Munich Reinsurance Am., Inc. v. Am. NataEUR(TM)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 workersaEUR(TM) 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 EverestaEUR(TM)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 aEURoefor the amount of ultimate net lossaEUR|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 ReaEUR(TM)s] participating in the [Munich Re-Everest] Reinsurance AgreementaEUR|.aEUR? The agreements further provided that ANICO indemnified Munich Re for aEURoeeach and every accident or occurrence or series of accidents or occurrences arising out of one eventaEUR|.aEUR? 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 ReaEUR(TM)s motion for partial summary judgment on its claims for breach of contract and declaratory judgment and ANICOaEUR(TM)s rescission claims as well as ANICOaEUR(TM)s cross-motion for summary judgment. First, the court determined that Munich Re was not entitled to summary judgment on ANICOaEUR(TM)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 ReaEUR(TM)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 ANICOaEUR(TM)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, aEURoe[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]aEUR(TM)s rights hereunder.aEUR? ANICO argued that Munich ReaEUR(TM)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 toMunichaEUR(TM) ReaEUR(TM)s untimely claims submission. The court then examined the following provision: aEURoe[t]he Reinsurer agrees to pay the Company on demand, the ReinsureraEUR(TM)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 claimsaEUR|aEUR? The court reasoned that the use of the terms aEURoeanyaEUR? and aEURoeallaEUR? expressly covered each and every claim covered by the partiesaEUR(TM) agreement, including the accidents that Munich Re contractually reserved at 50% of the reinsured attachment point. The court determined that under this language, Munich ReaEUR(TM)s failure to timely advise ANICO of any claim was not a condition precedent impacting Munich ReaEUR(TM)s right to receive payment. The court granted judgment in favor of Munich Re on this claim Third, the court addressed the partiesaEUR(TM) retention dispute. This argument hinged on the definition of the term aEURoeultimate net lossaEUR? as set forth in the agreements. The agreements provided that ANICO would indemnify Munich Re aEURoefor the amount of ultimate net lossaEUR|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 ReaEUR(TM)s] participatingaEUR|aEUR? Munich Re argued that it was only required to pay $250,000 before ANICOaEUR(TM)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.