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 9-14-2009 

# P rincet on Ins C o v

. C on ve rium Reins urance Inc P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-2136

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

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w Di git al Reposit ory

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w . vi ll anova . e du . Re c omme nde d C it at ion " P rinc e t on In s C o v

. C on ve rium Rein s ur anc e Inc " (2009). 2009 D e cisio n s . P ape r 675. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/675T he H onor abl e A . W al l ace T as hi m a, Seni orU ni t ed St at es C i r cui tJ udge, * U ni t ed St at es C our tof A ppeal s forthe N i nth C i r cui t , s i t t i ng bydes i gnat i on. NOT P 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. 08- 2136 P RI NC E T ON I NS UR ANC E CO M P ANY,

v. C O N V E R IU M R E IN S U R A N C E (N O R T H A M E R IC A ) I N C ., A ppel l ant

O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

forthe D i s tr i ctof N ew J er s ey ( D . C . N o. 06- cv- 00599) D i s tr i ctJ udge: H onor abl e M aryL . C ooper A r gued M ar ch 12, 2009 B efor e: Fuent es , C hagar es , T as hi m a, C i r cui tJudges * ( Fi l ed: Sept ember14, 2009) OP I NI ON T hom as S. N ovak ( A r gued) J os hua N . H ow l ey S i l l s Cu mmi s & G r o s s P . C. O ne R i ver fr ontPl aza N ew ark, N J 071022

C ouns el f orAppel lant W i l l i am E . M cG r ath, J r . ( A r gued) Smi th , Str a t t o n , W i s e , Heh e r& Br e n n a n , LLP 2 R es ear ch W ay Pr i ncet on, N J 08540 C ouns el f orAppel l ee T A S H IM A , C i r cui tJudge : D efe ndant - A ppel l antC onver i um R ei ns ur ance ( N or th A m er i ca) , I nc. ( “C onver i um ”) appea l s the D i s tr i ctC our t ’ s gr antof s um m aryj udgm enti n favorof Pl ai nt i ff- A ppel l ee Pr i ncet on I ns ur ance C o. ( “Pr i ncet on”) . T he D i s tr i ctC our trul ed that C o n v e riu m w a s lia b le f o r $ 1 .5 m ill io n , p lu s $ 2 0 7 ,0 0 0 in ter e st, u n d e r th e ter m s o f its w o rk e rs ’ c o m p e n s a tio n a n d e m p lo y e rs ’ l ia b ility (“ E L ” ) r e in s u ra n c e tr e a ty w ith P ri n c e to n . W e w ill v a c a te th e ju d g m e n t o f th e D is tr ic t C o u rt a n d re m a n d .

I. B eca us e w e w r i t e forthe part i es , w e r eci t e onl ythos e fa ct s nece s s aryt o our a n a lysis o f

th e is s u e p re s e n te d o n a p p e a l. Pr i ncet on and C onver i um s i gned a c ontr act( the “Rei ns ur ance T r eaty ” orthe

“ T re a ty ” ) in 1 9 9 5 , ac c o rd in g to w h ich C o n v e riu m a g re e d to p ro v id e re in su ra n c e to Pr i ncet on on Pr i ncet on’ s w or ker s ’ compensa t i on i ns ur ance pol i ci es . T he contr actw as dr aft ed byFi r s tR ei ns ur ance I nt erm edi ar i es C orp. ( “Fi r s tR e”) , w hi ch ac t ed as an age ntof P ri n c e to n . In the T reaty , C on veri um agreed thati tw ou l d rei m bu rs e P ri nceton’s w orkers ’3

compensa t i on and EL cl ai m s on an exc es s l os s bas i s . I f a c l ai m exce eded $1 mi l l i on, C onver i um w oul d r ei m bur s e Pr i ncet on’ s addi t i onal cos t s , up t o a maxi m um l i abi l i tyof $1. 5 m i l l i on. Forexampl e, i f an i ns ur ed partym ade a cl ai m t o Pr i ncet on for$500, 000, C onver i um w oul d ow e nothi ng beca us e the l i abi l i tyw oul d notexce ed the $1 mi l l i on th re sh o ld . If

