinent part, that the reinsurer "[d]oes hereby reinsure Aetna ... subject to the terms, conditions and amount of liability set forth herein, as follows[.]" Id. at 911 (emphasis supplied). The Second Circuit held:

Whatever the demand, the reinsurers' entire obligation is quantitatively limited by the dollar amount the reinsurers agreed to reinsure. Once the reinsurers have paid up to the certificate limits, they have no additional liability to Aetna for defense expenses or settlement contributions. Any other construction of the reinsurance certificates would negate the phrase "the reinsurer does hereby reinsure Aetna ... subject to the ... amount of liability set forth herein." (emphasis added). The reinsurers are liable only to the extent of the risk they agreed to reinsure. They cannot be liable for the insurer's action in excess of the agreement.
We hold that the "in addition thereto" language of the fourth provision of the reinsurance certificates does not exempt defense costs from the overall limitation on liability set forth in the first two provisions of each certificate. Rather, we hold that these costs are "subject to" the express cap on liability in each certificate.

Id. at 914 (emphasis supplied).

         Most courts that have considered this issue have relied upon the Bellefonte decision and held that reinsurers are not required to pay defense expenses that exceed the "Reinsurance Accepted" amount listed on the certificates. The Second Circuit considered the issue again in Unigard Sec.Ins. Co. Inc. v. North River Ins. Co., 4 F.3d 1049 (2nd Cir. 1993). There, the reinsured/appellant attempted to distinguish Bellefonte by relying on a "follow the form" clause in its certificate, which provided that "the liability of the reinsurers, 'except as otherwise provided by this Certificate, shall be subject in all respects to all the terms and conditions of [the underlying policy]." Id. at 1070-1071 (emphasis in original). The reinsured/appellant argued that this clause, not considered by the Bellefonte Court, was significant because the reinsured was ordered to pay expenses via binding arbitration, rather than pursuant to a settlement agreement which the reinsurer did not participate in, as in Bellefonte. However, the Court of Appeals did not find the facts in Unigard distinguishable. Rather, it emphasized the certificate at issue contained the same "subject to" clause as in Bellefonte, which limited all of the reinsurer's obligations in the certificate to the amount listed as "Reinsurance Accepted." Id. at 1071. Moreover, the Unigard Court noted: "The efficiency of the reinsurance industry would not be enhanced by giving different meanings to identical standard contract provisions depending upon idiosyncratic factors in particular lawsuits." Id.

         The United States District Court for the Eastern District of Pennsylvania relied upon Bellefonte and Unigard in Aetna Cas. & Sur. Co. v. Philadelphia Reinsurance Corp. ("PRC"), No. 94-2683, 1995 WL 217631 (E.D. Pa. 1995), and Pacific Employers Ins. Co. v. Global Reinsurance Corp. of America ("Global/PEIC I"), No. 09-6055, 2010 WL 1659760 (E.D. Pa. 2010).

         In both cases, the district court ruled in favor of the reinsurer, finding the language in the facultative certificates at issue was nearly identical to the language of the certificates in Bellefonte and Unigard. See PRC, supra, 1995 WL 217631 at *1; Global/PEIC I, supra, 2010 WL 1659760, at *1. Both certificates included a provision that required the reinsurer to pay its proportionate share of losses, and "in addition thereto" its proportionate share of expenses. PRC, supra, 1995 WL 217631 at *1; Global/PEIC I, supra, 2010 WL 1659760, at *1. Moreover, both certificates included an introductory clause that stated the latter provisions were made "in consideration of the payment of the premium and subject to the … amount [or limits] of liability set forth herein[.]" PRC, supra, 1995 WL 217631 at *1; Global/PEIC I, supra, 2010 WL 1659760, at *1. (citation omitted and emphasis in original).

         In PRC, the district court granted summary judgment in favor of the reinsurer, finding that the reinsured, Aetna, was bound by the ruling in Bellefonte since it was also a party in that case. PRC, supra, 1995 WL 217631 at *4. Aetna attempted to distinguish the facts in Bellefonte by asserting that the underlying policies were different: in Bellefonte, the underlying insurance policy was cost-inclusive, while in PRC, the underlying policy was cost-supplemental. See id. However, the district court rejected this claim, stating: "The Bellefonte decision did not depend on whether or not the underlying policy included costs in the limit of liability, i.e., was cost-inclusive." Id. at *3 (footnote omitted). The court also refused to consider Aetna's evidence regarding custom in the reinsurance industry because it determined the certificate at issue was unambiguous. See id.

