LAWRENCE E. KAHN, District Judge.
In this reinsurance-coverage dispute, Plaintiff, insurer Utica Mutual Insurance
Utica is incorporated under the laws of, and has a principal place of business in, New York. Dkt Nos. 22-10 ("SMF") ¶ 1; 28-1 ("SMF Response") ¶ 1. Goulds manufactured pumps that allegedly incorporated asbestos. SMF ¶ 5; SMF Resp. ¶ 5. In 1973, Goulds was based in New York. SMF ¶ 5; SMF Resp. ¶ 5. Utica issued a number of insurance policies to Goulds, among which was an umbrella liability policy ("Umbrella Policy") running from July 1, 1973 to July 1, 1974. SMF ¶ 6; SMF Resp. ¶ 6. The Umbrella Policy has a liability limit of $25 million "per occurrence or in the aggregate." SMF ¶¶ 7-8; SMF Resp. ¶¶ 7-8. Utica entered into a facultative contract of reinsurance
Numerous asbestos-related bodily injury claims have been asserted against Goulds. SMF ¶ 5; SMF Resp. ¶ 5. In 2006 or 2007, Goulds and Utica reached, following litigation, a settlement agreement regarding Goulds' claims for coverage under the Umbrella Policy and other policies. SMF ¶ 17; SMF Resp. ¶ 17. Utica has been paying a portion of Goulds' losses and defense costs pursuant to this settlement agreement. SMF ¶ 20; SMF Resp.¶ 20.
Munich has, pursuant to the Certificate, reimbursed Utica for five-million dollars of loss and expense payments made by Utica to Goulds under the Umbrella Policy. SMF ¶ 21; SMF Resp. ¶ 21.
Utica filed the Complaint in January 2012. Compl. At the initial pretrial conference in July 2012, Munich advised that it would be filing an early motion for summary judgment. Text Order of July 25, 2012. The Honorable Andrew T. Baxter, U.S. Magistrate Judge, authorized a limited period of discovery that could be extended following the Court's ruling on
Rule 56 of the Federal Rules of Civil Procedure instructs a court to grant summary judgment if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). Although "[f]actual disputes that are irrelevant or unnecessary" will not preclude summary judgment, "summary judgment will not lie if ... the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir.1991).
The party seeking summary judgment bears the burden of informing the court of the basis for the motion and of identifying those portions of the record that the moving party claims will demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party shows that there is no genuine dispute as to any material fact, the burden shifts to the nonmoving party to demonstrate "the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. This requires the nonmoving party to do "more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
At the same time, a court must resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000); Nora Beverages, Inc. v. Perrier Grp. of Am., Inc., 164 F.3d 736, 742 (2d Cir.1998). A court's duty in reviewing a motion for summary judgment is "carefully limited" to finding genuine disputes of fact, "not to deciding them." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1224 (2d Cir.1994).
Federal Rule of Civil Procedure 56(d) provides that, if a party opposing a summary judgment motion demonstrates that "for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order." The party opposing summary judgment must identify "potentially discoverable evidence" that might raise an issue
Both parties acknowledge that: (1) the Certificate requires Munich to reimburse Utica for expense payments; (2) the Certificate has a five million-dollar limit of liability; and (3) Munich has already reimbursed Utica for five-million dollars of losses and expenses. This dispute centers on whether Munich's expense payments are subject to the limit of liability or whether Munich is obligated to pay for expenses in excess of that limit. Munich contends that the limit of liability is expense-inclusive. See SJ Mem. at 15-20.
Utica attached a two-page document to its Complaint. Dkt. No. 1-3 ("Document"). The first of the Document contains "declarations," Dkt. No. 1-1 at 2
Utica cannot now controvert what it has effectively admitted. Utica attached the Document, including the Conditions Page, to the Complaint; treated the Document as accurate, and relied upon it throughout the Complaint. In the Complaint, Utica states that Munich and Utica "entered into a reinsurance agreement ... (`the Certificate'). A copy of the Certificate provided by Munich Re is attached as Exhibit 1." Compl. ¶ 10 (emphasis added). Utica now argues that it "merely stated that the documents attached to the complaint were documents that [Munich] provided to Utica." Dkt. No. 57 ("Continue Reply") at 5. But Utica did more than
Munich has provided additional admissible evidence that the Document is an accurate version of the Certificate. In a supplemental affidavit filed in response to Utica's Motion to Strike, Hill states that he is responsible for handling reinsurance claims from Utica, that he has reviewed the underwriting file for the Certificate on "more than one occasion," that he is "familiar" with the documents contained in that file, and that those documents are maintained by Munich "in the regular course of its business as a reinsurance company." Dkt. No. 44 ("Hill Response Affidavit") ¶ 4.