a n in su re d p a rtym a d e a c laim f o r $ 2 .5 m ill io n o r m o re , C o n v e riu m w o u ld payPr i ncet on the maxi m um $1. 5 m i l l i on pr ovi ded underthe Tre aty . M os ti m por t antfor the case at bench , pay m ents un der the tr eat yw ere “s ub j ectt o, ” am on g o ther provis i on s, “w arr ant i es of A R T I C L E V . ” A r t i cl e V i ncl uded fourw arr ant i es , one of w hi ch r ead a s fol l ow s : “[Pr i ncet on] w arr ant s thatthe maxi m um E m pl oy er s ’ L i abi l i tyl i m i t s ar e as fol l ow s , ors o deemed: i . B odi l yI nj urybyA cci dent–$100, 000 eac h acc i dent. . . . ” The $ 1 0 0 ,0 0 0 lim it w a s s u b se q u e n tlyin c re a se d to $ 5 0 0 ,0 0 0 . In iti a lly , the T re a tyc o v e re d o n ly pol i ci es w r i t t en i n N ew J er s ey , buti tw as l at erexpande d t o i ncl ude others t at es , i ncl udi ng N ew Y or k, w hi ch w as added i n M ar ch, 1998. I n A ugus t , 1998, Pr i ncet on i s s ued an i ns ur ance pol i cyt o 1s tC hoi ce M et al & St eel C o. , I nc. ( “1s tC hoi ce M et al ”) . T he pol i cyi ncl uded a $100, 000 l i m i tforE L cl ai m s , but u n b ek n o w n st t o P ri n ce ton , this l im itw as u n en fo rce ab le un d er N ew Y o rk law . In S e p tem b e r, 1 9 9 8 , X in g Z h a n g , the p re sid e n t an d a n e m p lo y e e o f 1 st C h o ice M e tal, su f f e re d a c a tas tro p h ic in

ju ryw h e n h e f

e ll w h ile w o rk in g o n th e ro o f o f a b u ild in g in B r ookl yn. H e fi l ed a c l ai m forw or ker s ’ compensa t i on underhi s pol i cyw i th Pr i ncet on, and he a l s o s ued the ow nerof the hous e fordamages i n N ew Y or k s t at e court . T he ow ner4

o f th e h o u s e f

ile d a th ir d -p a rt yc o m p la in t a g a in s t 1 s t C h o ic e M e ta l f o r i n d e m n if

ic a tio n . I n m os tci r cumst ance s , the w or ker s ’ compensa t i on cl ai m w oul d pr ecl ude Zhang fr om fi l i ng an addi t i onal s ui t , butthe s t at e courtrul ed thatbeca us e Zhang m ayhave be en “gr avel yi nj ur ed” w hi l e w or ki ng on a mul t i fami l ydw el l i ng, he w as perm i t t ed t o s ue under Ne w Yo r k l a w. Be c a u s e th i s s u i twa s o u t s i d e th e wo r k e r s ’ c o mp e n s a t i o n s y s t e m, Pr i ncet on w as l i abl e underi t s E L pol i cy , and bec aus e the pol i cyw as w r i t t en i n N ew Y o rk , the $ 1 0 0 ,0 0 0 lim it o n c o v e ra g e w a s u n e n f o rc e a b le. P rin c e to n se ttl e d th e c a se in 2002 for$4. 4 m i l l i on. T he s ett l ementpr ovi ded thati tw oul d “ful l yand fi nal l ydi s pos e of [Zhang’ s ] w or ker s ’ compensa t i on cl ai m , as w el l as the mat t erpendi ng befor e the C our t . ” T he set t l em ent di d n ot r equ i re that Zh ang refr ai n from fi l i ng futur e w orkers ’ c o m p e n sa tio n c laim s, b u t p ro v id e d th a t an ysu b se q u e n t w o rk e rs’ c o m p e n sa tio n c laim w oul d be “s ubj ectt o a cr edi ti n an amountequal t o the netr ecove ryfr om thi s s ett l ement . ” Pr es um abl y , i f Zhang w er e aw ar ded w or ker s ’ compensa t i on benef i t s i n exce s s of the s ett l ementamount , he w oul d be abl e t o r ecove raddi t i onal m oneyfr om Pr i ncet on i n the exce s s amount . T he l aw y er s w ho r ecomm ended thi s form of s ett l ementr egar ded the p o ss ib ili tyo f

