2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

12-4-2009 

# S amuel H eym an v

. N ew Y ork P rop e r ty/C a s ualty Ins
P r e c e de nt i al or N on-P r e c e de nt i al : P r e c e de nt i al D ocke t N o . 07-2510

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2009 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin
. C arl s on@l a

w . vi ll anova . e du

. Re c omme nde d C it at ion

" S amue l H eym an v

. N ew Y ork P r ope r ty/C as ualty In s " (2009). 2009 D e cisio n s . P ape r 13. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/13P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

N o. 07- 2510

G- I HOL DI NGS , I NC

. ; S AM UE L J

. HE YM AN, A p p e llan ts

v. R E L IA N C E IN S U R A N C E C O M P A N Y ; GR E AT AM E RI CA N I NS UR ANC E CO M P ANY; H A R T F O R D F IR E IN S U R A N C E C O M P A N Y ; NEW Y ORK PR OPE RTY/ CAS UALTY I NSURANCE

S E C U R IT Y F U N D ; NEW J ERS EY P ROP ERT Y- LI ABI LI TY I NSURANCE

G U A R A N T Y A S S O C IA T IO N ; T WI N C I T Y F I RE I NS UR ANC E CO M P ANY

A p p ea l from the U n it ed S tat es D istri ct C o u rt fort he D i s t r i ctof N ew J er s ey ( D

. C

. C i vi l A ct i on N o. 00- cv- 06189) D i s t r i ctJ udge: H onor abl e D enni s M

. C avana ugh2 A r gued J anuary29, 2009 B e f o re : S C IR IC A , C h ie f

J u d g e , A M B R O , and SM I T H , C i r cui tJ udges ( O pi ni on fi l ed: O ct ober26, 2009) A nt honyB ar t el l , E s qui r e M cC art er & E ng l i sh 1 0 0 M u lb e rryS tre e t FourG at ew ayC ent er N ew ark, N J 07102- 0652

S teph an G

. W eil , E sq u ir e J er ol d O s hi ns ky , E s qui r e ( A r gued) D icks tei n S h ap ir o 1 8 2 5 E y e S t r e e t , N

. W. W as hi ngt on, D C 20006- 0000 C o u n se l f

o r A p p e llan ts A rno ld R

. G erst, E sq u ir e B rad M

. W eintrau b , E sq u ir e W ei nerL es ni ak 629 Par s i ppanyR oad P. O

. B ox 438 Par s i ppany , N J 07054- 0438 L aw r ence J

. B i s t any , E s qui r e ( A r gued) C elesti n e M

. M o n tagu e, E sq u ir eWe u s e t h i s s a me t e r m t o r e f e rt o G- I ’ s p r e d e c e s s o r , GAF 1 C orpor at i on, t o w hi ch G

- I s ucce eded i n 2000. F o r c o n v e n ien c e , all re f e re n c e s to H a rtf

o rd in c lu d e T w in 2 C i t y F i r e I n s u r a n c e C o m p a n y. 3 W h i t e & W i l l i a ms 1800 O ne Li ber t yPl ace Phi l adel phi a, PA 19103- 0000 C ouns el forA ppel l ees

OPI NI ON O F THE COURT

A M B R O , C i r cui tJ udge G

- I H ol di n g s, I nc. ( “G

- I ”) pur chas ed fr om R el i ance 1 Insu ran ce C o m p an ya p o li cyco v er i ng claim s m ad e a g ains t G -I’ s d ire c to rs a n d o f

f ice rs b e tw e e n Ju ly1 9 9 9 a n d Ju ly2 0 0 2 . S h o rtly aft ert he pol i cyw as i s s ued, R el i anc e enc ount er ed fi nanci al di ffi cul t i es . I n t he s um m erof 2000, H art for d Fi r e I ns ur ance C om pany t ook over cl ai m s admi ni s t r at i on for R el i ance .

2 H ar t for d als o as s um ed s om e of Rel i ance ’ s l i abi l i t i es and r ei ns ur ed otherof thos e l i abi l i t i es goi ng forw ard. T o pr ot ect itse lf a g a in st R e lian c e ’s im p e n d in g in s o lv e n c y , G -I s p litits i ni t i al R el i ance pol i cyw i t h H art for d, keepi ng cover age for cl a i ms ma d e u p t o J u l y 1 5 , 2 0 0 0 wi t h Re l i a n c e a n d s hi ft i ng4 cover age f

ort he r emai ni n g per i od ( J ul y15, 2000 t o J ul y1, 2002) t o a new H ar t for d pol i cy . R el i ance w enti nt o l i qui dat i on a n d G -I s o u g h t co v e ra g e f o r th re e f ra u d u len t c o n v e y a n c e su its agai ns tSam uel J

. H eym an, i t s C E O , ch airm an of i t s B oar d of D i rect ors and con t rol l i ng shareholder

. T he fi rs t of tho se su its w as br oughtdur i ng the amended R el i ance cover age pe r i od, w hi l e the ot her t w o w er e brought dur i ng t he H art for d cover age p e rio d . U n d e r th e p o licie s’ ter m s, b e c a u se a ll th re e su its re late t o t he s ame al l egedl yfr audul entconv ey ance , thei rfi l i ng dat es r el at e bac k t o the dat e of the fi r s ts ui t( and thus fal l w i t hi n t he R eli an ce co v era g e p eriod ).
G

- I fi l ed a cl ai m forcover age i n R el i ance ’ s l i qui dat i on. B u t it a lso su e d H a rtf

o rd , a rg u in g b o th th a t H a rtf o rd w a s lia b le under t he pol i cy i t had i s s ued t o G

- I ( des pi t e t he fact that the fi r s ts ui t , t o w hi ch the othert w o r el at e bac k, w as fi l ed dur i ng the R eli an ce p o lic yp eriod ), an d that H artfo rd w as li ab le t o G -I undert he R el i ance pol i cybeca us e agr eement s H art for d ent er ed into w ith R eli an c e m ad e H artfo rd re sp o n sible fo r R eli an ce ’s co v era g e o b li g ati o n s. In a d d it ion , G -I co n tend ed that H artfo rd w as barr ed by j udi ci al es t oppel fr om ar gui ng thatt he s ui t s fi l ed dur i ng i t s pol i cyper i od r el at ed back t o t he s ui tfi l ed dur i ng the R el i ance pol i cyper i od becau se, in an e ar l i ers t age of t he l i t i gat i on, H ar t for d had t aken a pos i t i on atodds w i t h that arg um ent
. I n gr ant i ng H art for d’ s m ot i on fors um m ary j ud gm ent, t he D i stri ctC ou rtrejec t ed all of these content i on s. W e d o s o a s we l l , a n d th u s a f f i r m.Th e Uni t e d St a t e s Di s t r i c t Cou r t f o r t h e So u t h er n D i s t r i ct 3 of N ew Y or k and t he S upr eme C our t of t he St at e of N ew Y or k, 5 I . F ACT S AND P ROCE DURAL HI S TORY
I n February2000, G

- I boug h t an i ns ur ance pol i cyfr om R el i ance t hatcover ed l i abi l i t yar i s i ng outof cl ai m s m ade by t hi r d par t i es agai ns tG

- I ’ s di r ect or s and off i cer s ( i ncl udi ng H eym an) betw ee n J ul y1, 1999 and J ul y1, 2002. T he pol i cy i ncl uded an “ i nt err el at ed w r ongful act s ” pr ovi s i on, s t at i ng that t he fi l i ng dat e of a l l s ui t s ar i s i ng fr om the s ame w r ongful act w oul d be the dat e on w hi ch th e fir s ts uch s ui tw as fi l ed. T he cover age l i m i tw as $15 m i l l i on. G

- I appea r s t o h av e p ai d a p re m iu m o f

$ 1 8 5 ,0 0 0

. I n 1997, fac i ng m or e than $200 mi l l i o n in e xi s t i ng as bes t os l i abi l i tyand the pr os pectof hundr eds of thous ands of futur e cl ai m s , G

- I di s t r i but ed t o H eym an the s t ock of a p ro f itab le s u b sid iar y . A s ex p e c ted , a sb e sto s cla im a n ts or th e ir repr esent at i ves fi l ed fraud ule n t conv ey ance a ct i on s agai nst H eym an and G

- I : t hes e w er e fi l ed on ( 1) J anuary3, 2000 byan i nj ur ed empl oy ee s eeki ng cl as s cert i fi cat ion ( t he “N ett l es a c t i o n ” ) ; ( 2 ) S e p t e mb e r1 9 , 2 0 0 0 b yth e Cent e rf o rCl a i ms R e so lu tio n , a n o n -p ro f

it en tityc re a ted b y a sb e sto s d e f e n d a n ts to pay cl ai m s ( t he “C C R act i on”) ; and ( 3) Sept ember17, 2001 by t he O ffi ci al C om m i t t ee of A s bes t os C l ai m ant s i n G

- I ’ s C hapt er 11 bankrupt cy cas e fi l ed i n 2001 ( t he “C l ai m ant s C o m m i t t ee ac ti o n ”). 3venues fort he N et t l es and C C R act i ons r es pect i vel y , pl ace d t hos e ac t i ons on hol d i n 2001 pendi ng r es ol ut i on of m at er i al par t s of G