Utica's arguments regarding the possibility that another conditions page was a part of the Certificate might, if considered, create a genuine dispute of material fact or necessitate additional discovery. See SJ Resp. at 25-26. However, Utica is bound by its admission. As a result, the only evidence in the record indicates that the Document is a copy of the Certificate. Munich has therefore demonstrated an absence of a genuine dispute of material fact regarding the Certificate's terms.
The Certificate does not include a choice-of-law provision.
"It is well settled that New York has long recognized the use of center of gravity or grouping of contacts as the appropriate analytical approach to choice of law questions in contract cases." In re
Munich asserts that New York law indisputably governs interpretation of the Certificate; Utica contends that either New Jersey or Connecticut law may be applicable. See SJ Resp. at 28-29; SJ Reply at 19. While the analysis is not as clear-cut as Munich contends, the Court nonetheless concludes that there is sufficient evidence to conclude that New York law should apply and that Utica need not be granted further discovery on this issue.
The undisputed evidence demonstrates that the Utica "part" of every relevant factor weighs in favor of New York. Utica admits in the Complaint that it resides in New York and "at all relevant times, ... was a New York corporation with a principal place of business in New York." Compl. ¶ 1. Utica has presented affirmative evidence indicating that it negotiated the Certificate, and requested that it issue, from New York. See Dkt. No. 22-5. As to performance of the Certificate, there is uncontroverted evidence that Utica has requested payment from, and received payment in, New York. See Dkt. No. 43-1; Nat'l Union Fire Ins. Co. of Pittsburgh v. The Travelers Indemnity Co., 210 F.Supp.2d 479, 484 (S.D.N.Y.2002) (finding that, where reinsured seeking recovery under reinsurance contract was a New York corporation, and payment would therefore be made to reinsured in New York, New York had the greatest interest in outcome of action); Callon Petroleum Co. v. Nat'l Indem. Co., No. 06-CV-0573, 2009 WL 2707304, at *3 (E.D.N.Y. Aug. 24, 2009) (noting that "it is fair" to find that the place of contract performance is the reinsured's domicile). Utica argues that the subject matter of the Certificate is its payments to Goulds under the Umbrella Policy, which were made in many different states. SJ Resp. at 29 n. 16. Utica admits, however, that Goulds was "based" out of New York when the Umbrella Policy issued. SMF Resp. ¶ 5. Where liability insurance applies to risks in multiple states, the principal place of business of the insured has the greatest interest in those payments. See In re Liquidation, 923 N.Y.S.2d 396, 947 N.E.2d at 1179. Thus, New York is the state with the greatest interest in Utica's payments to Goulds. Finally as noted supra, Utica has and had a principal place of business and place of incorporation in New York.
Utica has offered no evidence that its role in any of the relevant factors extended beyond New York — it has not shown, for example, that it signed or agreed to the Certificate in another state or that Munich's payments were received in another state. If such evidence existed, it would be in Utica's possession. Utica therefore cannot defeat the SJ Motion by asserting a need for discovery of such evidence. See Pedraza v. Alameda Unified Sch. Dist., No. C 05-4977, 2011 WL 5025121, at *2 (N.D.Cal. Oct. 20, 2011) ("[Plaintiffs] could have countered with evidence in their own possession.... They failed to do so"); Santiago v. Lloyd, 33 F.Supp.2d 99, 105 (D.P.R.1998) ("The Court is not persuaded by [p]laintiffs' request for `discovery' regarding
In contrast to the evidence of its wholly New York connections, Utica has proved too much by demonstrating that a number of states have some contacts with Munich's "part" of the choice-of-law factors. The Court must find the one state with the "most significant relationship to the transaction and the parties." In re Liquidation, 923 N.Y.S.2d 396, 947 N.E.2d at 1178 (emphasis added). Utica has shown that Munich's contacts are divided among New Jersey, Connecticut, and Delaware: Utica offers evidence that the Munich employee responsible for negotiating and issuing the Certificate was located in Connecticut; that Munich has performed under the contract by reviewing Utica's billings in, and making payment from, New Jersey; and that Munich is incorporated in Delaware and New Jersey. See SJ Resp. at 28-29.
