Ace Prop. & Cas. Ins. Co. v. R & Q Reinsurance Co.
(Pa. C.P. May 15, 2012)
The Pennsylvania Court of Common Pleas was asked to interpret the meaning of the terms “loss” and “expense” in multiple reinsurance certificates issued by defendant, a reinsurance company (hereinafter “reinsurer”), to plaintiff, a property and casualty insurance company (hereinafter “insurer”). The reinsurer argued that the term “loss”, which is not defined in the reinsurance certificates, means indemnity only. The insurer, on the other hand, argued that the meanings of the words were set forth in the underlying policies for which the reinsurer provided reinsurance, and that the definition therein included indemnity and expense.
The case involved a specific type of reinsurance, called facultative reinsurance, which is reinsurance for all or part of a single policy. Under all underlying insurance policies at issue in this case, for which the insurer purchased reinsurance, the insured was sued by claimants alleging asbestos bodily injury and, in each case, the insured under each policy entered into a funding agreement with the insurer respecting the payment of such claims. Pursuant to facultative certificates, the insurer submitted proofs of these losses to the reinsurer and sought payment for said losses as well as a declaration ensuring future payments. The refused to pay the proofs of loss, claiming that under an “excess of loss” facultative certificate, “loss” means indemnity only. The insurer argued that the meaning of “loss” is limited to indemnity only under circumstances in which the facultative certificate is “non-concurrent”. However, “loss” can mean indemnity and expense in other circumstances, such as under an “excess of loss” facultative certificate.
The court determined that the insurer was entitled to summary judgment as a matter of law because there was no genuine issue of material fact. The liability of the reinsurer followed that of the insurer in the eyes of the court. Because the reinsurer had copies of the underlying insurance policies, or at the very least had access to them, it was imputed with knowledge of the terms of those policies. The facultative certificates at issue were “excess of loss,” as agreed upon by the contracting parties, and therefore the definition of “loss” included defense and expense costs in addition to indemnity.
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