- I ’ s bankrupt cycas e. M ar s h & M cLennan C om pani es i s a pr ofes s i onal s ervi ces 4 f ir m . M a rs h is its in s u ra n c e b ro k e ra g e b u s in e s s . See Ov e r v i e w: T h e Bu s i n e s s e s o f M M C , ht tp: //w w w . m m c. com/ about/ i ndex. php ( l as tvi s it ed O ct
. 21, 2 0 0 9 ). T h is n e w p o licyw a s is su e d b ya H a rtf o rd su b sid iar y , T w in 5 C ityF ire In su ra n c e C o m p a n y . Fo r c o n v e n ien c e , w e re f e r sim p ly to H artfo rd a s the issue r. 6 In e arly2 0 0 0 , R e lia n ce w as in fin an cial trou b le. In sum m er and fal l 20 00 , pu rs uan t t o an A ssetP u rc hase Ag r e e me n t , a Qu o t a S h a r e Re i n s u r a n c e Ag r e e me n ta n d t wo C l ai m s Ser vi ci ng A gr eeme n ts, H art for d acqui r ed r enew al and o th e r ri g h ts t o , a n d b e c a m e a re in su re r an d se rv ice r of , c e r tain R e lian c e p o licie s. In Ju ly2 0 0 0 , af ter R e lia n c e ’s r a tin g f

e ll b elow the m inim u m fi n an cial gu idelines fo r i n su rers set b yG -I’ s insu ran ce b rok er, M arsh , G -I’ s ri sk m an ag er (R o b ert F lug g er) 4 as ked M ar s h t o arr ange f orG

- I t o acq u ir e a di r ect or s and offi cer s i ns ur ance pol i cyfr om H art for d. R el i ance change d t he cover age t erm i nat i on dat e of i t s pol i cyt o J ul y15, 2000 fr om J ul y1, 2002, and H ar t for d i s s ued G

- I an i dent i cal pol i cy w i t h a per i od of Jul y15, 2000 t o J ul y1, 2002. A n endor s ementt o t he 5 H ar t for d p o li cy li m i t ed the s um of cove r age unde ri tand the amended R el i ance pol i cyt o $15 m i l l i on. A s partof theF o r th e rem ai nderof thi s opi ni on, w e r efe rt o G

- I and 6 H e ym a n c o lle c tiv e ly as “ G -I .” T he pr ocedur al hi s t oryi s compl ex. A ft erR el i ance deni ed 7 cover age of the N et t l es and C C R cl ai m s , G

- I s ued R el i ance and its e x c e ss in s u r e r , G re a t A m e ric a n In su ra n c e C o m p a n y , in N ovember2000 i n N ew J er s eys tat e cour t
. G

- I di d notadd 7 t r ans act i on, R el i anc e r efunde d, and H art for d r ece i ved, $ 1 5 3 ,9 3 5 .1 8 in p re m iu m s . I n s um , t her e w er e now t w o pol i ci es : t he ame n d ed R el i ance pol i cy , w hi ch cove r ed cl ai m s m ade be t w een J ul y1, 1999 and J ul y15, 2000; and the H art for d pol i cy , w hi ch cove r ed cl ai m s m ade be t w een J ul y15, 2000 and J ul y1, 2002. T he N et t l es ac t i on fi l i ng dat e fa l l s w i t hi n the amended R el i ance pol i cyper i od and the C C R and C l ai m ant s C om m itt ee f i l i ng dat es fal l w i t hi n t he H art for d pol i cy per i od. B utbeca us e of the i nt err el at ed w r ongful act s pr ovisi o ns i n bot h the amended R el i ance and H ar t fo rd p o li ci es , the fi l i ng dat e of the C C R and C l ai m ant s C om m i t t ee a ct i ons r el at e bac k t o the fi l i ng dat e of the N et t l es act i on, pl aci ng t hem out s i de t he H art for d pol i cyper i od and w i t hi n t he amended R el i ance pol i cyper i od.
G

- I and H eym an s oughtcover age f orthe thr ee 6 fra u d u lent co n v ey an ce ac ti o n s. A P en n sy lvan ia st ate c o u rt or der ed the l i qui dat i on of R el i ance i n O ct ober2001, and G

- I has ag ree d to pu rsue co v era g e fro m R eli an ce in tha t pro ce ed ing

. In 7H ar t for d as a def endantunt i l A ugus t2001 beca us e, acc or di ng t o G

- I , i tw as unaw ar e of the agr eement s betw een R el i ance and H ar t for d, had nots een the H art for d pol i cy , an d di d notknow t hatt he amended R el i ance pol i cy m oved up t he cover age pe r i od end dat e fro m Ju l y2002 t o J ul y2000. R el i ance r emoved t he act i on t o t he U ni t ed St at es D i s t r i ctC our tfort he D i s t r i ctof N ew J er s ey . T hat act i on w as s ubs equent l y di s m i s s ed and r efi l ed by G

- I i n t he B ankrupt cy C our ts upervi s i ng i t s bankrupt cy . I n M ay 2002, t he B ankrupt cyC our tr efe r red thi s non- cor e pr ocee di ng b a c k to the D i stri ctC ou rt
. Itst ay ed G -I ’s cl ai m s agai nst R el i ance. I n 200 4, t he D i stri ct C ou rtdis m i ssed cl ai m s agai nst t he ex cess i nsurer(G reatA m eri can) w i t ho ut pr ej ud i ce bec ause G -I h a d n o t e x h a u s te d its ri g h ts a g a in s t R e lia n c e . I n A ugus t2004, G

- I added a s defe ndant s the N ew J er s ey 8 Pr ope rty - Li ab i l i tyI n s u r a n c e Gua r a n t e e As s o ci at i on and the N ew Y or k Pr oper t y/ C as ual t yI ns ur ance Secur i t y Fund. T he D i s t r i ct C our tdi s m i s s ed the cl ai m s agai ns tt he form erw i t houtpr ej udi ce i n D ece m ber2006 beca us e r ecove r yagai ns ti tdepende d on re so lu tio n o f

c o v e ra g e iss u e s p e n d in g a g a in st R e lian c e in P e n n sy lv a n ia. In D e c e m b e r 2 0 0 8 , the p a rties stip u late d to di s m i s s al w i t houtpr ej udi ce of G

- I ’ s cl ai m s and thi s appea l as agai ns tt he l at t er . C l ai m s agai ns tt hes e i ns ur er s ar e t her efor e not 8 this case , G -I see k s co v era g e f rom H artfo rd. T h e D istri ct C o u rt i n 2004 deni ed mot i on s b y G -I fors um m aryj udgm entand by H artfo r d fordi s m i s s al

. I n J une 2006, G

- I agai n m oved for s um m aryj udgm entand H art for d di d so as w el l

. T he D i s t r i ct C o u rt th e n g ran ted H artfo rd’s m o ti o n an d d en ied th at of G -I, w hich now app eal s. 8b e f o re u s o n a p p e a l. 9 I I . J URI S DI CTI ON AND S TANDA RD O F REVI EW
T h e D istric t C o u rt h a d d iv e rsityju risd ictio n p u rsu a n t to 2 8 U .S .C . § 1 3 3 2 a n d w e h a v e ju r is d ic tio n u n d e r 2 8 U .S .C . § 1291. W e exe r ci s e pl enaryr evi ew of an or dergr ant i ng s u m m a ry ju d g m e n t. G o n z a l ezv . A MR , 549 F. 3d 219, 223 ( 3d C i r . 2008)

. Sum m aryj udgm enti s appr opr i at e if ther e ar e no genui ne i s s ues of m at er i al fac tand the movi ng part yi s ent i t l ed to ju d g m e n t a s a m a tte r o f l a w . I d. “[ T ]o su rviv e su m m ary j ud g m en t . .
. [, ] a non[- ] m ovantm us tpr es ents uffi ci ent ev iden c e to all o w a re aso n ab le j u ryto f ind in [ it s] fa v o r. ” Sover ei gn B ank v. B J’s W

hol es al e C l ub , 533 F. 3d 162, 172 ( 3d C i r . 2 0 0 8 ) ( i n t e r n a l b r a c k e t s a n d q u o t a t i o n m a r k s o m i t t e d )

. We m ake ourvi ew of the evi dence and i nfer ence s t her efr o m as f a v o ra b le a s p o s s ib le to th e n o n -m o v a n t. U nited States ex re l. Ko s e n s ke v . C a r l is l e H

MA , I nc. , 5 5 4 F

. 3 d 8 8 , 9 4 (3d C ir

. 2 0 0 9 ). T he D i s t r i ctC our tappl i ed N ew J er s eyl aw ; t he part ie s do not appea l t hatchoi ce and w e fol l ow i t
. W e mayaff i r m on any g ro u n d s u p p o rt e d b y th e re c o rd

. A z ubuko v. R oyal , 443 F. 3d 3 0 2 , 3 0 3 (3d C ir

. 2 0 0 6 ).
III . A N A L Y S IS
G

- I argu es t hatH art for d m us tcovers om e oral l of the fr audul entconvey ance act i ons beca us e: ( 1) R el iance and H a rtf o rd a g re e d to p ro v id e in su ra n c e c o v e ra g e f o r a sin g leG- I ’ s a r g u me n t th a t Re l i a n c e a me n d e d i t s p o l i cyw i t hout 9 G

- I ’ s cons entorot herw i s e fai l ed t o abi de bythe ca ncel l at i on p rov isi o n s o f th e p o li cy is, str ict ly co n stru ed , o f n o h elp to G -I, 10 pol i cyper i od, and thus the H art for d pol i cyperi od i ncl udes the amended R el i ance poli cyper i od; ( 2) t he i nt err el at ed w r ongful ac ts pro v isio n s in the p o li cies sh o u ld n o t app ly , an d there fo re a t lea st th e tw o late r-f

ile d f ra u d u len t co n v e y a n c e a c tio n s f a ll w i t hi n t he pol i cyper i od H art for d cl ai m s i tcover ed; and/ or( 3) t he pur chas e, s ervic i ng, and r ei ns ur ance agr eement s betw een H ar t for d and R el i ance , and the cl os e r el at i ons h i p o f thos e part i es i n anyevent , m ake H ar t for d di r ect l yl i abl e underthe amended R el i ance pol i cy . I tfur t her c ont ends t hatw e s houl d us e the doctr i ne of j udi ci al es t oppel t o bar H art for d fr om r el y i ng on the i nterrel at ed w rongf

ul act s provis i on s t o av oid cove rage becau se H a rtf o rd a ss e rte d a c o n tra d icto rya rg u m e n t in its m o tio n to d ism iss in th e D istric t C o u rt.
A . T h e H ar t f

or d Pol i c y P e r i od Does N ot I nc l ude t he A m e nde d R e l i anc e Pol i c y P e r i od.
I t appea r s t hat G