The Court is therefore convinced that, even if further discovery revealed additional Munich connections to Connecticut or New Jersey, Munich's multi-state connections would be insufficient to overcome Utica's exclusively New York connections.
Under New York law, interpretation of a contract is a legal question for the court to decide. Int'l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 83 (2d Cir.2002) (citing K. Bell & Assocs. Inc. v. Lloyd's Underwriters, 97 F.3d 632, 637 (2d Cir.1996)). "[A] written contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed." Cruden v. Bank of N.Y., 957 F.2d 961, 976 (2d Cir.1992). "Where ... the contract is clear and unambiguous on its face, the intent of the parties must be gleaned from within the four corners of the instrument, and not from extrinsic evidence." Rainbow v. Swisher, 72 N.Y.2d 106, 531 N.Y.S.2d 775, 527 N.E.2d 258, 258 (1988). "Contract language is ambiguous if it is `capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.'" Am. Home Assur. Co. v. Hapag Lloyd Container Linie, GmbH, 446 F.3d 313, 316 (2d Cir.2006) (quoting Lightfoot v. Union Carbide Corp., 110 F.3d 898, 906 (2d Cir.1997)). Unlike liability insurance policies, reinsurance contracts are not construed against the drafter. See British Int'l Ins. Co. Ltd. v. Seguros La Republica, S.A., 342 F.3d 78, 81-82 (2d Cir.2003).
Munich contends that, under three controlling cases, the Certificate's five-million dollar limit of liability unambiguously covers expenses. SJ Mem. at 15-19; SJ Reply at 20-22. Utica responds
In Bellefonte Reins. Co. v. Aetna Cas. & Sur. Co., 903 F.2d 910 (2d Cir.1990), Unigard Sec. Ins. Co., Inc. v. N. River Ins. Co. (Unigard II), 4 F.3d 1049 (2d Cir.1993), and Excess Ins. Co. Ltd. v. Factory Mut. Ins. Co., 3 N.Y.3d 577, 789 N.Y.S.2d 461, 822 N.E.2d 768 (2004), certificate limit-of-liability provisions silent as to whether they were expense-inclusive or — exclusive were deemed to be unambiguously expense-inclusive. Of particular note, Excess Insurance held that a certificate may exempt expenses from its limit of liability "by expressly stating that the defense costs [a]re excluded from the indemnification limit.... Failing this, ... reinsurers [a]re entitled to rely on the policy limit as setting their maximum risk exposure." 789 N.Y.S.2d 461, 822 N.E.2d at 772 (emphasis added).
The limit-of-liability provision in the Certificate is also silent as to its cost inclusiveness:
Doc. at 1. "[The] Court is bound ... by decisions by the New York Court of Appeals and the Court of Appeals for the Second Circuit." Cowen & Co. v. Tecnoconsult Holdings Ltd., No. 96 CIV. 3748, 1996 WL 391884, at *4 n. 3 (S.D.N.Y. Jul. 11, 1996). The Court therefore presumes that the Certificate's limit-of-liability provision is unambiguously cost-inclusive. Utica argues, however, that other provisions in the Certificate render Bellefonte, Unigard II, and Excess Insurance inapposite and demonstrate that the Certificate's limit of liability is cost-exclusive or, at the very least, ambiguous. SJ Resp. at 30-35.
Utica first argues that the Certificate's limit of liability, when read in conjunction with other provisions on the Declarations page, is "tied directly" to the Umbrella Policy's limit of liability. SJ Resp. Mem. at 30. It therefore argues that, because the Umbrella Policy's limit excludes expenses,
Doc. at 1. However, the Second Circuit and the New York Court of Appeals have implicitly rejected Utica's interpretation in finding that similarly worded certificate limits of liability do not incorporate the cost-exclusiveness of their respective reinsured policies' limits of liability. The limit of liability of the certificate as issue in Unigard II was described as a portion of the reinsured policy's limit of liability: "$5,000,000 each occurrence and in the aggregate part of the $30 million coverage under [the reinsured policy]." Unigard Sec. Ins. Co., Inc. v. N. River Ins. Co. ("Unigard I"), 762 F.Supp. 566, 571 (S.D.N.Y.1991). The certificate also contained an explicit "follow the form" clause stating the reinsurer's liability was to be "subject in all respects to the terms and conditions of the [reinsured policy]." Unigard II, 4 F.3d at 1055. The reinsured policy's limit of liability had been deemed cost-exclusive. See id. at 1071; Unigard I, 762 F.Supp. at 594. The district court therefore found that the certificate "incorporated by reference" this aspect of the reinsured policy's limit of liability and ordered the reinsurer to pay expenses in excess of the certificate's limit of liability. Unigard I, 762 F.Supp. at 594. The Second Circuit reversed, holding that the reinsured's obligation to pay for expenses above the reinsured policy's limit did not "alter the terms" of the certificate and its limit of liability. Unigard II, 4 F.3d at 1071.