f u tu re w o rk e rs’ c o m p e n sa tio n p a ym e n ts to Z h a n g a s re m o te: th e yto ld Pr i ncet on that , w i th t hi s s ett l ement , “furtherl i abi l i tybefor e the W or ker s ’ C om pens at i on B o a rd is te rm in a te d .” P rin c e to n f

iled a c laim w ith C o n v e riu m , w h ich C o n v e riu m d e n ied tw ice – in Sept ember , 2003, and aga i n i n A ugus t , 2004. C onver i um ci t ed the w arr antypr ovi s i on of5

th e T re a tya n d a rg u e d th a t itw a s re sp o n sib le f o r o n ly$ 5 0 0 ,0 0 0 in E L c o v e ra g e . U p to th a t p o in t, Z h a n g h a d re c o v e re d le s s th a n $ 3 0 0 ,0 0 0 in w o rk e rs ’ c o m p e n s a tio n b e n e f its . B e c a u se C o n v e riu m w a s lia b le o n lyf o r c laim s in e x c e ss o f

$ 1 m ill io n , itc laim e d th a t it di d notow e Pr i ncet on anythi ng underthe tr eaty . Pr i ncet on di s agr eed a nd s ued i n N ew J e r s e ys t a t e c o u r t . Co n v e r i u m r e mo v e d th e c a s e t o f e d e r a l c o u rta n d f

i l e d a c o u n t e r c l a i m, as ki ng fora dec l ar at oryj udgm entthati tw as fr ee of l i abi l i tyt o Pr i ncet on. B oth part i es m oved fors um m aryj udgm ent . T he di s tr i ctcourtgr ant ed Pr i ncet on’ s m ot i on, and C onver i um appea l ed. II. T he D i s tr i ctC our thad j ur i s di ct i on pur s uantt o 28 U . S. C . § 1332, and w e have j ur i s di ct i on pur s uantt o 28 U . S. C . § 1291. W e r evi ew the D i s tr i ctC our t ’ s gr antof s um m aryj udgm entde novo, appl y i ng the s ame st andar d thatthe D i s tr i ctC our tus ed. L a w re n c e v . C ity o

f P h ila d e lp h ia , 527 F. 3d 299, 310 ( 3d C i r . 2008) . T hati s , w e vi ew t he evi dence i n the l i ghtm os tfavor abl e t o the partyoppos i ng s um m aryj udgm entand dr aw a ll ju s tif ia b le , re a s o n a b le in f

e re n c e s in its f

a v o r. Id . W e w i l l aff

i r m i f “the pl eadi ngs , t he di s coveryand di s cl os ur e mat er i al s on fi l e, and anyaff i davi t s s how thatther e i s no gen uine i ssue as t o an ym at eri al factand that [Pri nceton] i s ent i t l ed to j ud gm ent as a m at t er of l aw . ” F ed. R . C i v. P . 56 (c) . T he sam e st and ard app l i es w hen there are cr ossm o tio n s f

o r s u m m a ry ju d g m e n t. Law r ence , 527 F. 3d at310. III .6 A. T he fi r s tques t i on w e mustaddr es s i s choi ce of l aw . T he ca s e w as fi l ed i n N ew J er s ey , buti ti nvol ves conducti n both N ew Y or k and N ew J er s ey , and the Tre atydoes not in c lu d e a c h o ice -o f

