Princeton Insurance Co. v. Converium Reinsurance (North America) Inc.
(Third Circuit, September 14, 2009)
In Princeton Insurance Company v. Converium Reinsurance (North America) Inc., the cedent and reinsurer entered into a treaty regarding workers’ compensation and employer’s liability policies. The treaty provided reinsurance for claims exceeding $1 million. The treaty included a warranty which provided that the cedent “warrants that the maximum Employer’s Liability limits are as follows, or so deemed: i. Bodily Injury by Accident – $100,000 each accident.”
The treaty covered New York policies. The cedent issued a New York policy with a $100,000 employer’s liability limit. Unbeknowst to the cedent, however, in New York limits in employer’s liability coverage are unenforceable, and the insurer must provide unlimited coverage. New York also allows common law indemnification claims against an injured plaintiff’s employer where the plaintiff is “gravely injured.” Such common law indemnification claims are covered by employer’s liability insurance. A “grave injury” claim arose against one of the cedent’s insureds, and the cedent settled the claim for $4.4 million. It sought reimbursement from its reinsurer. The reinsurer denied, and suit followed. At the summary judgment stage, the district court granted summary judgment to the cedent on the basis that the treaty unambiguously covered losses above $1 million. The Third Circuit held that such an interpretation failed to give meaning to the “deemer” language.
The reinsurer asserted that the employer’s liability limits, for purposes of the reinsurance treaty, were “deemed” to be $100,000, and therefore well under the $1 million threshold. The cedent argued that it complied with the warranty – the face of the policy included a $100,000 limit – but since it was unenforceable, it did not violate the warranty. The cedent argued that the inclusion of the policy limits in the warranty rendered the treaty ambiguous, and that if the parties intended a blanket limit on the reinsurance employer’s liability coverage, it would have done so expressly. The reinsurer argued that the “deemer” applied, and that the employer’s liability policy was deemed to have $100,000 limits.
The Third Circuit credited both interpretations as possible, and found the provision ambiguous, rendering summary judgment unavailable. It remanded the matter to district court.
For a copy of the decision, click here
By Sarah J. Delaney and Jeffrey L. Kingsley