In Bellefonte, decided three years earlier, the same interpretive approach was taken. The reinsured policy's limit was five-million dollars, $500,000 of which was reinsured by the reinsurer. 903 F.2d at 912. The certificate again described the certificate's limit of liability as a portion of the reinsured policy's limit of liability, noting that the "Reinsurance Accepted" was "$500,000 part of $5,000,000." Id. As in this case, the certificate further provided that the reinsured was to retain the unreinsured portion of the reinsured policy's limit of liability. Id. There was substantial evidence that the reinsured policy's limit of liability was cost-exclusive: the insured had sued the reinsured for expenses in excess of the limits of liability, and the reinsured had agreed to pay expenses in excess of those limits. Id. at 911. Nevertheless, the Second Circuit did not even consider the reinsured policy's limit of liability, instead holding that the certificate's limit of liability was a "cap on all payments under the certificate." Id. at 913.
The New York Court of Appeals also ignored the reinsured policy's limit of liability in Excess Insurance, in which a $7,000,000 portion of a $13,5000,000 policy was reinsured. 789 N.Y.S.2d 461, 822 N.E.2d at 769; see id., 789 N.Y.S.2d 461, 822 N.E.2d at 773 (Read, J., dissenting). Again, the certificate's limit of liability was described as a portion of the reinsured policy's limit of liability: "Limit: US$ 7,000,00 any one occurrence [part of] US$ 13,500,00 any one occurrence...." Id., 789 N.Y.S.2d 461, 822 N.E.2d at 769 (majority opinion). Moreover, as in Unigard,
Utica has not argued that the Certificate's and Umbrella Policy's respective limits of liability in this case are more closely "tied" to each other than the respective certificates' and reinsured policies' limits of liability in Unigard II, Bellefonte, and Excess Ins. Co. The Court discerns no meaningful distinction. If anything, the inclusion of a follow-the-form clause in the Unigard II and Excess Insurance certificates — a clause that is not present in the Certificate here — indicates a closer relationship. Utica's citation to the Second Circuit's summary order in Travelers Casualty & Surety Co. v. ACE American Reinsurance Co., 201 Fed.Appx. 40 (2d Cir.2006) is unavailing for exactly this reason. In Travelers, the certificate included a follow-the-form clause stating that "the terms and conditions of liability of the [c]ertificate[] shall `follow' those of the [p]olic[y], except as otherwise specifically provided.'" Id., 201 Fed.Appx. at 41. This clause therefore established a presumption that the terms in the certificate would be defined identically to the terms in the reinsured policy. Id. Because the certificate described the reinsured's liability under the reinsured policy and the reinsurer's liability under the certificate using identical terms, the court held that the certificate had not "otherwise specifically provide[d]" that the latter should be interpreted differently than the former. Id. Here, there was no such follow-the-form clause, and therefore no explicit presumption that terms used in the Certificate must be given the same meaning as they are in the Umbrella Policy. Moreover, even if the Certificate did contain such a clause, it would not avail Utica. Bellefonte and Mutual Insurance included such a clause and involved the exact issue here: the cost-inclusiveness of a limit of liability. Nevertheless, the reinsured policies' limits of liability were not relied upon in defining the certificates' limits of liability. Travelers, however, involved a different issue: the proper definition for a specific term describing the time period to which the limit of liability applied. See id. at 41. Bellefonte and Mutual Insurance, as directly on-point authorities, must be followed. The Court therefore determines that the Certificate's limit of liability provision does not adopt the purported cost-exclusion of the Umbrella Policy's limit of liability.