         In Global/PEIC I, the district court granted the reinsurer's motion for judgment on the pleadings, noting:

[I]f the parties intended to exclude expenses from the total liability limit, they could have made that clear through [the "Reinsurance Accepted"] language or another part of the Facultative Certificate. They did not do so.

Id. at *3. Consistent with prior case law, the Global/PEIC I Court found the "in addition thereto" provision "merely outlined the two separate proportions to losses and expenses that [the reinsurer] is obligated to pay[.]" Id. at *4. Moreover, the Court emphasized the "subject to" clause which made all of the provisions in the certificate, including the one providing for the payment of expenses "in addition" to losses, subject to the liability limit.[17] Id.

         It also merits mention that the New York Court of Appeals followed the Bellefonte and Unigard decisions in Excess Ins. Co. Ltd. v. Factory Mut. Ins. Co., 822 N.E.2d 768 (N.Y. 2004), and held the reinsurer was not required to pay "loss adjustment expenses in excess of the stated limit in the reinsurance policy." Id. at 771. In that case, the reinsurance policy explicitly provided a "limit" of "$7 million per occurrence." Id. at 771. The Excess Court concluded: "Once the reinsurers have paid the maximum amount stated in the policy, they have no further obligation to pay [the reinsured] any costs related to loss adjustment expenses." Id.

         Further, the Court rejected the reinsured's attempt to distinguish the case from Bellefonte and its progeny because the underlying contract at issue was property insurance rather than liability insurance. See id. at 772. Moreover, the Excess Court found the parties could have anticipated "the possibility of incurring loss adjustment expenses in settling a claim, " and "nothing prevented [the reinsured] from insuring that risk either by expressly stating that the defense costs were excluded from the indemnification limit or otherwise negotiating an additional limit for loss adjustment expenses[.]" Id. The Excess Court stated: "Failing this, the reinsurers were entitled to rely on the policy limit as setting their maximum risk exposure." Id. See also Utica Mut. Ins. Co. v. Clearwater Ins. Co. ("Clearwater"), No. 6:13-CV-1178, 2014 WL 6610915 (N.D. N.Y. 2014) (relying upon Bellefonte and Excess in granting summary judgment in favor of reinsurer; certificate was unambiguous, and did not expressly exclude costs from liability cap); Continental Casualty Co. v. Midstates Reinsurance Corp., 24 N.E. 3d 122, 127-128 ( Ill. App. Ct., 1st Dist. 2014) (affirming order granting judgment on the pleadings to reinsurer; relying upon "similar" provisions in Bellefonte, to find certificate language "clearly and unambiguously" caps expenses under policy limit), appeal denied, 31 N.E. 3d 767 (Ill. 2015).

         Nevertheless, both the Second Circuit Court of Appeals and the United States District Court for the Northern District of New York have found the language in other facultative certificates ambiguous, thereby precluding the entry of summary judgment. See Utica Mut. Ins. Co. v. Munich Reinsurance America Inc. ("Munich"), 594 Fed.Appx. 700 (2nd Cir. 2014); Utica Mut. Ins. Co. v. R & Q Reinsurance Co. ("R & Q"), 2015 WL 4254074 (N.D. N.Y. 2015).

         In Munich, the certificate explicitly stated the reinsurer "agrees to indemnify [the reinsured] against losses or damages … subject to the reinsurance limits shown in the Declarations[.]" Munich, supra, 594 Fed.Appx. at 703 (emphasis supplied and citation omitted). The certificate also included a later provision making the reinsurer "liable for its proportion of allocated loss expenses incurred by the [reinsured] in the same ratio that the Reinsurer's share of the settlement or judgment bears to the total amount[.]" Id.

