890 F.3d 74
2d Cir.2018Background
- Century Indemnity (reinsured) sought reimbursement from reinsurer Global Reinsurance under facultative reinsurance certificates for losses and related expenses (e.g., defense costs).
- The Southern District of New York granted summary judgment for Global, reading the certificates to cap Global’s liability at the stated per-occurrence dollar limit for loss and expenses combined.
- The district court relied on this court’s prior decisions in Bellefonte and Unigard in finding the contract language unambiguous.
- On appeal, the Second Circuit expressed uncertainty about whether New York law (particularly Excess Insurance Co. v. Factory Mutual) imposed a rule or presumption that a per-occurrence limit caps all reinsurer obligations, and certified that question to the New York Court of Appeals.
- The New York Court of Appeals held that Excess does not create a rule or presumption that a per-occurrence liability cap necessarily caps all reinsurer obligations (including defense costs), and emphasized that reinsurance contracts must be interpreted using ordinary contract principles and the contract language itself.
- The Second Circuit vacated the district court’s judgment and remanded for reconsideration of the contract terms under standard New York contract-interpretation principles.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a per-occurrence liability cap in a reinsurance certificate necessarily limits total reinsurer liability to that cap (including defense costs) | Century: cap should not automatically include defense costs; contract language and industry practice could allow reimbursement beyond the cap | Global: the stated per-occurrence dollar amount is the maximum payable for loss and expenses combined | New York Court of Appeals: No rule or presumption that a per-occurrence cap caps all obligations; courts must interpret the contract language and context |
| Whether Bellefonte/Unigard control interpretation here | Century: prior law shouldn’t foreclose contract-specific interpretation or industry usage evidence | Global: Bellefonte/Unigard support treating certificate limits as inclusive caps | Second Circuit: Bellefonte/Unigard were persuasive but New York law requires contract-by-contract interpretation; district reliance on those cases was erroneous without applying New York’s principles |
| Whether Excess created a general rule of construction | Century: Excess does not mandate that caps include defense costs; interpretation depends on language | Global: (implicit) Excess supports treating limits as capping total liability | New York Court of Appeals: Excess did not impose a rule or strong presumption; standard contract rules apply |
| Proper next step after guidance from NY Court of Appeals | Century: remand to interpret contract terms and consider evidence of meaning/context | Global: maintain summary judgment result as contract is unambiguous | Second Circuit: vacated and remanded for the district court to construe the specific contract language under New York law |
Key Cases Cited
- Bellefonte Reins. Co. v. Aetna Cas. & Sur. Co., 903 F.2d 910 (2d Cir. 1990) (treated certificate language as limiting reinsurer liability to stated amount)
- Unigard Sec. Ins. Co. v. North River Ins. Co., 4 F.3d 1049 (2d Cir. 1993) (related precedent on interpreting reinsurance limits)
- Excess Ins. Co. v. Factory Mut. Ins. Co., 3 N.Y.3d 577 (N.Y. 2004) (addressed interpretation of reinsurance caps; did not create a universal rule)
- Global Reins. Corp. of Am. v. Century Indem. Co., 843 F.3d 120 (2d Cir. 2016) (Second Circuit opinion that certified question to NY Court of Appeals)
- Global Reins. Corp. of Am. v. Century Indem. Co., 30 N.Y.3d 508 (N.Y. 2017) (New York Court of Appeals: no rule presuming per-occurrence cap includes defense costs; interpret contract language)