-la w p ro v isio n . T h e D istric t C o u rt a p p lied N e w Je rse ylaw b e c a u se it s aw no di ffe r ence aff

ect i ng the out come of t he ca s e w hetherN ew Y or k orN ew J er s ey la w a p p lie d . See Lebegern v. For m an , 471 F. 3d 424, 428 ( 3d C i r . 2006) ( not i ng that underN ew J er s eyl aw , i f the out come of a ca s e w oul d be the s ame underN ew J er s eyl aw a n d th a t o f

a n o th e r s ta te , N e w J e rs e yla w a p p lie s ). W e agr ee w i th the D i s tr i ctC our ton thi s poi nt . B oth N ew Y or k and N ew J er s ey ap p lythe s am e p ri n ciples o f c o n tr ac t l aw relev an t t o this case . In b o th states, w h ethe r a c o n tr a c t is a m b ig u o u s is a q u e s tio n o f la w . G r ow C o. v. C hoks hi , 959 A . 2d 252, 272 (N .J. S u p e r. C t. A p p . D iv . 2 0 0 8 ); Kass v. Kass , 6 9 6 N .E .2 d 1 7 4 , 1 8 0 (N .Y . 1 9 9 8 ). O n ly i f a c our tdet erm i nes thata contr actpr ovi s i on i s ambi guous – thati s , thati ti s s ubj ectt o at le a s t tw o re a s o n a b le in te rp re ta tio n s – s h o u ld th e is s u e b e le f t to a ju ry. B e dr o c k

Fo u n d s ., I nc. v. G eor

ge H . B r ew s t er& Son, I

nc. , 1 5 5 A .2 d 5 3 6 , 5 4 1 (N .J. 1 9 5 9 ); S ta t e v . Ho me I ndem . C o. , 4 8 6 N .E .2 d 8 2 7 , 8 2 9 (N .Y . 1 9 8 5 ). T h e re is o n e d if

f e re n c e b e tw e e n N e w Je rse ya n d N e w Y o rk law re lev a n t to th is c a se , b u t itu lti m a telyh a s n o e f f e c t o n o u r d e c isio n . U n d e r N e w Y o rk law , “[ a ]m b ig u ity i s det erm i ned byl ooki ng w i thi n the fourcorner s of the document , nott o out s i de s our ces . ” Kass , 6 9 6 N .E .2 d a t 1 8 0 . A c o u rt sh o u ld n o t co n sid e r th e m e a n in g o f c o n tra c t term s in7

iso latio n , b u t ra th e r in th e c o n tex t o f th e d o c u m e n t as a w h o le a n d th e c irc u m sta n c e s in w hi ch i tw as exec ut ed, att empt i ng t o under s t and the part i es ’ i nt ent i ons as expr es s ed i n t he d o c u m e n t. I

d. a t 1 8 0 -8 1 . N e w J e rs e yla w a p p e a rs to ta k e a s o m e w h a t b ro a d e r v ie w . E xtr i ns i c fa ct s m aybe cons i der ed, al bei t“onl yforthe purpos e of i nt erpr et i ng the w r i t i ng