Both Bellefonte and Unigard II involved a reinsurance certificate that explicitly subjected the entire reinsurance agreement to the limit of liability. See Bellefonte, 903 F.2d at 911; Unigard II, 4 F.3d at 1071. In this case, there is no such broad "subject to" language appearing at the beginning of the Certificate. The Certificate states at the top of the Declarations Page that reinsurance is provided "SUBJECT TO THE GENERAL CONDITIONS SET FORTH ON THE REVERSE SIDE." The limit of liability, however, appears on the Declarations Page — the same side as this "subject to" language. Thus, neither the overall provision of reinsurance nor liability for expenses is explicitly "subject to" the limit of liability. But the absence of broad "subject to" language is not determinative. Utica correctly notes that Bellefonte and Unigard II "relied heavily" on "subject to"
Utica's strongest argument is that the Certificate, by omission, excludes expenses from the limit of liability. SJ Resp. at 31-32. The first three conditions of the Certificate are as follows:
Conditions Page (emphasis added). Utica correctly notes that the first condition explicitly subjects Munich's payment of "losses or damages" to the limit of liability, while the third condition does not so subject Munich's payment of "allocated loss expenses." Resp. Mem. at 31. It therefore reasons that, by implication, only losses or damages, rather than expense payments, are subject to the limit of liability. Id. But, as noted supra, the New York Court of Appeals has held that where there is a limit-of-liability clause, a certificate exempts expenses from that clause "by expressly stating that the defense costs [a]re excluded from the indemnification limit.... Failing this, ... reinsurers [a]re entitled to rely on the policy limit as setting their maximum risk exposure." Excess Insurance, 789 N.Y.S.2d 461, 822 N.E.2d at 772. The Certificate's omission of language subjecting expenses to the limit of liability, even when contrasted with its inclusion of language so subjecting losses, does not constitute the requisite "express" statement of exclusion. See BLACK'S LAW DICTIONARY (9th ed.2009) (defining "express" as "[c]learly and unmistakably communicated; directly stated").
Moreover, not only does the Certificate fail to expressly exclude expenses from the limit of liability, it affirmatively indicates that the limit of liability is applicable to expenses: the limit is described as a "limit of liability," as opposed to, e.g., a "limit of loss," while the third condition states the that Munich "shall be liable for its proportion of allocated loss expenses."
The Certificate's second condition, which covers Munich's liability for settlement
Utica cites Aetna Casualty and Surety Co. v. Home Insurance Co., No. 89 Civ. 7043, 1992 WL 321631 (S.D.N.Y. Oct. 30, 1992), in support of its exclusion-by-implication argument. However, Aetna was decided twelve years before Excess Insurance and its pronouncement of an "express statement" standard for limit-of-liability cost-exclusiveness. Moreover, the certificate at issue in Aetna contained language arguably constituting such an express statement. The conditions page subjected "ultimate net loss payments" to the limit of liability. Aetna, 1992 WL 321631, at *2. "Ultimate net loss" was then explicitly defined to exclude expenses. Id. The court therefore deemed the agreement ambiguous as to the limit's application to expenses, noting that the "clear exclusion of expenses from the dollar limitations" distinguished the certificate from the certificate at issue in Bellefonte. Id. There is no such clear exclusion here. The Certificate, like the Aetna certificate, explicitly subjects loss payments to the limit of liability. But unlike the Aetna certificate, the Certificate does not define the "losses" so subjected, let alone explicitly define those losses to exclude expenses.
The Court therefore determines that the Certificate's limit of liability unambiguously applies to expenses.
Utica argues that, even if the Certificate is not facially ambiguous, evidence of custom and practice should be considered in its interpretation. SJ Resp. Mem. at 36 n. 18. The weight of authority is against Utica's contention. "Under New York law, evidence of custom or practice may be admissible only if the agreement is
Finally, Utica argues that Munich has waived its cost-inclusive argument by previously paying Utica for expenses above the Certificate's limit of liability. See SJ Resp. at 60. But "[Utica] has overlooked a major limitation of the waiver doctrine. As New York courts have explained, the waiver doctrine is inapplicable if `the issue is the existence or nonexistence of coverage.'" Nat'l Union Fire Ins. Co., 210 F.Supp.2d 479, 485 (quoting Albert J. Schiff Assoc., Inc. v. Flack, 73 A.D.2d 329, 425 N.Y.S.2d 612, 618 (1980)). Here, Munich argues that the Certificate does not cover the expenses at issue. This argument cannot be waived.
Accordingly, it is hereby:
Employers Insurance is also inapposite. At issue was whether costs expended by the reinsured in defending against a declaratory judgment action by the insured were included in the certificate's coverage of expenses. 256 F.Supp.2d at 924-25. The court determined that they were and ordered the reinsurer to pay those costs — costs which, when combined with moneys the reinsurer had already expended, exceeded the reinsurance limits in the certificate. Id. at 925-26. But whether expenses were subject to that limit was not at issue or discussed in any way. See generally id. The case therefore sheds little light on the issue before the Court.
