Court of Appeals November Session: Arguments of Interest for November 15, 2017

The Court of Appeals’ November Session continues at Court of Appeals Hall on Wednesday, November 15, 2017 with four cases on the argument docket (the Court’s case summaries can be found here).

First up is a certified question from the Second Circuit Court of Appeals involving reinsurance agreements.  Particularly, the Court of Appeals will hear arguments on whether a per occurrence liability cap in a reinsurance contract limits the total reinsurance available under the contract to the amount of the cap regardless of whether the underlying policy is understood to cover expenses such as, for instance, defense costs. Next, the Court will hear arguments in a workers’ compensation case, asking whether the injured worker, who sustained a work-related injury and obtained a schedule loss of use award, was entitled to ongoing payments for litigation expenses incurred in an action against a third-party tortfeasor.

Finally, the Court will hear arguments in two cases that present the same issue: in a medical malpractice action, when does the statute of limitations begin to run when the theory is that the malpractice is “wrongful birth.” In those cases, the plaintiffs allege that a doctor who treated them for infertility negligently failed to test the egg donors for a chromosomal abnormality before birth, and both children were eventually born with the abnormality.  Does the claim for “wrongful birth” accrue when the doctor failed to do the test or when the children were born?

No. 124      Global Reinsurance Corporation of America v Century Indemnity Co.

In Global Reinsurance, Global issued reinsurance certificates to Century to reinsure insurance policies that Century had issued to Caterpillar Tractor Company.  After Caterpillar was sued in numerous cases relating to alleged exposure to asbestos in Caterpillar’s products, Century was obligated to pay for Caterpillar’s defense expenses in addition to paying up to the liability limits of its policies.  According to Global, Century has paid $60 million to Caterpillar and has agreed to pay $30.5 million more.  Of that amount, Global alleges that 10% is the actual liability loss and 90% is defense costs.

In this dispute, the parties each interpret the reinsurance certificate differently.  Global claims that its liability is capped by the total amount in the “Reinsurance Accepted” section of the certificate, which was intended to include both liability and expenses.  Century counters that the reinsurance cap applies only to the “loss” (e.g., settlement amount, judgment award), and that Global is liable to pay all expenses that exceed that amount.

The U.S. District Court for the Southern District of New York adopted Global’s interpretation, holding that the certificates unambiguously limited Global’s liability for both losses and expenses. See Glob. Reins. Corp. of Am. v. Century Indem. Co., No. 13 Civ. 06577, 2014 WL 4054260, at *4‐7 (S.D.N.Y. Aug. 15, 2014).

Noting that the Court of Appeals had not explicitly spoken on this issue, whether a liability cap in a reinsurance policy limits liability for both losses and expenses, the Second Circuit certified the question to the Court of Appeals.  Particularly, the Second Circuit certified this question:

Does the decision of the New York Court of Appeals in Excess Insurance Co.v. Factory Mutual Insurance Co., 3 N.Y.3d 577 (2004), impose either a rule of construction, or a strong presumption, that a per occurrence liability cap in a reinsurance contract limits the total reinsurance available under the contract to the amount of the cap regardless of whether the underlying policy is understood to cover expenses such as, for instance, defense costs?

The Second Circuit’s opinion can be found here.

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