– n o t f o r th e p u rp o se o f

m o d if y in g o r e n lar g in g o r c u rta ili n g its ter m s, b u t to a id in det erm i ni ng the meani ng of w hathas been s ai d. ” A t l . N . A i r l i nes v. Schw i m m er , 96 A . 2d 652, 656 ( N . J . 1953) . B eca us e w e conc l ude thatthe contr acti s ambi guous on i t s fac e, and thatextr i ns i c evi dence does notunequi vocal l yr es ol ve the ambi gui ty , thi s di s t i nct i on i s notdet erm i nat i ve. B. T h e c e n tra l issu e in th is c a se is w h e th e r th e w a rra n typ ro v isio n in th e T re a tylim its C onver i um ’ s l i abi l i tyforE L cl ai m s . T he D i s tr i ctC our thel d thatthe contr actw as unambi guous and cont ai ned no s uch l i m i t at i on. T he D i s tr i ctC our tpoi nt ed outthatthe c e n tra l co n tra c t p ro v isio n th a t cr e a ted liab ili tyf o r C o n v e riu m o c c u rre d in A rticle III, in w hi ch C onver i um agr eed t o r ei m bur s e [Pr i ncet on] , on an exc es s of l os s bas i s , forthe amountof u ltim a te n e t lo s s w h ic h [ P ri n c e to n ] m a yp a ya s a re s u lt o f lo s s e s . . . cover i ng W or ker s ’ C om pens at i on and Em pl oy er s ’ L i abi l i tycl as s es of b u sin e ss a s id e n tifie d in A P P E N D IX A , su b jec t to th e u n d e rw riting c riter ia of A R T I C L E I V , the underw r i t i ng gui del i nes of A PPE N D I X B , w arr ant i es o f A R T IC L E V an d ex clus ion s o f A R T IC L E V I. T h e T re a tyd e f

in e d “ u lti m a te n e t lo ss ” a s “ th e su m a c tu a llyp a id b y[ P rin c e to n ] in s ett l ementof l os s es forw hi ch i ti s hel d l i abl e. ” Thi s w as i n turn l i m i t ed s o that8

C onver i um “s hal l notbe l i abl e foranyl os s unt i l [Pr i ncet on’ s ] ul t i m at e netl os s i n eac h occurr ence exce eds $1, 000, 000 and then [Pr i ncet on] s hal l be l i abl e forthe amountof [Pr i ncet on’ s ] ul t i m at e netl os s i n eac h occurr ence i n exce s s of $1, 000, 000 but [Pr i ncet on’ s ] l i abi l i tys hal l notexce ed $1, 500, 000 i n eac h occurr ence . ” A rticle V , the p o rtio n o f th e T re a tyd e a lin g w ith w a rra n ties , sta ted th a t, “[P ri nceton] w arr ants that the m axim um E m ploy ers ’ Liabi l i tyl i m i t s ar e as foll ow s, or so deemed: i . B odi l yI nj urybyA cci dent–$100, 000 eac h acc i dent. . . . ” A ccor di ng t o the D i s tr i ctC our t , the w arr antys ect i on di d notal t erthe bas i c ana l y s i s underw hi ch C onver i um w as l i abl e forup t o $1. 5 m i l l i on forcl ai m s pai d byPr i ncet on i n exce s s of $1 m i l l i on. A l though C onver i um ’ s l i abi l i tyw as “s ubj ectt o . . . [the] w arr ant i es of A R T I C L E V , ” thi s m eantonl ythatPr i ncet on pl edged thati tw oul d i s s ue EL i ns ur ance s ubj ectt o t he l i m i t s des cr i bed i n the w arr ant i es . I n the D i s tr i ctC our t ’ s vi ew , Pr i ncet on compl i ed w i th t he w arr ant i es , offe r i ng a pol i cyt o 1s tC hoi ce M et al w i th E L cover age l i mi t e d ( o n i t s f

a c e ) t o $ 1 0 0 , 0 0 0 . I f

th e p a r t i e s h a d i n t e n d e d t o l i mi tCon v e r i u m’ s EL l i abi l i tyt o $500, 000 peri nci dent , theyw oul d have done s o expl i ci t l yi n the s ect i on that c o n t a i n e d th e o th e rl i mi t a t i o n s o n Con v e r i u m’ s l i a b i l i ty , n o ti n th e warr a n tys e c t i o n . To cons true the w arr antys ect i on as i m pos i ng a l i m i t at i on on cover age w oul d r equi r e deny i ng the comm on under s t andi ng of the w or d “w arr anty . ” Ther efor e, the D i s tr i ctC our thel d, the contr actunambi guous l ydoes notl i m i tE L cover age, and C onver i um w as l i abl e fort he f u ll $ 1 .5 m ill io n in c o v e ra g e , p lu s in ter e st.A s w e pr evi ous l ynot ed, thi s l i m i tw as s ubs equent l yr ai s ed t o $500, 000. 1 9 T he pr obl em w i th t he D i s tr i ctC our t ’ s anal y s i s i s thati tfai l s t o acc ountforthe ph ras e “or so deem ed” in the w arr antysect i on . T he w arr antyprovis i on i n q uest i on st at es,