- I agues t hat t he H art for d pol i cyper i od inclu d es th e e n ti re init ial R eli an ce p o li cyp eriod b ec au se (1 ) G -I r eques t ed a pol i cy fr om H art for d thatw oul d coverthe R el i ance pol i cyper i od and ( 2) H art for d behave d as i f t hi s w er e the ca s e. W e a r r i ve a t t he s e a r gu ment s by c on s t rui ng i n t he m ost f a v o ra b le w a yG -I’s c o n ten tio n s th a t R e lian c e a m e n d e d its p o li cy p e ri o d w ith o u t G -I’ s co n sen t an d that H artfo rd 9as i ts ugges t s t hatt he i ni t i al R el i ance pol i cyrem ains i n for ce a n d Re l i a n c e , r a t h e rt h a n H a r t f o r d , i s th e r e f

o r e l i a b l e . We c o n stru e th is a rg u m e n t as th e c laim th a t H a rtf o rd m ista k e n ly pr ovi ded G

- I w i t h a pol i cythatfai l ed t o conform t o a r eques tby G

- I fora pol i cyt hatw oul d covert he ent i r e per i od of J ul y1, 1999 t o J ul y1, 2002 ( r atherthan the Ju ly 1 5, 2000 t o J ul y1, 2 0 0 2 p eriod in the p o li cyH artfo rd in fa ct i ssu ed ). T hi s “r eas onabl e expec t at i ons ” appr oach t o interpret i ng 10 i nsurance contr act s app l i es even w here, as here, t he i nsured i s a s o p h is tic a te d a c to r. See D o to , 6 5 9 A

. 2 d at 1 3 7 6

– 7 7 (co m p an y ’s c o m m e rc ial-u m b re lla lia b ili typ o li c y); Sp arks v. St. P au lIns. 11 effecti velyassum ed R el i ance’s obli gati on s. W e n o te at th e o u tsetthat, in arg u ing th a t th e H artfo rd pol i cyper i od i ncl udes t he i ni t i al R el i ance per i od, G

- I i s as ki ng us t o di s r egar d t he pl ai n l anguage of the H art for d pol i cy , w hi ch, byi t s t erm s , cover s onl y t he per i od betw een Jul y 15, 2000 and Ju ly1 , 2 0 0 2

. T h at, h o w ev er, i s n o t nec essa ri lyfa tal to G -I’ s pr os pect s , atl eas tnoti n t hi s cont ext
. U nderN ew J er s eyl aw , an i ns ur ance pol i cyt hathas been uni l at er al l y dr aft ed by t he i ns ur er ( s uch as t hi s one) w i l l typi cal l ybe tr eat ed as a co n tr actof a d h e s io n . See D oto v. R usso , 6 5 9 A

. 2 d 1 3 7 1 , 1 3 7 6 (N

. J. 1 9 9 5 ). A s s uch, N ew J er s eycou rt s “cons t ru[e] contr act s of i ns ur ance t o r efl ect t he re as onabl e expect at i ons of t he i ns ur ed i n t he fa ce o f a mbi g u o u s l a n g u a g e a n d p h r a s i n g , a n d [ , ] i n e x c e p t i onal c irc u m sta n c e s, [ e v e n ] w h e n th e lit e ra l m e a n in g o f th e p o licyis p la in .” I

d. at1377 ( i nt ernal ci t at i on om i t t ed)

. T hus , i ti s open 10C o. , 4 9 5 A .2 d 4 0 6 , 4 1 4

– 1 5 (N .J. 1 9 8 5 ) (la w y e r’s liab ili ty in su ra n c e p o licy ); Seal ed Ai rC or p. v. R oya l Indem

. C o. , 961 A

. 2 d 1 1 9 5 , 1 2 0 6 (N

. J. S u p er. C t. A p p . D iv. 20 0 8 ) (co rpo rati o n ’s d ir ec tors an d o ff

icers p o li cy ). 12 t o G

- I t o ar gue that( 1) i tw as r eas onabl e t o expec tt hatt he H ar t for d pol i cyper i od w oul d i ncl ude the pe r i o di n i t i a l l yc over ed b yth e R e lian c e p o licy , a n d (2 ) th is is o n e o f th o se situ a tio n s in w h ich its re a s o n a b le e x p e c tatio n s s h o u ld tru m p th e p lain m e a n in g o f th e p o lic y . S ee P iz z ul l o v. N

. J. M f rs . I ns . C o. , 952 A. 2 d 1 0 7 7 , 1 0 8 9 ( N. J

. 2 0 0 8 ) ( “ [ I ] n s o me c i r c u ms t a n c e s , we have r ecogni zed thati tm i ghtbe appr opri at e t o perm i tan i ns ur ed’ s r eas onabl e expe ct at i on t o over come t he pl ai n m eani ng of a pol i cy . ”)

. I n p e r f o r mi n g t h e r e a s o n a b l e - e x p e c t a t i o n s a n a l y s i s , we f i r s ta s k wh e t h e r , wi t ho utma k i n g a r e q u e s to rr e c e i v i n g s o me aff i r m at i ve s i gnal , an i ns ur ed ca n r eas on ab l yexpec tthatthe pol i c yp e r i o d o f

a n e w po l i c yi tt a k e s o u ti n r e s p o n s e t o t he fi nanci al di ffi cul t i es of a pr i or i ns ur er w i l l i ncl ude t he per i od of t he ol d pol i cy . I f s uch an i ncl us i on w oul d fol l ow as a mat t erof c o u r s e , t h a tw o u l d s t r e n g t h e n G

- I ’ s p o s i t i o n c o n s i d e r a b l y. H ow ever, G -I has pr ov i ded no evidence to show t hat the p rocess of ac qui r i ng a new pol i cyfr om o n e insu r eri n r es pons e t o t he fi nancia l di ffi cul t i es of a pr i ori ns ur eri s s o s t andar di zed or d ri v en b ysu ch d eterm inate pu rpo ses th at an insu red (he re G -I) can r eas onabl yexpec ta s peci fi c r el at i ons hi p betw een t he pol i cy per i ods of the pri or and new pol i ci es . A s a r es ul t , t o putati s s ueA s not ed, G

- I empl oy ed an i ns ur ance br oker , M ar s h. 11 Be c a u s e G- I d o e s n o tc h a l l e n g e t h e a c t i o n s o f i t s b r o k e r , we for go anal y s i s of age ncyr el at i ons hi ps betw een oramong M ar s h, H a rt f o rd , a n d /o r G -I

. See A den v. Fort sh , 776 A

. 2d 792, 800–01 (N

. J. 2 0 0 1 ). 13 w h ethe r i t w as reaso n ab le fo r G -I t o h av e e x p ec ted th e H artfo rd p o licyto c o v e r th e e n tire R e lian c e p o licyp e rio d , G -I h a d to estab li sh eith er that (1) itreq u ested a p o li cyco v ering the e n ti re p eriod an d H artfo rd d id n o t cl ea rl yref u se to p rov ide i t o r, m o re gener al l y , t hat( 2) H ar t ford b yi t s act i ons orr epr es ent at i ons o therw ise crea ted a rea so n ab le ex p ec tat ion in G -I th at H artfo rd w o u l d p r o v i d e s u c h a p o l i c y. 11
G -I has prov i ded no evidence a reas on able j ury cou l d u se to f ind that G -I actua ll yreq u ested a p o li cyfro m H artf o rd c o v e rin g th e a m e n d e d R e lian c e p o licyp e rio d o f Ju ly1 , 1 9 9 9 to J ul y15, 2000. T he r ecor d cont ai ns onl ythe st atement s of F lug g er: Q

. . . . S o y o u u n d e rsto o d th a t y o u w e re g o in g to h a v e a H a rtf

o rd p o licyf

ro m a c e rt a in d a te, it w oul d be effe cti ve fr om a ce r t ai n dat e agr eed upon, a nd y ourR el i ance pol i cyw oul d be ca ncel ed a s o f th a t d a te; is th a t co rre c t?
A

. Y es.14 Q.

. . . Yo u u n d e r s t o o d th a tth e ywe r e two s e p a r a t e p o l i c i e s [ ?]

. . . A

. T heyw ou l d h ave b een tw o separat e po l i ci es.

