Century Indemnity Co. v. OneBeacon Insurance Co.
173 A.3d 784
Pa. Super. Ct.2017Background
- In 1983–84 Century’s predecessor and PEIC issued umbrella liability policies (covering defense costs in addition to limits) and procured facultative reinsurance certificates from OneBeacon’s predecessor for specific layers; each certificate listed a “Reinsurance Accepted” dollar amount.
- Certificates used identical printed language: a front-page preamble stating the reinsurance is “in consideration of the payment of the premium and subject to the general conditions set forth on the reverse side hereof,” Sections I–IV (with Section IV showing the Reinsurance Accepted limit), and nine general conditions on the reverse.
- Relevant reverse provisions included (1) a “following form” clause (reinsurer’s liability shall follow the company and be subject to the company’s policy terms), (3) an “in addition thereto” clause (reinsurer pays its proportion of losses and, in addition thereto, its proportion of expenses), and (4) prompt payment after receipt of proof of loss.
- Century/PEIC paid large asbestos defense sums and sued OneBeacon when OneBeacon paid only up to the Reinsurance Accepted limits and refused amounts above those caps for defense expenses.
- The trial court denied OneBeacon’s summary judgment (finding the certificate ambiguous re: whether the Reinsurance Accepted cap included defense expenses), allowed extrinsic evidence on industry custom, awarded damages to Century/PEIC (multimillion-dollar verdict) and prejudgment interest; OneBeacon appealed.
Issues
| Issue | Plaintiff's Argument (Century/PEIC) | Defendant's Argument (OneBeacon) | Held |
|---|---|---|---|
| Whether the facultative certificates unambiguously cap OneBeacon’s liability (losses and defense expenses) at the “Reinsurance Accepted” amount | Certificates ambiguous; reinsurance should follow underlying policy (which covered defense costs in addition to limits), so reinsurer must cover defense expenses in excess of the Reinsurance Accepted amount; extrinsic evidence on industry custom supports that view | Certificate language is unambiguous and cost-inclusive: the Reinsurance Accepted amount is the reinsurer’s total liability (losses and expenses); Bellefonte and progeny control | Court found the certificates ambiguous as to whether defense expenses are capped; summary judgment for OneBeacon denied |
| Admissibility/weight of extrinsic evidence (industry custom, underwriter testimony, expert testimony) | Industry custom and underwriters’ testimony show intent/concurrency; expert Hall’s custom-and-usage testimony supports Century/PEIC | OneBeacon contended the extrinsic evidence was inadmissible or unpersuasive (witnesses lacked independent recollection; expert merely offered legal interpretation) | Trial court permissibly considered extrinsic evidence; appellate court found ample evidentiary support and no abuse of discretion |
| Collateral estoppel from prior federal rulings (Global decisions) | N/A (OneBeacon argued prior federal rulings preclude relitigation) | OneBeacon: prior district-court rulings holding similar certificates cost-inclusive (capping expenses) bind Century/PEIC | Collateral estoppel rejected: prior cases differ on certificate wording and several rulings were not final (some reversed or certified to higher courts), so preclusion improper |
| Prejudgment interest and damages calculations (whether OneBeacon’s prompt-payment duty was triggered earlier) | Proofs of loss were sufficiently definite; OneBeacon had ability to calculate amounts and thus owed prejudgment interest from earlier dates | OneBeacon argued billing irregularities and withheld documentation meant it could not ascertain amounts until later (thus no earlier interest) | Court awarded prejudgment interest; appellate review found no abuse of discretion and evidence supported damages and interest awards |
Key Cases Cited
- Bellefonte Reinsurance Co. v. Aetna Cas. & Sur. Co., 903 F.2d 910 (2d Cir.) (reinsurance certificates construed to cap reinsurer liability at stated amount; "in addition thereto" does not exempt expenses from overall cap)
- Unigard Sec. Ins. Co. v. North River Ins. Co., 4 F.3d 1049 (2d Cir.) (followed Bellefonte; subject-to clause limits reinsurer exposure to stated amount)
- Excess Ins. Co. Ltd. v. Factory Mut. Ins. Co., 822 N.E.2d 768 (N.Y. 2004) (reinsurer not liable for loss-adjustment expenses beyond stated per-occurrence limit)
- Pacific Employers Ins. Co. v. Global Reinsurance Corp. of Am., 693 F.3d 417 (3d Cir.) (reversed district-court resolution on other grounds and deemed expense-cap issue moot on appeal)
- TruServ Corp. v. Morgan's Tool & Supply Co., 39 A.3d 253 (Pa.) (adoption of Restatement §354 principles for prejudgment interest in contract cases)