Munich Reinsurance Am., Inc. v. Am. Nat’l Ins. Co.
(D.N.J. Mar. 28, 2013)
On March 28, 2013, USDC Judge Freda L. Wolfson granted summary judgment in part on a motion for reconsideration of an earlier decision, but noted that with respect to certain retrocessional reinsurance claims there remain genuine issues of material fact. In the case, Munich Reinsurance America Inc. (Munich Re) reinsured the workers’ compensation insurance program of Everest National Insurance Co. (Everest) under an excess-of-loss reinsurance agreement. Munich Re then retrocessionally reinsured the Everest coverage with American National Insurance Co. (ANICO). Munich Re alleges that ANICO owes it $4,330,578.01 under the retrocessional agreements.
For the period of January 1, 1998 through December 31, 2001, Munich Re entered into a reinsurance relationship with Everest to reinsure Everest’s workers compensation insurance program under an excess of loss agreement. Munich was only liable for a portion of a claim exceeding the initial $250,000 attachment point and up to a limit of $750,000.
Munich Re next purchased an excess of loss retrocessional cover. American National Insurance Company (ANICO) was one of the retrocessionaires, and agreed to attach at the $500,000 level. The parties entered into two agreements for 2000 and 2001. The agreements provided that ANICO would indemnify Munich Re “for the amount of ultimate net loss…which may accrue to [Munich Re] as a result of loss or losses occurring during the term of [the] Agreement[s] as a result of [Munich Re’s] participating in the [Munich Re-Everest] Reinsurance Agreement….” The agreements further provided that ANICO indemnified Munich Re for “each and every accident or occurrence or series of accidents or occurrences arising out of one event….” It is this language which formed the basis for the dispute.
On December 22, 2009, Munich Re commenced the action against ANICO, alleging that ANICO owed Munich Re $4,330,578.01 under the retrocessional agreements that ANICO refused to pay. The District Court considered Munich Re’s motion for partial summary judgment on its claims for breach of contract and declaratory judgment and ANICO’s rescission claims as well as ANICO’s cross-motion for summary judgment.
First, the court determined that Munich Re was not entitled to summary judgment on ANICO’s rescission claim based on a theory of waiver. The court explained that Munich Re failed to establish that ANICO did not pursue rescission within a reasonable time of becoming aware of the facts supporting Munich Re’s alleged failure to disclose. The court also reasoned that competing expert reports and contradictory testimony as to the materiality of undisclosed information made summary judgment inappropriate for either party on the rescission claim.
Second, the court examined ANICO’s untimely claims submissions defense In its argument, ANICO pointed to the language of Article X of the retrocessional agreements, which stated, in pertinent part, “[t]he Company [Munich Re] agrees to advise the Reinsurer [ANICO] promptly of all claims coming under this Agreement on being advised by the Original Ceding Company, and to furnish the Reinsurer with such particulars and estimates regarding the same as are in the possession of the Company. An omission on the part of the [Munich Re] to advise the Reinsurer of any loss shall not be held to prejudice the [MunichRe]’s rights hereunder.” ANICO argued that Munich Re’s failure to immediately notify it of these claims absolved the retrocessionaire from its responsibility to pay the claims. The court determined that ANICO failed to demonstrate prejudice due toMunich’ Re’s untimely claims submission.
The court then examined the following provision: “[t]he Reinsurer agrees to pay the Company on demand, the Reinsurer’s proportion of all losses and/or loss expenses paid by the Company arising from the Underlying Agreement, including any and all expenses incurred directly by the Company in the litigation, defense and settlement of claims…” The court reasoned that the use of the terms “any” and “all” expressly covered each and every claim covered by the parties’ agreement, including the accidents that Munich Re contractually reserved at 50% of the reinsured attachment point. The court determined that under this language, Munich Re’s failure to timely advise ANICO of any claim was not a condition precedent impacting Munich Re’s right to receive payment. The court granted judgment in favor of Munich Re on this claim
Third, the court addressed the parties’ retention dispute. This argument hinged on the definition of the term “ultimate net loss” as set forth in the agreements. The agreements provided that ANICO would indemnify Munich Re “for the amount of ultimate net loss…which may accrue to [Munich Re] as a result of loss or losses occurring during the term of [the] Agreement[s] as a result of [Munich Re’s] participating…” Munich Re argued that it was only required to pay $250,000 before ANICO’s excess obligation was triggered, as Everest would have also paid $250,000, thereby raising the total to the $500,000 attachment point. ANICO argued that Munich Re alone was required to pay $500,000 before ANICO was obligated on the excess policy.
Judge Wolfson granted summary judgment in part to Munich Re on Sept. 28, 2012, and denied ANICO’s motion. ANICO moved for reconsideration on October 11, 2012, asking the court to reconsider its opinion with respect to ANICO’s arguments relating to claims reporting under the retrocession contracts and ANICO’s claim of prejudice as it relates to claims reporting. Accoridng to Judge Wolfson, “these agreements provide that ANICO will indemnify Munich for losses Munich sustains under the Munich-Everest reinsurance agreement as long as Munich gives ANICO notice of those claims in the manner directed by the Munich-ANICO agreements.”
The judge explained that “Article X of the agreements directs Munich to provide ANICO with notice of all workers’ compensation claims Munich receives from Everest and, for which, Munich intends to seek retrocessional cover from ANICO.” For its part, “Article XVI directs Munich to advise ANICO of all claims within seven years following the expiration of each agreement.” According to Judge Wolfson, “ANICO is not obligated to pay those claims not noticed within this seven-year period, which the parties refer to as the ‘sunset’ period.” And indeed, according to ANICO, several of Munich’s claims were not noticed in this seven year period” the judge found.
Additionally, “ANICO contends: (a) that the Court failed to fully consider the applicability of Article XVI of the parties’ 2000 and 2001 agreements in connection with ANICO’s crossmotion for summary judgment on its untimely claim submission defense; and (b) with respect to Article X of the parties’ agreements, that the Court erred in granting summary judgment on ANICO’s prejudice defense to Munich’s untimely claim submissions.” Ultimately, Judge Wolfson granted ANICO’s motion for reconsideration of Article XVI, and vacated its grant of summary judgment toMunichon the untimely claim submission defense regarding the 2000 and 2001 claims submitted after December 31, 2007 and December 31, 2008, respectively. As for the 2000 claims, the Judge granted summary judgment to ANICO. With regard to the 2001 claims, the Judge denied summary judgment to both parties, finding that there is a genuine issue of material fact that precludes summary judgment.