“ [ P ri n c e to n ] w a rr a n ts th a t th e m a x im u m E m p lo y e rs L ia b ility lim its a re a s f o llo w s , or so deem ed : i . B o d il yInju ryb yA cc iden t–$ 1 0 0 , 0 0 0 ea ch ac cide n t . . . . ” (e m p h asis ad d ed ). 1 W e f o llo w th e p a rties u sa g e a n d u se th e so m e w h a t in e leg a n t term “ D e e m e r C lau se ,” to re f e r to th is p h ra se . C o n v e riu m p ro p o se s th a t th e D e e m e r C lau se , w h ich w a s in c lu d e d in the Tre atyatC onver i um ’ s i ns i s t ence , m eans that , i f Pr i ncet on fai l s t o i ncl ude an enfor cea bl e l i m i ton l i abi l i typur s uantt o the Tre aty , the l i m i tw i l l neverthel es s be dee m ed to h a v e b e e n in c lu d e d , an d th e p o licyw ill b e c o v e re d u n d e r th e T re a tya s if th e lim its w e re in p la c e . Pr i ncet on advoca t es a s l i ght l ydi ffe r enti nt erpr et at i on. A ccor di ng t o Pr i ncet on, t he D eemerC l aus e comes i nt o eff ectonl yi f Pr i ncet on i s s ues an i ns ur ance pol i cyw i th no sta ted lim its o n E L c o v e ra g e . In su c h a c a se , the p o licyis c o v e re d u n d e r th e T re a tya s if i ti ncl uded w arr antyl i m i t s , j us tas C onver i um s ugges t s . Pr i ncet on does notbel i eve the D eemerC l aus e i s i m pl i cat ed i n t he curr entcas e, how ever , w her e the i ns ur ance pol i cyat i s s ue compl i es on i t s fac e w i th the w arr antyr equi r ement . T he 1s tC hoi ce M et al pol i cy d id in c lu d e a lim it o n E L c o v e ra g e – it ju s t s o h a p p e n e d th a t th e lim it w a s u n e n f o rc e a b le . O n ei therunder s t andi ng of the D eemerC l aus e, the w arr antypr ovi s i on cannotbe i nt erpr et ed as the D i s tr i ctC our ts aw i t , s ol el yas a pr om i s e orguar ant ee. I n a typi cal10

w arr anty , the w arr ant oragr ees t o ful fi l l a pr om i s e, and anyfai l ur e t o compl yw i th the p ro m is e w o u ld re p re s e n t a b re a c h o f th e c o n tr a c t. See B L ACK ’ S L AW D I CTI ONARY 1725 ( 9th ed. 2009) ( defi ni ng “w arr anty ” as a type of pr om i s e orr epr es ent at i on w hos e br eac h w ill n o t b e lig h tly e x c u s e d : “ a w a rr a n ty is c o n c lu s iv e ly p re s u m e d to b e m a te ri a l . . . a n d . .

