Patton Boggs Reinsurance Newsletter - December 2012: New Jersey Federal Court Grants Partial Summary Judgment to Retrocedent, But Preserves Rescission Claim for Trial

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Munich Reinsurance Am., Inc. v. Am. Nat’l Ins. Co., No. 09:6435, 2012 WL 4475589 (D. N.J. Sept. 28, 2012).

In a complicated retrocessional dispute, the New Jersey federal court granted in part and denied in part the retrocedent’s motion for summary judgment and preserved the retrocessionaire’s rescission counterclaim for trial.  In its opinion, the court provides a nice basic primer on reinsurance and cites many articles and treatises written by reinsurance practitioners, including one footnote citation to an article written by this newsletter’s editor.

The dispute centers on the alleged failure of the retrocessionaire to pay under two of the retrocessional agreements.  The retrocessionaire alleges various counterclaims and seeks rescission based on misrepresentations it claims it uncovered during discovery.

The court construed the claims under New York law and first addressed the retrocessionaire’s rescission claim and whether the claim was asserted within a reasonable period of time.  After reviewing the facts, the court denied the retrocedent’s motion for summary judgment on the retrocessionaire’s rescission claim based on waiver.  The court also held neither party’s motion for summary judgment on the rescission claim was appropriate because of competing expert testimony.  The court also denied the retrocessionaire’s motion for summary judgment on late notice holding that the relevant language in the notice clause did not operate as a condition precedent, but held in favor of the retrocedent because the retrocessionaire was unable to carry its burden of demonstrating prejudice.

The court also ruled in favor of the retrocedent on the construction of the retention provision of the retrocessional contract.  The retrocedent claimed that the retention provision triggered the retrocedent’s obligation when both the retrocedent and the underlying ceded paid a cumulative total of $500,000 on each loss occurrence.  The retrocessionaire claimed that the underlying cedent’ payments did not count toward ultimate net loss.  The court found that the contract language was only susceptible to one reasonable interpretation and that extrinsic evidence supported that same conclusion.

Topics:  Breach of Contract, Reinsurance, Rescission, Summary Judgment

Published In: Civil Procedure Updates, General Business Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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