Lead Opinion
Two of the respondents in receivership proceedings have appealed from an order entered by the Circuit Court for Leon County denying their petition for a priority as to certain reinsurance proceeds.
The basic question presented for our determination in this appeal is whether that court erred in such denial in view of the appellants’ contention that the reinsurance contrаct was for their benefit as the original insureds.
The appellants, Imperial Polk Leathers, Inc., and Saddle Creek Properties, Inc., both hereinafter referred to as “Imperial,” were among the groups оf respondents which were subscribers of the Florida Insurance Exchange, an insolvent domestic reciprocal insurer, had been ordered into receivership, with the appellee-relator, the Treasurer and ex officio Insurance Commissioner, being appointed as the receiver. The receiver filed a petition for instructions, and Imperial filed the petition first mentioned above for affirmative relief аsserting a priority to certain reinsurance proceeds. In the order appealed from herein the court, among other things, denied the appellants’ petition.
The pertinent facts established by the evidence and a stipulation entered into by the parties are as follows:
Imperial asked an insurance agency to secure fire insurance coverage for its
On August 4, 1966, a fire occurred at the premises of Imperial, and the Exchange and Imperial agreed to a total fire loss of $333,030.66. Proofs of claim were timely filed.
Prior to the receivership of the Exchange, Llоyds, a reinsurer, paid the Exchange under its fire treaty $75,873.02 for the fire loss incurred by Imperial, and another reinsurer paid the Exchange under its facultative reinsurance contract $55,-973.70 for the fire loss incurred by Imperiаl. No part of this reinsurance money was ever turned over to Imperial by the Exchange. ■ No part of Imperial’s fire loss has ever been paid.
This court in McDonough Construction Corp. v. Pan American Surety Co.,
In this appeal, however, Imperial contends that the courts have recognized three exceptions to the foregoing principle: (1) where the reinsurer binds itself to the terms and conditions of the original contract; (2) where the reinsurer binds itself to assume complete liability for the original policies; and (3) where, by special agreement between the original insured and its insurer, reinsurance is made a condition of the original policy.
Upon a consideration of the authorities, we have reached the conclusion that the first exception to the above general principle which we recognized in the McDon-ough case, supra, is a valid exception to that principle in Florida. This case, as to that exception, makes this, we conclude from our research on the point, a casе of first impression in Florida.
In support of its contention that such an exception should be recognized in the case at bar, the appellant cites and relies upon the decision of the Alabamа Supreme Court in United States Fire Ins. Co. v. Hecht,
Our independеnt legal research, however, shows that there is a split of authority as to this proposition. After full consideration of the conflicting authorities, we have concluded that the three cases relied uрon by the appellant represent the better view and more nearly coincide with our concepts of justice under law.
Among the decisions from jurisdictions other than Alabama and Missouri recognizing what we consider to be the better view are Hunt v. New Hampshire Fire Underwriters Assoc.,
In the case at bar two certificates of reinsurance contained this provision:
In our opinion, the above-quoted provisions of the reinsurance agreements bring this case squarely within the rule recognized in the Hecht, Homan, and Higgins cases, supra, as an exception to the general principle which we recognized in the McDonough case, supra. Accordingly, wе think that the Circuit Court committed reversible error in denying the appellants’ petition for a priority as to the reinsurance proceeds.
Therefore, the order appealed from herein must be, and it is, reversed and the cause is remanded with instructions for further proceedings consistent with the views set forth above.
Reversed and remanded with directions.
Dissenting Opinion
(dissenting).
I sincerely regret my inability to agree with the majority opinion of my esteemed colleaguеs.
The trial court found from the evidence, and I agree, that the contracts of reinsurance involved in this case were not procured at the insistence of appellant insureds as a condition of placing their insurance with the insolvent insurer. The reinsurance contracts between the insurer and the reinsurers were procured solely for the protection of the insurer, and to indemnify it against any loss it may subsequently sustain for the liability incurred by it under insurance policies issued to appellant insureds.
In McDonough Construction Corporation v. Pan American Surety Company
The majority opinion holds that under the better reasoned decisions rendered by courts of other jurisdictions, an exception to the general rule pronounced in Mc-Donough should be appliеd in resolving the question presented in this appeal. It bases its conclusion upon the decisions rendered by the Supreme Court of Alabama in United States Fire Insurance Company v. Hecht,
The majority opinion concludes that the language of the reinsurance agreement which provides that “the reinsurers’ liability shall be subject to the same risks, valuations, endorsements, assignments, and conditions as the original insurance with loss, if any, to be settled and paid pro rata with the reinsured at the same time and place and upon the same terms and conditions,” subjects the reinsurers to liability in a direct action brought by the insureds, and entitled the insureds to the prоceeds of the reinsurance agreement applicable to their policies. It is my interpretation of the foregoing language that its purpose, intent and legal effect are to fix the meаsure of the reinsureds’ liability to the insurer, and do not convert the reinsurance agreement into a contract of indemnity against liability for the claims of policyholders. This is the conclusion reached by the Supreme Court of Ohio in Stickel v. Excess Insurance Company of America,
I would affirm the judgment appealed.
Notes
. McDonough Construction Corporation v. Pan American Surety Company (Fla.App.1966)
. United States Fire Insurance Company v. Hecht (1935),
. Homan v. Employers Reinsurance Corporation (1940),
. First National Bank of Kansas City v. Higgins (Mo.1962),
. Stickel v. Excess Insurance Company of America (1939),
See also Thompson, Reinsurance, Chap. 11, pp. 311-312.