. m us tbe s tr i ct l ycompl i ed w i th”) . U nderei therpr opos ed i nt erpr et at i on of the D eemer C laus e, th e w arran tyin the T rea tyfu n cti o n s d iffe ren tl y . T h e c o n seq u en ce o f P ri n ce ton ’s f a ilu re to c o m p lyw ith th e w a rra n tyis th a t, at lea st in so m e c irc u m sta n c e s, P rin c e to n is d e e m e d to h a v e c o m p lied . E f f e c tiv e ly , the D e e m e r C lau se re d e f in e s th e E L lim its in P ri n c e to n ’s p o lic ie s in a w a yth a t lim its C o n v e ri u m ’s lia b ility u n d e r t h e T re a ty. T he D i s tr i ctC our t , byvi ew i ng the w arr antypr ovi s i on s ol el yas a tr adi t i onal w a rra n ty , ef

f e c tiv e lyre n d e re d th e D e e m e r C lau se m e a n in g les s. T h e p rin c ip le th a t, i n i nt erpr et i ng a contr act , “‘ al l part s of the w r i t i ng and eve ryw or d of i t , w i l l , i f pos s i bl e, be gi ven ef fec t , ’ ” Kr os now s kiv. Kr os now s ki , 126 A . 2d 182, 188 ( N . J . 1956) ( quot i ng 9 W I L L I ST ON ON C ONTRACTS § 4 6 (re v . ed . 1 9 4 5 )); a c c o rdC u m b e rla n d C o u n ty I m pr ovem ent

A uth. v. G SP R ecy cl i ng C o. , 818 A . 2d 431, 438 ( N . J . Super . C t . A pp. D i v. 2003) , i s es peci al l yr el evanther e, w her e C onver i um i ns i s t ed thatthe D eemerC l aus e be in se rte d in to th e T re a tyth a t P rin c e to n ’s a g e n t h a d d ra f ted . T h e D istric t C o u rt e rre d in c o n c lu d in g th a t th e w a rra n tyc lau se , b e c a u se o f its lab e l as a w a rra n ty , u n a m b ig u o u slyd id n o t lim it C o n v e ri u m ’s lia b ility u n d e r t h e c o n tr a c t. C.11

If th e w a rra n tyse c tio n p lac e d so m e lim itatio n o n C o n v e riu m ’s lia b ili tyto P rin c e to n , the q u e stio n re m a in s w h e th e r th e m e a n in g o f th e lim itatio n is u n a m b ig u o u sly defi ned i n t he Tre aty . I f s o, the ca s e ca n be dec i ded atthe s um m aryj udgm ents t age; o th e rw is e , w e m u s t r e m a n d it f o r t ri a l. S e e P e n n b a r rCo r p . v . I n s . Co . o f N. A m. , 976 F . 2 d 1 4 5 , 1 4 9 -50 (3d C ir . 1 9 9 2 ); B edrock Fou nd s. , 155 A . 2d at541. E ach pa r tycont ends thati t s i nt erpr et at i on i s the onl yr eas onabl e one, and thats um m aryj udgm ents houl d be g ra n ted to it. T he s tr onges tar gum entforC onver i um ’ s pos i t i on i s comm on s ens e. I tw oul d be s tr ange f orthe part i es t o have meantt o excl ude N ew Y or k pol i ci es fr om a l i m i t at i on on E L c o v e ra g e th a t a p p lie d to e v e ry o th e r s ta te in w h ic h P ri n c e to n w ro te in s u ra n c e p o lic ie s . B oth part i es under s t ood thatthe Tre atyl i m i t ed EL cover age t o $500, 000, and they pr es um abl ypr i ced the cove r age a ccor di ngl y . I f Pr i ncet on w er e abl e t o es cape the lim itatio n s o f

th e T re a tyb yw riting a n in su ra n c e p o licyth a t co n f o rm e d w ith th e T re a ty w arr ant i es i n form butnoti n s ubs t ance , the part i es ’ i nt ent i ons atthe t i m e of s i gni ng t he c o n tr a c t w o u ld b e d e f

e a te d . T o bol s t eri t s ar gum ent , C onver i um turns t o evi dence of i nt ernal comm uni cat i ons in w h ich P rin c e to n e m p lo y e e s s e e m to h a v e a c k n o w led g e d th a t a $ 5 0 0 ,0 0 0 lim it w o u ld a p p ly . C o n v e riu m c a lls th e se c o n v e rsa tio n s “ c o n tem p o ra n e o u s” w ith th e c o n tra c t, bu t in fac t , the ea r l i es tci t ed comm uni cat i on came fr om 2002, s even y ear s aft erthe Tre atyw as sign ed an d fo u r y ea rs af ter i t w as a m en d ed to inc lud e N ew Y o rk. O n lysli g h tl ym o re12

