Pacific Employers Ins. Co. v. Global Reins. Corp. of America

Issue Discussed: DJ Expenses / Costs within or in Addition to Limits

Submitted by Amy Kline*

Date Promulgated: April 23, 2010

Pacific Employers Ins. Co. v. Global Reins. Corp. of America, No. 09-6055, 2010 WL 1659760

(E.D. Pa. Apr. 23, 2010)

Court:  United States District Court for the Eastern District of Pennsylvania

Issue Decided: Whether a cedent’s expenses are recoverable from its reinsurer in excess of the amount stated in the reinsurance certificate’s limit clause.

Key Holding              

Identifying Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co.[2] as “well-reasoned and persuasive authority,” the Eastern District of Pennsylvania dismissed the cedent’s claim for expenses in excess of the stated limits of the reinsurance certificate. In so holding, the court found the certificate to be unambiguous. In particular, the court looked to the preamble paragraph, “which is applicable to all paragraphs of the “Reinsuring Agreements and Conditions” page” that stated: “In consideration … of the premium, and subject to the terms, conditions and limits of liability set forth herein and in the Declarations made apart thereof, the Reinsurer does hereby reinsure the ceding company named in the Declarations . . . in respect of the Company’s policy(ies) as follows.” According to the court, the reinsurance obligations are “subject to” the “limits of liability.”

Key Takeaways

Pacific Employers reaffirms the “Bellefonte Rule” that a reinsurer’s liability is limited to the stated limits on the certificate.

*Amy Kline is a Vice-Chair of the Litigation Department and a Partner in the Insurance Practice Group of Saul Ewing LLP, resident in Philadelphia, Pennsylvania.

[2]               Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co., 903 F.2d 910 (2d Cir. 1990).