Utica Mut. Ins. Co. v. R&Q Reinsurance Co.

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

Submitted by Amy Kline

Date Promulgated: June 4, 2015

Utica Mut. Ins. Co. v. R&Q Reinsurance Co., No. 6:13-cv-1332, 2015 WL 4254074 (N.D.N.Y. June 4, 2015)

Court: United States District Court of the Northern District of New York

Issue Decided: Whether expenses arising from a separate lawsuit are included in a reinsurer’s maximum liability as stated in a reinsurance certificate.

Key Holding              

The U.S. District Court for the Northern District of New York distinguished Bellefonte and Unigard and held that the reinsurer could be held liable for expenses in excess of the stated limit of the facultative certificate because the certificate was ambiguous with respect to whether expenses were subject to the policy limit. While the certificate at issue contained “subject to” language, the court reasoned that the clause, which was in the certificate’s preamble, made the reinsurance “subject to” the terms and conditions, rather than “subject to” the reinsurer’s amount of liability. The court also looked to a provision that was not considered in Bellefonte or Unigard that provided, “however, should the [reinsured’s] policy limit include expenses, the Reinsurer’s maximum limit of liability shall be as stated in Item 4, of the Declaration [i.e. $1 million].”  Applying the doctrine of expression unius est exclusion alterious, which states when certain persons or categories are specified in a contract, an intention to exclude all others may be inferred, the court concluded that because the certificate sets forth one particular instance in which the reinsurer’s liability limit included expenses, by implication its liability limit does not include expenses in other instances.  Because the certificate was ambiguous, the court held that extrinsic evidence was necessary to interpret its terms.

Key Takeaways

Utica may signal an increasing willingness on the part of courts to distinguish Bellefonte and Unigard based upon specific language in the certificate at issue, to find that a certificate is ambiguous and to allow the parties to rely upon extrinsic evidence to prove the meaning of the agreement.

[1]               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.