Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc.

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

Submitted by Amy Piccola

Date Promulgated: December 4, 2014

Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., 594 Fed. Appx. 700 (2d Cir. 2014)

Court: U.S. Court of Appeals for the Second Circuit

Issue Decided: Whether reinsurer’s liability for expenses was subject to facultative reinsurance certificate’s liability limit.

Submitted By: Amy L. Piccola[1]


Key Holding

The U.S. Court of Appeals for the Second Circuit found that “[t]he fact that Munich’s obligation to indemnify Utica against ‘losses or damages’ is expressly made ‘subject to’ the Certificate’s limit of liability suggests that the parties intended to exclude Munich’s liability for expenses — which is not expressly made ‘subject to’ the limit of liability — from that limit.” However, the Court also stated that “Utica’s interpretation is not obviously correct” because Munich Re’s “liability for settlement payments is not expressly made ‘subject to’ the Certificate’s $5 million limit of liability, yet Utica does not argue that the limit of liability excludes settlements.”

The Court therefore concluded that the certificate was “ambiguous as to whether its limit of liability includes expenses” and remanded the matter to the District Court. The Court directed that on remand, extrinsic evidence must be considered in construing the certificate, and that further development of the record may be necessary

Key Takeaways

The Court of Appeals for the Second Circuit distinguished its earlier decision in Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co.[2], which established the oft-challenged rule that reinsurers may cap their losses under facultative certificates at the stated amount on the face of a certificate, as well as Unigard Security Insurance Co. v. North River Insurance Co.[3] and Excess Insurance Co., Ltd. v. Factory Mutual Insurance[4], later cases adopting Bellefonte.

According to the Second Circuit, Bellefonte and Unigard “turned on a provision in the policies at issue that expressly made all of the reinsurers’ obligations ‘subject to’ the limit of liability; they did not hold that a limit of liability, without such ‘subject to’ language, is presumptively expense-inclusive.”  The Court also explained that it did not read Excess Insurance “as holding that any presumption of expense-inclusiveness can be rebutted only through express language or a separate limit for expenses.”



[1]               Amy L. Piccola is an Associate in Saul Ewing LLP’s Insurance Practice Group.

[2]               903 F.2d 910 (2d Cir. 1990).

[3]               4 F.3d 1049 (2d Cir. July 31, 1993).

[4]               3 N.Y.3d 577 (N.Y. Ct. App. 2004).