. . . Q

. . . . D i d y ou have a n under s t andi ng thatt he eff ect i ve dat e w oul d be s om e t i m e i n orabout J u l yo f 2 0 0 0 f o r[ t ] h e Hart f

o r d p o l i c y ?
A

. Y es. Q

. . . . [D ] i d y ou have an under s t andi ng t haty our R el i ance pol i cyw oul d be i n eff ectup unt i l t he d a t e o f t h e c a n c e l l a t i o n a n d r e wr i t e ?
A

. E i t hert hat or t hey w er e j us tgoi ng t o cont i nue w ith the R eli an ce p o li cy . B asica llyH artfo rd w o u ld h a n d le th e c laim s, a n d H a rtf o r d w o u ld c o l l e c tt h e p r e mi u ms a n d wha t e v e r . I b e l i e ve th e re w a s a b if

u rc a tio n b e tw e e n th e t w o . . . . I w as goi ng to g etH art for d paperform yD and O p o lic y . B as ed on thi s t es t i m ony , w e ca nnots aythatFl uggeras ked forG -I po i nts t o o t her st at em ents byF l ug ger descri bing his 12 expec t at i ons r egard i ng the “pr i orl i t i gat i on dat e” unde rt he H art ford p oli cy . “P ri or l i t i gati on date” i s a t e c h n ica l phrase r efe r r i ng t o a dat e t hat pr ece des t he s t art of t he pol i cyp eriod. F lu g g e r’s sta tem e n ts a re irre lev a n t b e c a u se w e a re in ter e ste d in hi s expe ctat i ons conce r ni ng the pol i cyper i od, notthe “pr i or litig a tio n d a te .” 15 a pol i cycover i ng cl ai m s m ade dur i ng the amended R el i ance p o li cyp eriod (July1 , 1 9 9 9 to Ju ly1 5 , 2 0 0 0 ). 12
A s the re is n o ev iden ce that G -I req u ested that H artfo rd c o v e r a p e r i o d t h a ti n c l u d e d t h e a me n d e d Re l i a n c e p e r i o d , we tu rn to w h e th e r G -I, b a se d o n H a rtf o rd ’s b e h a v io r, co u ld r eas onabl yhave e xpect ed H art for d t o i ncl ude i n i t s cover age the a m e n d e d R e li a n c e p e rio d . G -I h a s p ro v id e d n o e v id e n c e to su p p o rtthat p rop o sit ion

. Itn ev erthe less p o ints t o tw o fa ctors t hati tbel i eves j us t i fya r eas onabl e expe ct at ion

. F ir s t , t he co n tent an d ad m inistrati o n o f th e initi al R eli an ce an d H artfo rd p o l i c i e s w e r e t h e s a m e . S p e c i f i c a l l y: ( a ) i n w r i t i n g th e p o l i c y, H ar t for d di d none of t he t ypi cal underw r i t i ng act s of a s ucce s s or insu rer ( e. g. , r equi r i ng G

- I t o compl et e a ne w appl icat i on and pr ovi de updat ed i nform at i on) ; ( b) t he H art for d pol i cynum ber r emai ned the s ame as t he i ni t i al pol i cynum berexcep t foran
“ H ” ; an d (c ) c laim s a d m in istra tio n p u rsu a n t to a g re e m e n ts betw een Rel i ance and H art for d t r ans ferr ed “s eaml es s l y ” fr om R el i ance t o H ar t for d. Second, G

- I cont ends t hatt he handl i ng of pr emi um s and the l i abi l i t y cap s ugges t ed thatH art for d as s um edG -I a lso p o in ts to a n a f f id a v it b y F lu g g e r th a t s tate s th a t a 13 M a r s h r e p r e s e n t a t i ve “ c o n v e y e d Ha r t f o r d ’ s o f f e rt o a s s u me r es pons i bi l i t i es underG

- I ’ s exi s t i ng R el i ance pol i cy . ” Fl ugger d o e s n o t sta te w h e th e r th is o f f e r in c lu d e d a ss u m p tio n o f liab ili ty f o r c laim s m a d e b e f

o re Ju ly1 5 , 2 0 0 0 . W ith o u t m o re d e tail aboutw hat“r es pons i bi l i t i es ” Fl uggerm eant , th is l ends no su p p o rtto G -I.

Th e i n i t i a l Re l i a n c e p o l i c y s t a t e s t h e p r e mi u m as 14 $185, 000, excl udi ng a s m al l s t at e s ur char ge. T he bi nderforthe H a rtf o rd p o licy lists th e p re m iu m a s $ 1 5 3 ,9 3 5 .1 8

. T h is s u g g e sts t hatR el i ance keptm or e than $30, 000 of the i ni t i al p remi um w hen i t amended i t s pol i cy t o cover t he s hor t er per i od of J ul y1, 1 9 9 9 to J u ly 1 5 , 2 0 0 0 . H a rt f o rd g o t th e re s t. W e n o te th a t th e re is so m e q u e stio n w h e th e r G -I a c tu a lly pai d $185, 000 fort he i ni t i al R el ia nce pol i cy . T he pr emi um l i s t ed fort h e H ar t for d pol i cyi s $121, 422, befor e appl y i ng a 16 th e o ld R e lian c e p o licy

— sp e c if ica lly , (a ) G -I n e v e r p a id ad d ition al pre m ium s, (b) tho se itp aid to R eli an ce w ere t r ans ferr ed di r ect l yt o H art for d, and ( c) an endor s ementcappe d combi ned l iabili t yof H art for d and R el i ance underthe pol i ci es at$15 m i l l i on. 13
T he handl i ng of pr emi um s and the combi ned l i abi l i t ycap co u ld n o t h a v e cre ated a re aso n ab le ex p ec tat ion that H artfo rd w o u ld c o v e r th e a m e n d e d R e lian c e p o lic yp e rio d . T h e re is evi dence t hat Fl ugger knew t hat R el i ance s pl i t t he o ri g i nal p o licyp re m iu m w ith H a rtf o rd

. T h a t sh o u ld h a v e su g g e ste d to 14sm all stat e su rch arg e. T h is am o u n t d if fe rs fro m the H artfo rd pol i cypr emi um of $153, 935. 18 l i s t ed on the i n s ur ance bi nder i ssued byH art ford. B y analogy , a dis crepancym i gh tal so exis t betw een t he pr emi um l i s t ed on t he i ni t i al R el i ance pol icyand w hatG

- I pai d. R eg ard less h o w m u ch p rem ium G -I actua ll yp aid, th ere is ev iden ce th at R eli an ce sp li t i t w ith H artfo rd. T h e re co rd c o n tain s s tate m e n ts b y b o th F lu g g e r an d a H a rtf o rd e m p lo y e e to t hat effect

. F l ug ger st at ed in an aff i dav i tt h a t a M ars h rep rese n tat ive to ld h im that “u n ea rne d ” p rem ium s p aid b yG -I to R eli an ce w o u ld b e f o rw ard ed to H artfo rd. T h e H artfo rd e m ploy ee sta ted th a t “H a rtf o rd a g re e d w ith o u t re u n d e rw riting to w rite a n e w p o licy f

o r th e re m a in d e r o f

th e ter m f

o r th e p ro ra ta p re m iu m th a t w a s c a n c e lle d o u t o f th e R e lia n c e a c c o u n t.” W e ar e m i ndful t hat H art for d t ook over80% of the i ni t i al 15 pr emi um , and thi s ex ce eded t he por t i on of the i ni t i al pol i cy per i od t hatH ar t for d as s um ed ( r oughl y 67% )

. I f, as a mat t erof i ndus t r ypr act i ce, pr emi um and poli cy per i od s houl d be p ro p o rtio n a l (a p o ss ib ili tyn o t ad d re ss e d in th e re c o rd ), th e n th is s ugges t s t hat H ar t for d’ s s har e of the or i gi nal pr emi um w as out of pr opor t i on t o i t s per i od of cove r age. 17 a r eas onabl e corpor at e i ns ur ed empl oy i ng a risk m anage rt hat R el ia nce a nd H ar t for d w er e s pl i t t i ng t he r i s k i ns ur ed byt he or i g i n a l p o l i c y . Su c h a s p l i t t i n g o f r i s k s h o u l d i n tu r n have s ugges t ed to G

- I t hatR el i ance and H art for d w er e s pl i t t i ng t he i ni t i al t hr ee- y earpol i cyper i od. G

- I s houl d have c oncl uded that H ar t for d w as notagr eei ng t o coverthe ent ir e i ni t i al R el i ance pol i cyper i od. 15If H a rtf o rd ’s s h a re o f

th e o rig in a l p re m iu m w e re g ro ss ly e x c e s s iv e re lativ e to th e p o rtio n o f th e p o licyp e rio d th a t it assu m ed , then it m igh t b e reaso n ab le fo r G -I t o ex p ec t H artfo rd t o cover m or e of the or i gi nal pol i cyper i od. G

- I has notm ade this ar gum entand w e ca n fi nd no evi dence t hatH art fo rd r ece i ved a gr os s l yexce s s i ve s har e of t he i ni t i al pr emi um i n any event
. W e ther efor e do notbel i eve thatthe mi s m at ch betw een pr emi um di vi s i on and pol i cy per i od cover ages j us t i fi es deny i ng s um m aryj udgm enther e.
18 T h e c o m b in e d liab ili ty c a p a lso sh o u ld h a v e su g g e ste d to a reas on able i nsured t hat R el i ance a nd H a rtf o rd spli tthe ri sk ( and cove r age pe r i od) of the i ni t i al pol i cy . T hatpol i cychar ged a c e rta in p re m iu m f

o r c o v e ra g e o f $ 1 5 m ill io n . B e c a u se G -I d id notadd t o t he i ni t i al pr emi um i n obt ai ning the H art for d pol i cy (ra th e r, it sp lit th e p re m iu m b e tw e e n R e lian c e a n d H a rtf o rd ), it m akes s ens e thatco m b ined cove r age unde rt he amended R el i ance and H ar t for d pol i ci es w oul d not varygr eat l yfr om t he $15 m i l l i on comm anded a tt he out s etbyt he s ame pr emi um (a ssum i ng t he ri sk profil e of G -I had no tchan ged m arke d ly s i nce Rel i ance fi r s t w r ot e i t s cover age)

. I n fac t , the part i es kept t he combi ned l i m i tatthe fi r s t
- s et$15 m i l l i on. I f H ar t for d had as s um ed al l r i s k under t he i ni t i al R el i ance p o li cy , then a re aso n ab le i n su red w o u ld h av e e x p ec ted H artfo rd t o acqui r e the ent i r e pr emi um G

