OneBeacon Ins. Co. v. Aviva Ins. Ltd., No. 10-7498, 2013 U.S. Dist. LEXIS 70212 (E.D. Pa. May 17, 2013).
A Pennsylvania federal court granted partial summary judgment to a reinsurer on statute of limitations grounds, but denied summary judgment based on genuine issues of material fact on a number of issues. This case involves successor entities dealing with delays in claims cessions under a contract that was never finalized between a U.S. cedent and a U.K. reinsurer. Changes in billing practices were challenged and the parties also entered into a tolling agreement covering certain “catch-up” billings for delayed claims. Ultimately, the cedent terminated the tolling agreement and brought suit to recover various billings.
In deciding the cross-motions for summary judgment, the court focused on the core issue of the statute of limitations. Everyone agreed that the limitations period was four years, but neither could agree on when the limitations period commenced. Because the court found, based on the parties’ stipulation, that the reinsurance agreement (which was never formalized in writing) conditioned the reinsurer’s payment of reinsurance billings, the court held that the statute of limitations ran from the performance of that condition (here, the submission of a claims bordereau). Thus, bordereaux submitted more than four years before the cedent commenced the lawsuit and not subject to the tolling agreement were barred by the statute of limitations.
As to the bordereaux that were the subject of the tolling agreement, the court held that there was a genuine dispute of material fact as to whether the cedent’s delay in billing was reasonable and whether those billings fell within the exception provided for in the agreed-upon errors and omissions clause of the reinsurance agreement.
The court also denied summary judgment on a certain category claims that the cedent argued was controlled by the agreed-upon follow-the-fortunes clause. The dispute was whether the claims were handled in a reasonable fashion or whether the claims handling violated the cedent’s duty of utmost good faith. The court found that there was a genuine dispute of material fact as to whether those claims fell within the follow-the-fortunes clause.
The cedent also disputed the reinsurer’s imposition of additional documentation requirements to validate a billing. The court also found a genuine dispute of material fact as to whether the parties agreed to modify their contract to reflect this additional documentation requirement.