“REINSURANCE ACCEPTED” CLAUSE INTERPRETED TO DEFINE MAXIMUM EXPOSURE, INCLUDING EXPENSES
A court has found that a reinsurer’s (Global Reinsurance Corporation of America) maximum exposure under a facultative certificate is $1 million dollars, inclusive of expenses. The issue raised in the case by the parties’ cross-motions for judgment on the pleadings was whether expenses are subject to the $1 million limit stated in the certificate’s “Reinsurance Accepted” section. The reinsured (Pacific Employers Insurance Company) alleged the $1 million cap did not apply to the expenses, and requested that the court find that as a matter of law that Global was obligated for up to $1 million of loss and, in addition thereto, a pro rata share of expenses. In turn, Global sought a declaration that the cap is the maximum Pacific Employers could potentially recover. The “Reinsurance Accepted” section stated: “$1,000,000 ANY ONE OCCURRENCE AND IN THE AGGREGATE[.]” Examining the certificate’s plain language, the court found that this section’s “broad and unambiguous language” encompassed expenses because it defined Global’s maximum exposure. The section did not differentiate between reinsurance accepted for “losses” versus reinsurance accepted for “expenses,” but simply provided a total cap on liability for loss payments, expense payments, or any combination thereof. Pacific Employers Insurance Co. v. Global Reinsurance Corp. of America, Case No. 09-6055 (USDC E.D. Pa. Apr. 23, 2010).
This post written by Brian Perryman.
