Catlin Speciality Insurance v. QA3 Financial Corp.
36 F. Supp. 3d 336
S.D.N.Y.2014Background
- Catlin Specialty Insurance sued QA3 for a declaratory judgment about the scope and limit of insurance coverage; QA3 counterclaimed for breach of contract (bad faith counterclaim was earlier dismissed).
- The court previously denied summary judgment to both sides, finding policy language ambiguous and allowing a jury trial based on extrinsic evidence (emails, prior policy drafts, witness testimony).
- At the charging conference QA3 asked for jury instructions applying contra proferentem and a heightened burden on Catlin to show exclusions were "clear and unmistakable." The court refused both requested instructions.
- The jury found for Catlin, concluding the applicable aggregate limit was $1,000,000; QA3 moved for a new trial and to amend the judgment under Rules 59/59(e).
- The court denied the new-trial and Rule 59(e) motions, holding that (1) because extrinsic evidence was presented the jury properly resolved intent and contra proferentem was inapplicable, (2) the requested heightened-burden instruction was merely a restatement of contra proferentem and therefore inappropriate at trial, and (3) Catlin’s voluntary withdrawal of a claim and the Rule 50 ruling given QA3 mooted any need to amend the judgment.
Issues
| Issue | Plaintiff's Argument (Catlin) | Defendant's Argument (QA3) | Held |
|---|---|---|---|
| Whether the court should instruct the jury to apply contra proferentem | Contra proferentem not necessary where jury resolves ambiguity using extrinsic evidence; parties negotiated terms | Policy ambiguous; ambiguous provisions should be construed against drafter (Catlin) via contra proferentem | Refused: because meaningful extrinsic evidence was presented and QA3 was a sophisticated negotiator, contra proferentem was inapplicable |
| Whether insurer must meet a heightened burden ("clear and unmistakable" / "only reasonable interpretation") to prove an exclusion | Insurer need only prove its interpretation is correct by a preponderance when extrinsic evidence is presented | Insurer must show exclusion is stated in clear and unmistakable language and is the only reasonable interpretation | Refused: the heightened-burden instruction is a restatement of contra proferentem and not appropriate where extrinsic evidence goes to the jury; preponderance standard sufficed |
| Whether the judgment should be amended under Rule 59(e) to address counts withdrawn or decided at trial | Original judgment already afforded the relief obtained at trial; Catlin’s voluntary withdrawal and Rule 50 ruling produced preclusive effect | QA3 sought amendment to modify disposition of withdrawn Count III | Denied: trial rulings and withdrawal provided the parties the relief they were entitled to; no amendment necessary |
Key Cases Cited
- Greenfield v. Philles Records, 98 N.Y.2d 562 (court determines contract interpretation seeks parties' intent)
- State v. Home Indem. Co., 66 N.Y.2d 669 (extrinsic evidence permits fact-finder to resolve ambiguity; contra proferentem is last resort)
- Morgan Stanley Grp. v. New England Ins. Co., 225 F.3d 270 (2d Cir.) (contra proferentem applied only after extrinsic evidence fails to resolve intent)
- Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304 (exclusions must be in clear and unmistakable language)
- Parks Real Estate Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33 (2d Cir.) (insurer’s burden at trial is to prove its interpretation is correct when extrinsic evidence exists)