- I had i ni t i al l y pai d t o R el i ance a n d to h a v e a ss u m e d c o v e ra g e u p to th e f u ll $ 1 5 m ill io n lim it.A s w e di s cus s ed above , G

- I ’ s s ophi s t i cat i on does not 16 p re v e n t u s f

ro m c o n stru in g th e in su ra n c e p o licie s it a c q u ire s in l i ghtof i t s r eas onabl e expe ct at i ons . I tdoes , how ever , aff ectthe a n a ly sis o f

w h a t w o u ld c o u n t as a re a so n a b le e x p e c tatio n f o r it t o h a v e h a d w h e n o b t a i n i n g a p a r t i c u l a rp o l i c y. 19 T hatH ar t for d di d notdo t hes e thi ngs s hould h av e putG

- I on not i ce that , abs ento ther affi r m at i ve s i gns , i tcoul d not re a s o n a b ly ex p e c t H a rt f o rd to c o v e r t h e e n tir e p o lic yp e ri o d

. T he i den ti tyin co n tent an d ad m inistrati o n of the amended R e l i a n c e a n d H a r t f

o r d p o l i c i e s d o e s n o tc h a n g e o u rv i e w . We m ayt ake G

- I ’ s s ophi s t i cat i on i nt o acc ount i n deci di ng w hatw as o b je c tiv e ly re a s o n a b l e f

o r it to e x p e c t f

ro m its in s u re rs . See W e r n e rIn d u s ., In c . v . F irs t S ta te In s . C o ., 548 A

. 2d 188, 192 ( N

. J

. 1988)

. A nyknow l edge of G

- I t hatH art fo r d had t aken 16 o v e r c la im s a d m in istra tio n f o r R e lian c e sh o u ld n o t re a so n a b ly h av e c au sed G -I t o ex p ec t cov era g e f rom H artfo rd fo r the e n ti re pol i cyper i od. A r eas onabl e i ns ur ed w i t h enough s ophi s t i cat i on t o empl oya r i s k m anage rw oul d know the di ffe r ence betw een c la im s s e rv ic in g a n d th e a s s u m p tio n o f lia b iliti e s . S im ila rl y , a s ophi s t icat ed i ns ur ed w oul d r ecogni ze thatus e of i dent i cal pol i cyl angu ag e an d a l ack of addi t i onal underw r i t i ng do not nece s s ar i l y sign al t hata new i ns ur erhas as s um ed l i abi l i t i es underan ol d pol i cy . Such an i ns ur ed w oul d al s o r ecogni ze that t hes e att r i but es ar e cons i s t entw i t h a s pl i t t i ng of ri s k, pol i cy p e r i o d s a n d p r e m i u m s b e t w e e n a n o l d a n d a n e w i n s u r e r . We th u s d isc e rn n o b a sis to c o n c lu d e th a t G -I c o u ld h a v e re a so n a b lyIt is th e re f o re u n n e c e ss a ryf

o r u s to d e c id e w h e th e r th is is 17 o n e o f th o se in sta n c e s in w h ich a n in su re d ’s r e a so n a b le expec t at i ons can trum p the pl ai n m eani ng of the pol i cy l anguage , an i ssu e w i t h r es pectt o w hi ch N ew J er s eyl aw pr ovi des l i t t l e gui dance

. 20 expec t ed i t s pol i cyw i th H art for d t o covert he R el i ance pol i cy per i od. 17
B . T he I n ter rel at ed W rongf ul A ct s P rovi s i on A p p l i es. A s an alt ern ati v e, G -I clai m s tha t eve n if th e H artfo rd p o li cyd o es n o t co v er th e en ti re i n it ial R eli an ce p o li cy , itco v ers th e C C R a n d C laim a n ts C o m m itt e e a c tio n s b e c a u se p lain tiff s in t hos e ac t i ons fi l ed them w i t hi n the H art ford p ol i cyper i od of Ju ly 1 5 , 2 00 0 to Jul y1, 20 02

. In r espon se, H art ford p oint s to t he i nt err el at ed w r ongful act s pr ovi s i on i n t he pol i cy , w hi ch ( as not ed al r eady ) deems the fi l i ng dat e for al l cl ai m s ar i s i ng outof t h e s a me wr o n g f

u l a c ta s th e f

i l i n g d a t e o f

th e f i r s ts u c h c l a i m. B eca us e pl ai nt i ffs i n t he N ett l es act i on ( t he fi r s tof the thr ee fra u d u lent co n v ey an ce ac ti o n s) f il ed o n Jan u ary 3 , 2 0 0 0 , b ef o re t he J ul y 15, 2000 s t art of t he H art for d pol i cy peri o d , t he interrela te d w ron g fu l acts pro v isi o n , H artfo rd c o n tend s, b ars cov erage for al l t hree act i on s. G -I ap p ea rs t o co n ce d e this in the ab str ac t, b u t cou n ters th a t th e in ter re late d w ro n g f u l ac ts pr o v isio n sh o u ld n o t a p p lytoA s not ed above , N ew J er s ey cour t s , i n i nt erpr et i ng 18 in su ra n c e c o n tra c ts, stri v e to g iv e e f f e c t to th e re a so n a b le expec t at i ons of the i ns ur ed, even i n s om e i ns t ance s w her e doi ng s o w o u ld ru n c o n tr a ry to t h e c o n tr a c t’ s p la in m e a n in g . See P izz u llo , 9 5 2 A .2 d a t 1 0 8 9

. W e n e e d n o t d e c id e w h e th e r th is is one of thos e i ns t ance s , s i nce a n exami nat i on of the purpos es for 21 t hi s cas e bec aus e the pu rpo ses for w hi ch i ns ur er s i ncl ude that pr ovi s i on i n contr act s do not appl y her e. C i t ing insur ance t r eat i s es , G

- I s t at es t hatt hos e p u rpo ses ar e ( 1) t o ens ur e that r i s ks ar i s i ng outof the s ame w r ongful actar e s ubj ectt o one pol i cyand ther efor e one l i abi l i t yl i m i t , and ( 2) t o pr event change s i n pol i cyl anguage fro m one pol i cyper i od t o another f r o m c r e a t i n g d i s p a r a t e c o v e r a g e d e t e r mi n a t i o ns f o rth e s a me w ro n g f u l a c t. A c c o rd in g to G -I, th e se p u rp o se s d o n o t ap p ly h ere b ec au se th e $ 1 5 m il li o n co m b ine d ca p o n the H artfo rd p o li cyan d am en d ed R eli an ce p o li cyalread yen su res th at G -I cannotr ecove r m o re than $15 mi l l i on on al l cl ai m s combi ned forboth pol i ci es . B eca us e the l anguage of the amended R eli an ce an d H artfo rd p o li cies is i d en ti ca l, G -I co n ti n u es, th ere i s n o d a n g e ro f

d i s p a r a t e c o v e r a g e d e t e r mi n a t i o n s , a n d t h u s we s houl d t r eat t he pol i cy ’ s i nt err el at ed w r ongful act s pr ovi s i on as nott r i gger ed undert he fa ct s of thi s cas e. W e a re n o tconvi nced. E ven w er e w e i ncl i ned t o m ake appl i cat i on of t he pol i cy ’ s i nt err el at ed w r ongful act s pr ovi s i on cont i ngenton t he purpos es behi nd t hat p r ovi s i on— as oppos ed t o appl y i ng t he contr actas w r i tt en

— w e w o u ld s t i l l appl ythe 18w h ich in su re rs in c lu d e in ter re late d w ro n g f u l a c ts p ro v isio n s in c o n tra c ts fa il to re v e a l an yth in g th a t w o u ld h a v e ju stif ied G -I in th in k in g th a t th e p ro v isio n w o u ld n o t a p p lyu n d e r th e f a c ts b e f o re u s . 22 p ro v isio n . T h a t is b e c a u se th e in ter re late d w ro n g f u l ac ts pr ovi s i on does have a purpos e t hat appl i es t o t hi s cas e. Such a p ro v isio n n o t o n lya llo w s in su re rs to c a b in re late d w ro n g f u l ac ts t o a s i ngl e pol i cyp eriod ( t hus s ubj ectt o one l i m i t ) , i tal s o, as one o f t h e t r e a t i s e s t h a t G- I i t s e l f c i t e s p o i n t s o u t , a l l ow s an i n s u r e d ( s u c h a s G

- I ) t o o b t a i n c o v e r a g e u n d e ra n e w p o l i c y, des pi t e fa ci ng addi t i onal l i abi l i t yexpos ur e fr om i t s pas tact s , by “r es ervi ng t he ar gum entt hatany futur e cl ai m s ar i s i ng outof the in ter c o n n e c ted w ro n g f

u l ac ts o f

a p re v io u slysu b m itt e d c laim w ill b e c o v e re d b yth e f o rm e r p o lic y .” J o h n F . O ls o n e t a l., D i r ectorand O

f f i cerLi abi l i t

y: I ndem ni f i cat i on and I

ns ur ance § 12: 10 ( 2008)

. W e thus have a m pl e r eas on t o gi ve ef fec tt o t he i nt err el at ed w r ongful act s pr ovi s i on bybarr i ng cover age f orthe C C R an d C la im a n ts C o m m ittee a cti o n s u n d er the H artfo rd p o l i c y. C . O t her A gree m ent s D o N ot M ake H art f ord D i r e c t l y L i abl e Fo r The Fra udul e nt C on vey an ce A cti on s. G

- I al s o ar gues t hat , even i f t he H art for d pol i cydoes not c o v e r th e th re e f

ra u d u le n t co n v e y a n c e a c tio n s, H a rtf o rd still m us tcovert hem becaus e agr eement s b etw een H art for d and23 R el i ance m ake H ar t for d di r ect l yl i abl e u n d erthe amended R el i ance pol i cy . Spe cifica l l y , G

- I cont ends that( 1) the agr eement s t hemsel ves cr eat e di r ectl i abi l i t y , or( 2) t he re in su ra n c e re latio n sh ip c re a ted b y th e m b rin g s this c a se w ith in t he ambi tof V

enet s anos v. Zucker

, Facher& Zucker , 638 A

. 2d 1333 ( N

. J

. Super

. C t
. A pp. D i v. 1 9 9 4) , w hi ch hel d a r ei ns ur er di r e c t l yl i a bl e t o a n i ns ur e d b e c a us e of t he r e i ns ur e r ’ s c l ose relati o n sh ip w ith the in su rer.

