New York Federal Court Grants Reinsurer’s Motion for Summary Judgment and Dismisses Action

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Seneca Ins. Co. v. Everest Reinsurance Co., No. 11 Civ. 7846 (BF), 2013 U.S. Dist. LEXIS 151594 (S.D.N.Y. Oct. 17, 2013).

A New York federal court granted summary judgment to a reinsurer and dismissed the cedent’s case for breach of contract.  The cedent filed an action for breach of contract against a reinsurer after the reinsurer denied coverage to the cedent.  The case concerned an adverse verdict from a retaliation employment suit against a corporation to whom the cedent provided coverage.  The suit resulted in the cedent having to pay $4.91 million in damages, including attorney fees, and $2.43 million in interest.  Important to the dispute was the reinsurance certificate, which specified a $5 million threshold that would trigger the reinsurer’s obligations to pay for loss and other expenses. 

In response to the cedent’s request for payment, the reinsurer denied coverage on various grounds, but material to the issue before the court was simply whether the $5 million threshold was satisfied. The case boiled down to the question of whether the interest amounts ($2.43 million) were properly considered “loss” or “interest on a judgment” under the reinsurance certificate.  Finding the latter, the court concluded that the judgment “loss” was $4.91 million, which fell just short of the $5 million loss threshold that would have triggered the reinsurer’s obligation to pay.  As a matter of law, the court found no genuine issue of material fact existed as to whether the $2.43 million in interest was not considered a “loss” under the reinsurance certificate.  Accordingly, the loss did not amount to the $5 million requirement needed in order for the reinsurer’s obligations to take effect.

Granting summary judgment in favor of the reinsurer, the court held that the reinsurer did not breach the reinsurance contract when it denied coverage.