         Based on the above provisions, the Munich Court found the language in the certificates was ambiguous as to whether or not the reinsurer was obligated to pay defense expenses in excess of the stated liability limits. On the one hand, the Court stated:

the Certificate can be read to exclude expenses from [the reinsurer's] $5 million limit of liability. The fact that [the reinsurer's] obligation to indemnify [the reinsured] against "losses or damages" is expressly made "subject to" the Certificate's limit of liability suggests that the parties intended to exclude [the reinsured's] liability for expenses-which is not expressly made "subject to" the limit of liability-from that limit.

Id. However, the Court also noted that while the "subject to" provision did not expressly include settlement payments, the reinsured "does not argue that the limit of liability excludes settlements." Id. Accordingly, the Court found "the Certificate is ambiguous as to whether its limit of liability includes expenses" and remanded for the district court's consideration of extrinsic evidence. Id.

         In doing so, the Court of Appeals specifically found the facts in Bellefonte, Unigard and Excess distinguishable. The Court opined:

In holding that the Certificate's limit of liability unambiguously includes expenses, the district court [herein] concluded that three prior decisions-two from this Court and one from the New York Court of Appeals-established a presumption that limits of liability in facultative reinsurance certificates are unambiguously expense-inclusive. But those decisions interpreted different policies than the one at issue in this case. The former two cases [Bellefonte and Unigard] turned on a provision in the policies at issue that expressly made all of the reinsurers' obligations "subject to" the limit of liability; they did not hold that a limit of liability, without such "subject to" language, is presumptively expense-inclusive. In the third case, Excess … the Court of Appeals arguably extended the rationale of our earlier decisions and suggested that a limit of liability, standing alone, is presumptively expense-inclusive because it serves to cap a reinsurer's total exposure (for losses and expenses) at a specific, negotiated amount. This presumption may best reflect the contracting parties' intentions in the mine run of cases, but in the reinsurance context as in any other, a party is bound by the terms to which it has agreed. And unlike the district court, we do not read Excess as holding that any presumption of expense-inclusiveness can be rebutted only through express language or a separate limit for expenses. As we have explained, the Certificate's statement that "losses or damages" are "subject to" the limit of liability reasonably implies that expenses are not. Although this negative implication is not strong enough-in the context of the Certificate as a whole-to demonstrate that expenses are unambiguously excluded from the limit of liability, we think it is sufficient to render the Certificate ambiguous, even in light of Excess.

Id. at 704 (emphasis supplied and internal citations omitted). Therefore, the Munich Court interpreted the certificate based on the language provided therein, and rejected the presumption created by the Excess Court that defense costs are capped by the liability limits unless they are explicitly excluded elsewhere in the certificate.

         In R & Q, supra, the District Court for the Northern District of New York considered whether defense costs were capped by the liability limits when the certificate at issue provided, inter alia: (1) the reinsurance was "subject to the terms hereon and the general conditions set forth on the reverse side hereof[;]" (2) the reinsurer agreed to indemnify the reinsured "against loss or damage … subject to the Reinsurance Accepted limits shown in the Declarations[;]" and (3) when a reinsured settles an underlying claim, should the reinsured's "policy limit include expenses, the Reinsurer's maximum amount of liability shall be as stated in Item 4, of the Declarations." R & Q, supra, 2015 WL 4254074, at *1-2.

         The R & Q Court first held the "subject to" clause at issue, while similar to the language in Bellefonte and Unigard, was nonetheless distinguishable. The Court explained:

The preamble in this case makes the reinsurer's obligations "subject to the terms hereon and the general conditions" of the Certificate. This "subject to" clause is, as R & Q argues, similar to those in Bellefonte and Unigard because one of the "terms hereon" is the amount of reinsurance accepted. But the "subject to" clause in this case does not unambiguously cap R & Q's liability for expenses to that policy limit because it does not expressly refer to the liability limit and, as set forth below, two of the conditions in the Certificate can be interpreted to support Utica's claim that R & Q is liable for expenses in excess of the policy limit.

Id. at *8 (emphasis in original).

         Next, the Court found that the R & Q certificate contained language nearly identical to that in Munich, by which the reinsurer agreed to indemnify the reinsured "against loss or damage … subject to the Reinsurance Accepted limits[.]" Id. at *9 (emphasis removed). The R & Q Court noted that, as in Munich, this language ...

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