1. H art f ord’ s agree m ent s w i t h R el i ance A ft er R el i ance e nco un t ered fi nan ci al diffi cult i es, H ar t for d enter ed i nt o a s er i es of agr eement s w i t h R el i ance co n ce rnin g v ariou s co v era g e ob li g ati o n s o f R eli an ce . C o n tr ary t o w hat G

- I ar gues , how ever , none of thos e agr eement s cr eat es d i r e c tl i a b i l i t y o f

H a r t f o r d f o rth e a m e n d e d R e l i a n c e p o l i c y. T he A s s etPur chas e A gr eementbetw een R el i ance and H ar t for d t r ans ferr ed books , r ecor ds , and r enew al r i ght s ( among o th e r th in g s) r e la tin g to th e a m e n d e d R e lian c e p o licyto H ar t for d. I t al s o t r ans ferr ed l i abi l i t i es as s oci at ed w i t h t he pol i cy “t o t he ext ent t hat any s uch l i abi l i t yi s appl i cabl e t o and ac crues w i t h r es pect t o per i ods s ubs equentt o t he C l os i ng [l i kel yJ une 30 , 20 00 , t he dat e t he part i es execu t ed the A sset P urchase A gr eement ]

. ” W e ther efor e r ead the A s s etPur chas e A gr eement t o t r ans fer l i abi l i t y t o H art for d on t he amended R el i ance pol i cyW e re a lize th a t th e a m e n d e d R e lian c e p o licyc o v e re d u n til 19 J ul y15, 20 0 1

. T h e di ffe r ence i n dat es does notaff ectour anal y s i s . T he s ame is true fort he Q uot a Shar e R ei ns ur ance A gr eem entand C l ai m s Ser vi ci ng A gr eement s di s cus s ed i mm e d i a t e l yb e l o w. T he i ni t i al R el i ance pol i cyperm i t s m odi fi cat i on onl yby 20 endor s eme n t si gned byR el i ance . T he cha nge i n pol i cyper i od at i s s ue i n t hi s cas e proba bl y r equi r ed such a n endor s ement
. B ut t her e i s none i n t he r ecor d. H ow ever , w hetherthe amendm ent thu s is i n ef

fe cti v e is i rreleva n t t o this case b ec au se w e are c o n c e rn e d w ith c laim s m a d e (o r re latin g b a c k to ) b e f o re Ju ly 2 0 0 0 , an d it i s u n d isp u ted th a t p re -Ju ly 2 0 0 0 c laim s f a ll w ith in bo t h the i nit i al and am end ed R el i ance p oli cyperi od s. 24 on l yfor cl ai m s m ade som et i m e aft er J un e 30 , 20 00

. B ecause 19 t he pl ai nt i ffs i n t he N et t l es act i on fi l ed i n J anuary2000, and the subsequ ent ac ti on s r el at e back t o thatdate, the A ssetP urchase A gr eementdi d nott r ans ferl i abi l i t yforthem t o H art for d. 20
T h e Q u o ta S h are R eins u ra n c e A g re em en t m ak es H artfo rd l i able for a port i on of am ou nts actual l y pai d byR el i ance under t he amended R el i ance pol i cy “r el at i ng t o cl ai m s . . . m ade on or aft er ” J ul y1, 2000. A s a threshol d m att er , the R ei ns ur ance A gr eementdoes notcr eat e di r ectl i abi l i t yt o the i ns ur ed for H a rtf o rd , b u t o n lylia b il ityo f it t o R e lian c e f

o r a m o u n ts R el i ance pay s outundert he amended R el i ance pol i cy . B uteven i f i tdi d, i tw oul d notcoverthe thr ee f r audul entconvey ance a c ti on s becau se t he R ei nsurance A greem ent app l i es on l yto25 cl ai m s m ade on oraft erJ ul y1, 2000.
H art ford en t ered i nto tw o C l ai m s S ervi ci ng A greem ents , one cove r i ng cl ai m s m ade on the amended R el i ance pol i cyon or befor e J une 30, 2000, and t he other cover i ng cl ai m s m ade a ft er t hatdat e. H ar t for d agr eed t o adj us t , defe nd, and i n s om e ca s es set t l e (on R el i ance’s beh al f) cl ai m s un der R el i ance p o l i ci es. B o th a g re e m e n ts c o n tain a p ro v isio n sta tin g th a t H a rtf o rd “ is in no eventfi nanci al l yr es pons i bl e for p ay m entors at i s fac t i on of

‘ cl ai m s , ’ l aw s ui t s , oranyform of ca us e of a ct i on agai ns tany ‘n a m e d in su re d ’ un d e r th e ‘p o licy (ie s).’” T h u s, h e re to o th e re is no bas i s fori m pos i ng di r ectl i abi l i t yon H art for d.

2. H art f ord’ s rel at i onshi p w i t h R el i ance G -I a rg u e s a d d iti o n a llyth a t, ev e n if n o n e o f th e sp e c if

ic ag ree m en ts be tw ee n H artfo rd a n d R eli an ce m ak es H artfo rd liab le u n d e r th e a m e n d e d R e lian c e p o licy , the c lo se re latio n sh ip cre ated b y tho se ag ree m en ts h ad the ef fe ct o f m ak ing H artfo rd g e n e r a l l yr e s p o n s i b l e f

o rR e l i a n c e ’ s c o v e r a g e o b l i g a t i o n s . We di s agr ee. A s n o ted a b o v e , this p a rticu la r a rg u m e n t o f G -I’s is dr a wn f r o m V enet s anos . I n th a tc a s e , th e i n s u r e r , Home s t e ad, “front[ed]” i n N ew Jer sey despit e i t s l ack o f an insurance l i cense byr ei ns ur i ng a l i cens ed i ns ur er , M u tual , t hati tcontr ol l ed. V e n e tsanos, 6 3 8 A. 2 d a t1 3 3 4

– 3 5 , 1 3 3 7

. Home s t e a d ( 1 ) had “the ent i r e expos ur e for [p o l i cy ] l i abi l i t y , ” i d. at1336, ( 2) had26 f in a l d e c is io n -m a k in g a u th o ri ty o v e r w h e th e r t o p a y , i d. at1335, (3 ) c o n d u c te d th e in s u ra n c e in v e s tig a tio n , i d. , ( 4) w as re s p o n s ib le f

o r n e g o tia tio n a n d s e ttle m e n t, i d. at1337, and ( 5) a c te d a s th e a g e n t f

o r s e rv ic e o f p ro c e s s o n M u tu a l, i d. at1336. A l t hough V

enet s anos r ecogni zed the “ge neral rul e thatan o rig in a l in su re d d o e s n o t en jo ya rig h t o f

d ire c t ac tio n a g a in st a t rue r ei ns ur er , ” i d. a t 1 3 3 9 , it h e ld th a t H o m e ste a d w a s d ire c tly lia b le o n th e p o lic y , i d. at1340, not i ng tha t“[w ] her e . . . the r ei ns ur i ng agr eementi t s el f pr ovi des

. . . thati tt akes char ge of and m anage s t he defe ns e of s ui t s agai ns t t he ori g inal i ns ur ed, t he re i ns ur er m ay be hel d t o be a ‘ pr i vy ’ ” t o t he i ns ur ed’ s act i on a g a in s t th e in s u re r. Id

. at1339.
T he C our ti n V

enets an os w as conce r ned w i t h pr ot ect i ng th e a b ili tyo f

a N e w Je rse y -in su re d to se e k re d re ss a g a in st a fo reign “f

ron ter” in N ew Jerse y co u rt s . Id. at1338–39. T he in su re r, M u tu a l, ha d e n ter e d re h a b ili tatio n p ro c e e d in g s in Penns y l vani a and the C our tw as conce r ned thatt he pl ai nt i ff w oul d fi nd it d iffi cul tt o l i t i gat e i t s bad fa i t h and cove r age cl ai m s i n a for ei gn j ur i s di ct i on, part i cul ar l yw her e, as i n that c a s e , th e re in s u ra n c e a g re e m e n t h a d n o t b e e n lo c a te d

. I d.
Ou rc a s e di f

f e r s mu c h f

r o m V enet s anos beca us e ( 1) H artfo r d di d nothave the s ame l evel of contr ol overR el i ance t hatH om es t ead ha d o v er M u tua l and ( 2) ther e i s no al l egat i on of fr ont i ng. T he A s s etPur chas e A gr eemen tdoes notconfe r contr ol over defe ns e and s ett l ement of cl ai m s under the amended R el i ance pol i cyand, as w e r emar ked above, does notW e co n side r m isl ea d ing G -I co u n sel’s c o n clus o ry 21 s t at eme n t in i t s openi ng br i ef that , undert he R ei ns ur ance A gr e e me n t , “ Hart f

o r d wi l l r e i mbu r s e o n e h u n d r e d p e r c e nt ( 100% ) of anypaym ent s byR el i ance . ” The r el evantpr ovi s i ons of the A gr eementar e more nuance d. T heyr ead: T h e C edi ng C om pany[R el i ance ] cede s and the R ei ns ur er[H ar t for d] her ebyacc ept s one hundr ed per cent( 10 0 % ) of the C edi ng C om pany ’ s N et L iab ili ty
. . . fo r U ltim a te N e t L o ss re latin g to c l a i ms . . . ma d e o n o ra f t e rth e Ef

f e c t i v e Ti me [Ju ly1 , 2 0 0 0 ]. “U l t i m at e N etL os s ” means t hatamount [of

27 tra n sf e r liab ili tyf

o r th e f ra u d u len t co n v e y a n c e a c tio n s to H a rtf o rd . T h e Q u o ta S h a re R e in su ra n c e A g re e m e n t irre v o c a b ly m a k e s H a rtf

o r d R e lian c e ’s “ law f

u l atto rn e y -in -f

a c t . . . , w ith ful l pow erof s ubs t i tut i on[, ] ” i n defe ndi ng, s ett l i ng and ot herw i s e admi ni s t er i ng cl ai m s undert he ame n d ed R el i ance p o licy , b u t o n ly “ w ith re sp e c t to c laim s m a d e o n o r af te r ” Ju ly 1, 2000

. T he R ei ns ur ance A gr eementthus di d notcede R el i ance ’ s contr ol ov er the ear l i er - fi l ed N ett l es act i on ort he ot hert w o fr audul entconvey an ce act i ons , t he fi l i ng dat es of w hi ch r el at e bac k t o t hatof the fi r s tact i on. A s w e al r eady no t e d , th e Re i n s u r a nce A gr eemental s o di d notr ei ns ur e R el i ance forthe fr audul entconvey ance cl ai m s . ( E ven i f i tdi d, i tdi d not d o so f u lly , a s tha t A g re e m e n t c o m m its o n ly a sh a re o f lo ss e s to H a rtf o rd

. ) T h e C laim s S e rv icin g A g re e m e n ts s p e c if ica lly 21lo s s e s ] t h a t th e C e d in g C o m p a n yh a s p a id

. . . . “N etL i abi l i t y ” means

. . . t hatpor t i on of any U l t i m at e N etL os s thatthe C edi ng C om panyhas r et ai ned netfori t s ow n acc o u n t aft ert he appl i cat i on of al l r ei ns ur ance . . . , w hi ch s hal l be a percentage of the C eding C om pan y ’s gross l i abi l i t yforl os s es , w hi ch per cent age sha l l be the a p p lica b le q u o ta s h a re p e rc e n tag e s in d ica ted in A ttac h m e n t A

. . . a n d sh a ll n o t ex c e e d th e lim its s e tf o r t h t h e r e i n . Re i n s u r e r ’ s l i a b i l i t yh e r e under w i t h r es pectt o anyl os s orl os s es s hal l notbe i ncr eas ed by r eas on of the i nabi l i t yof the C edi ng C om pan y to coll ectfrom anyotherrei nsurer s, w hethers peci fi c orgener al , anyamount s w hi ch m a yb e d u e f

ro m th e m , w h e th e r su c h in a b ility ar is e s f ro m th e in s o lv e n c yo f

s u c h o th e r r e in s u re rs o r o th e rw is e . . . . T hese prov i si on s t i e H art f ord’s l i abil i t yt o p ercent ages (m ost l es s t han 100) cont ai ned i n A t t achm en tA t o t he R ei ns ur ance A g re e m e n t. 28 prese r ved the author i t yof R el i ance t o di r ectH art for d i n t he h a n d lin g o f

a n y c la im

. In th is c o n te x t, V enet s anos i s s i m pl yoff t r ack f r om ourcas e. W e n o te in a d d iti o n th a t w e a re p a rticu lar lyre lu c tan t to p e rm it d ire c t re c o v e ryb y th e in su re d a g a in st th e re in su re r in th is29 cas e b ec au se o f R eli an ce ’s P en n sy lvan ia l iqu ida t i on pr ocee di ng. D oing so co uld expo se H art ford t o d ou ble l i abil i t ybecau se Penns y l vani a l aw does notr educe a r ei ns ur er ’ s l i abi l i t yt o t he i ns ur er ’ s es t at e as a r es ul t of di r ect paym ent s t o the i ns ur ed. 40 Pa. C ons . St at
. § 221. 34. D i r ectr ecove r yw oul d al s o pr eventt he Penns y l vani a l iqu ida t orfr om equi t abl yapport i oni ng the re c o v e ry a m o n g a ll in s u re d s . See i d. § 221. 1( c) ( i v)

. W e bel i eve G -I shou ld sta nd i n li ne in Pen nsy l van i a w i t h o t her i nsureds. See ge ner al l

y J a m e s E . R u d n ik , R ei nsu ra n ce as a Sour ce of R ec over y f orI ns ur ed Los s es , 1 5

- J a n . Con s t ru c t i o n La w. 31, 3 3

– 3 4 (1 9 9 5 ).
D . J u d ici a l E stop p el D o es N o t A p p ly to H art f ord’ s I nvok ing O f

T he I nt err el at ed W rongf ul A ct s P rovi s i on . In its f irst c o m p lain t, G -I a rg u e d th a t H a rtf o rd w a s lia b le on t he amended R el i ance pol i c ys o l e l ybeca us e of i t s r ei ns ur ance a n d o th e r a g re e m e n ts w ith R e lian c e . It d id n o t ye t a rg u e , as it d o e s h e re , th a t H a rtf

o rd w a s lia b le f

o r th e C C R a n d C laim a n ts C o m m itt e e a c tio n s u n d e r th e H a rtf o rd p o licy . In m o tio n in g to di s m i s s t he compl ai nt i n N ovember 2002, H art for d cl ai m ed that it w a s n o t b a d f

a ith to d e n yc o v e ra g e o f th e C C R a n d C laim a n ts C o m m ittee a cti o n s b ec au se, reg ard less w h ethe r H artfo rd’s agr eem en ts w i t h R el i ance cr eat ed di r ectl i abi l i t yfort he amended R el i ance pol i cy , both act i ons w er e fi l ed af t erthe end o f th e a m e n d e d R e lian c e p o licyp e rio d . In m a k in g th is a rg u m e n t, H a rtf

o rd ig n o re d th e in ter re late d w ro n g f u l ac ts30 pr ovi s i on i n t he amended R eli ance pol i cy . A s w e have s een, th a t p ro v isio n re late s th e f ili n g d a tes f

o r th e C C R a n d C laim a n ts C om m i t t ee a ct i ons back t o t he N ett l es ac ti o n fi l ed dur i ng t he R el i ance pol i cyper i od.
In F e b ru a ry2 0 0 3 , G -I a m e n d e d its c o m p lain t to c laim cover age unde rt he H art for d pol i cy . I n r es pons e t o G -I’ s new cl ai m , H ar t for d change d i t s pos i t i on. I n M ar ch 2003, i tobt ai ned perm i s s i on fr om t he D i s t r i ctC our tt o w i t hd raw i t s i ni t i al br i ef a n d f iled a n e w o n e in v o k in g th e in ter re late d w ro n g f u l ac ts p r o v i s i o n i n t h e Ha r t f

o r d p o l i c yt o d e n yc o v e r a g e f o rth e two l at eract i ons . I tnow ar gued— as i tdoes her e— t hat , due t o t hat pr ovi s i on, t he tw o l at eract i ons r el at e bac k t o the amended R e lian c e p o licyp e rio d . T h e D istric t C o u rt d e n ied th e m o tio n to d ism iss b u t, as w e ha v e see n , ev en tually g ran te d s u m m ary ju d g m e n t b a se d in p a rt o n th e in ter re late d w ro n g f u l ac ts pr ovi s i on. G

- I ar gues t hat , beca us e H art for d i ni t i al l y ar gued t hatt he C C R and C l ai m ant s C om m i t t ee a ct i ons w er e notcover ed byt he R el i ance pol i cy , i ts houl d notbe al l ow ed t o i nvoke the i nterrel at ed w rongf

ul act s provi si on t o denycov erage for tho se act i ons undert he H ar t for d pol i cy . U ndert he doctr i ne of j udi ci al est op pel, a cou rt can d efen d the i ntegr i t yof the j ud i ci al process by barr i ng a par t y fr om t aki ng contr adi ct orypos i t i ons dur i ng t he c o u rs e o f litig a tio n . S e e , e .g ., Ze dn e r v . U n ite d S ta te s , 54 7 U. S. 4 8 9 , 5 0 4 (2 0 0 6 ); Sc a r a n o v . C e n t. R

. R

. C o . o f N .J ., 203 F. 2d 5 1 0 , 5 1 3 (3 d C ir. 1 9 5 3 ); A li v . R u tg e rs , 76 5 A

. 2d 71 4, 71 8 (N

. J.31 2 0 0 0 ).
A s a th re sh o ld m a tter, w e c o n sid e r w h e th e r in d iv e rsity ca ses w e sh o u ld ap p lyfe d era l or stat e jud ici al estop p el l aw . In gen eral , fede ral cou rt s applyst at e l aw i n d i versi t ycases, atl east w h e re th a t la w is s u b s ta n tiv e in n a tu re . S ee E rie R

. R

. C o. v. Tom pki ns , 304 U

. S. 64, 78 ( 1938)

. B utw here an are a of l aw i m p l i c a t e s a “ s t r o n g f

e d e r a l p o l i c y, ” f

e d e r a l l a w m a y a p p l y. B yr d v. B l ue Ri dge Rural

E l ec. C oop. , 3 5 6 U

. S

. 5 2 5 , 5 3 8 (19 5 8 ). W e have l ong avoi ded deci di ng w hether fede ral j udi ci al e s to p p e l la w a p p lie s in d iv e rs ity c a s e s . See In re C ha m bers D e v . C o ., 1 4 8 F .3 d 2 1 4 , 2 2 9 n .1 3 (3 d C ir. 1 9 9 8 ); Ryan O per at i ons G

. P

. v. Sant i am - Mi dw es t Lum berC o. , 81 F. 3d 355, 3 5 8

– 5 9 & n

. 2 ( 3 d Ci r . 1 9 9 6 )

. Bu tt o d a y we we i g h i n , a s we bel i eve that“[a ] fede r al court ’ s abi l i t yt o pr ot ectit sel f fr om m ani pul at i on byl i t i gan ts s houl d notvaryacc or di ng t o the l aw o f the s t at e i n w hi ch t he under l y i ng di s put e ar os e. ” Ryan O per at i ons , 81 F. 3d at358 n. 2. I n doi ng s o, w e fol l ow fi ve o th e r C o u rt s o f

A p p e a ls

. See E as tm an v. U ni on P ac. R

. R

. C o. , 4 9 3 F .3 d 1 1 5 1 , 1 1 5 6 (1 0 th C ir. 2 0 0 7 ); O gden M ar t i n Sys

. of I ndi anapol is , I

nc. v. W hi t i ng C or

p. , 1 7 9 F .3 d 5 2 3 , 5 2 7 n .1 (7 th C ir

. 1 9 9 9 ); R is s et t o v. P l um bers and St eam f i t t ers Local343 , 94 F

. 3 d 5 9 7 , 6 0 3

– 0 4 (9th C ir

. 1 9 9 6 ); G uinness PL Cv. W ard , 955 F. 2d 875, 899 n. 20 ( 4th C i r . 1992) ( quot i ng A l l en v. Zuri ch Ins. C o. , 6 6 7 F

. 2 d 1 1 6 2 , 1 1 6 7 n . 4 (4th C ir

. 1 9 8 2 )); E dw ar ds v. A etnaO t her C ourt s , how ever , have gone t he other w ay orare 22 u n c e rt a in

. See, e. g. , Mon t erey D ev. C orp. v. L aw yer’s T i t l e Ins. C or p. , 4 F

. 3 d 6 0 5 , 6 0 8

– 0 9 (8th C ir

. 1 9 9 3 ) (ap p ly ing stat e law ); Kons tant i ni dis v. C hen , 626 F. 2d 933, 937–38 ( D

. C

. C i r . 1980) (sam e); see al

so A l t ernati ve Sys. C on cepts , In c . v. Syn op sys, I nc. , 374 F. 3d 23, 32 ( 1s tC i r . 2004) ( s t at i ng t hat“[a ] s j udi ci al e sto p p e l ap p e a rs n e ith e r c lea rlyp ro c e d u ra l n o r c lea rly su b sta nt i ve, t her e maybe a l egi t i m at e ques t i on as t o w hether fede r al or s t at e l aw . . . s houl d s uppl yt he rul e of de ci s i on, ” but d ec li n ing to an sw er it ). 32 Li f e I ns . C o. , 6 9 0 F

. 2 d 5 9 5 , 5 9 8 n . 4 (6th C ir

. 1 9 8 2 ). 22
T h o u g h t her e i s no r i gi d t es tforj udi ci al es t oppel , thr ee f a c to rs in f

o rm a f e d e ra l co u rt’s d e c isio n w h e th e r to a p p lyit: t her e mustbe ( 1) “i r r econci labl yi ncons i s t entpos i t i ons ; ” ( 2) “adopt ed .

. . i n bad fai t h; ” and ( 3) “a s how i ng t hat

. . . es t oppel

. . . add res s[es] t he h arm and

. . . no l esser s a n c ti on [i s] s uffi ci ent
. ” C hao v. R oy’s C ons tr . , I nc. , 5 1 7 F .3 d 1 8 0 , 1 8 6 n .5 ( 3d C i r . 2008) ( i nt ernal quo tat ion mar ks om i t t ed)

. W e do not cons i dert hes e fa ct or s , how ever , beca us e, i n ourC i r cui tj udi ci al e sto p p e l is g e n e ra llyn o t a p p ro p ria te w h e re th e d e f e n d in g p a rty di d notconvi nce the D i s t r i ctC ourtt o acc ept i t s ear l i erpos i t i on. U n itedS ta tes v . P e lu llo , 399 F. 3d 197, 2 2 2 –23 ( 3d C i r . 2005) ( quot i ng N

ew H am ps hi r e v. Mai ne , 532 U

. S. 742, 750–51 (2 0 0 1 )); D am Thi ngs Fr om D enm ark v. R us s B er r i e & C o. , I nc. , 2 9 0 F .3 d 5 4 8 , 5 5 9 n .1 6 (3 d C ir . 2 0 0 2 ); Montr os e Med. G r oup P ar t i ci pat i ng Sav. P l an v. B ul ger , 2 4 3 F

. 3 d 7 7 3 , 7 7 8 (3 d C ir

.33 2 0 0 1 ).
H er e the D i s t r i ctC our tneveracc ep ted H art for d’ s pr i or pos i t i on. H ar t for d w i t hdr ew t hat pos i t i on and as s ert ed i t s new one ( i

. e. , t hat the int err el at ed w rongf ul act s provi si on app l i es) b e f o re th e C o u rt ru led o n its m o ti o n to d is m iss . W h e n it d id rul e, t he C our tdi d notr el yon H art for d’ s i nit ial pos i t i on. R ather , i thel d agai ns tH art for d w i t houtdi s cus s i ng ei t her H a rtford’s pri or or new po si t i on . O n sum m aryj ud gm e n t, H artfo rd re asse rt ed it s n ew p o sit ion , an d the D is tri ct C o u rt rel i ed o n it

. B ecause t he C ou rtnev er r el i ed o n H art ford’s fi rs t p o s itio n , w e s h a ll n o t b a r i ts n e w o n e . W e do notm ean t o su gges tthatw her e no courthas a c c e p te d a n in itia l p o s itio n , ju d ic ia l e s to p p e l c a n n e v e r a p p ly. W e w ill a p p ly it to n e u tra lize th re a ts t o ju d icia l i n teg rity how evert heym ayar i s e. Forexampl e, i n Kr ys talC adil l acO lds m obi l e GM CTruc k, I nc. v. G ener alMot ors C or por at i on , 337 F. 3d 314 ( 3d C i r . 2003) , a bankrupt cycase , w e appl i ed j udi ci al es t oppel even though no courthad eve r reli ed on the d e b to r ’ s i n i t ia l p o s itio n . I d. at32 0– 21

. W e did so becau se cr edi t or s al m os tcert ai nl yhad r el i ed on i t , underm i n ing the b a n k ru p tc yp ro c e s s b yw e a k e n in g th e irb a rg a in in g p o s itio n . I d. a t 3 2 4

– 2 5

. H er e, G

- I has pr ovi ded no evi dence of a thr eatt o j udi ci al i n t e g r i t yo t h e rt h a n Ha r t f o r d ’ s i n c o n s i s t e n tp o s i t i o n s . We bel i eve a ppl y i ng j udi ci al es t oppel her e pre s ent s a gre at ert hr eat34 t o j udi ci al i nt egr i t y . W e do notpr ecl ude ar gum ent s notacc ept ed byt he D i s t r i ctC our t i n par t t o ens ur e t hat t he or deri n w hi ch a par t ypr es ent s i t s cl ai m s does notdet erm ine the out come of a cas e. W i t houtt hi s l i m i t at i on, an amendm ent t o a compl ai ntcan chec km at e oppos i ng couns el byi ntr oduci ng a n ew clai m t he defe ns e of w hi ch contr adi ct s the oppos i t i on’ s i ni t i al p o s i t i on. B ya me n d i n g i t s c o mpl a i n t , a p l a i n t i f f c o u l d ( i n t e n t i o n a l l yor n o t) f o r c e th e d e f

e n se to c h o o se b e tw e e n c o n c e d in g th e o ld cl ai m ort he new one. T hat resu l ti s undes i r abl e bec aus e a defe nd ant ough tt o h ave the op po rtun i t yt o p ut up t he b est pos s i bl e def

ens e i n l i ghtof al l the cl ai m s agai ns ti t
. W her e, as her e, a def

endant h as changed pos i t i on i n r es pons e t o an amended compl ai nt , ther e i s no offen se t o t he i nt egr i tyof the ju d icia l p ro c e ss w a rra n tin g e sto p p e l. T h e re is o n lyd a n g e r to t hatpr oces s avert ed.
I V. CO NC L US I ON
Be c a u s e i twa s c o n c e r n e d t h a tRe l i a nc e wo u l d b e c o me i ns ol vent , G

- I s hi ft ed partof the r i s k underan exi s t i ng R el i ance p o licyto H a rtf

o rd . F o r a h ig h e r p ric e , itm ig h t h a v e sh if ted a ll of i t
. B eca us e i tdi d n o t pa ythathi gherpr i ce a nd R el i ance b e c a m e in so lv e n t, G -I m u st s e e k c o v e ra g e f o r risk s it k e p t w ith R el i ance i n t hatcompany ’ s l i qui dat i on pr ocee di ng. H art for d, b o th in its d e a lin g s w it h R e lian c e a n d in th e p o licyit i ss u e d to G -I, so u g h t on lyto co v er ris k s start ing in Ju ly2 0 0 0 that w ere notot herw i s e exc l uded ( s uch as by the i nt err el at ed w r ongful ac ts p rov isi o n ). Itsh iel d ed it self f rom the c lai m s fo r w h ich G -I35 now s eeks cover age. W e decl i ne t o t amperw i t h t hi s s cheme. A l t hough H ar t for d s w i t ched i t s pos i t i on befor e the D i s t r i ct C our t , t hatC our t di d not r el y on t he ear l i er pos i t i on, and t hus as a thre sh o ld m att er w e w il l no t bar the ch an g e . W e the ref o re affirm i n all aspect s.