h e lp f u l f o r C o n v e riu m is d e p o sitio n tes tim o n yf ro m P a u l C u rtis, th e d ra f ter o f th e T re a ty o n b e h a lf

o f P rin c e to n ’s a g e n t, F irst R e . C u rtis te stif ied th a t h e u n d e rsto o d th e w a rra n ty pr ovi s i on as es t abl i s hi ng a l i m i ton cover age. T hi s t es t i m onyi s farfr om concl us i ve, h o w e v e r, b e c a u se it w a s n o t g iv e n u n til 1 2 y e a rs a f ter th e T re a tyw a s d ra f

ted , an d C u rtis u n d e rs ta n d a b ly d o e s n o t a p p e a r t o h a v e re m e m b e re d th e d e ta ils o f d ra f tin g th e T re a ty. C onver i um fur thercont ends thatthe courts houl d adopti t s i nt erpr et at i on beca us e the T re a tyw a s d ra f

ted b yP rin c e to n ’s a g e n t, an d c o n tra c ts s h o u ld b e in terp re ted stric tly a g a in s t th e d ra f

te r. See Ci t

y of O r ange Tw

p. v. E m pi r e Mor t

gage Ser vs . , I

nc. , 775 A . 2d 174, 181 ( N . J . Super . C t . A pp. D i v. 2001) . B utthi s ar gum enti s under cutbythe fa ctt hat the D eemerC l aus e i t s el f w as i ns ert ed i nt o the contr actatC onver i um ’ s i ns i s t ence . Pr i ncet on’ s pos i t i on depends pr i m ar i l yon the s tructur e of the contr act . I f the part i es i nt ended t o pl ace a bl anketl i m i ton C onver i um ’ s E L l i abi l i ty , one mi ghthave e x p e c ted th e m to in c lu d e a n e x p licit lim it i n th e p o rtio n o f th e T re a tyd e a lin g w ith liab ili tylim its, rath e r th a n to c re a te a n o b liq u e lim it i n th e w a rra n tyse c tio n . It i s plausi ble that a contr actw ou l d b e structured t o requir e P ri nceton t o d o it s bestt o est abli sh a lim it o n its E L liab ili ty , b u t to a ss ig n to C o n v e riu m th e risk th a t a g o o d -f a ith a ttem p t to e sta b lish a lim it w o u ld b e in v a lid a ted b yo p e ra tio n o f law . If th e p a rties h a d in ten d e d to d ra w su c h a d istin c tio n , the stru c tu re o f th e T re a tyw o u ld b e a lo g ica l w a yto a c h iev e th is e n d . T o dr i ve home t he poi ntthatthe Tre atydoes notdi r ect l ys t at e w hatC onver i um13

bel i eves i tdoes , Pr i ncet on pr oduced s ever al otherC onver i um contr act s thates t abl i s hed l i m i t s on E L cov erage m ore exp l i ci t l ythan the T reatydid. B ut the lack of p aral l el i sm betw een thes e otherdocument s and the Tre atycan be expl ai ned bythe fa ctthat C onver i um di d notdr aftthe Tre aty . Fur therm or e, atl eas tone of thes e C onver i um contr act s defi ned the l i m i t at i ons on cover age i n the w arr antys ect i on, s ugges t i ng thatt he T re a ty w a s n o t u n u s u a l in th is re g a rd . T he l anguage of the Tre atythus admi t s of m or e than one i nt erpr et at i on, and extr i ns i c evi dence does notpr ovi de much hel p. I n s hor t , the contr acti s ambi guous , and th e D is tr ic t C o u rt s h o u ld n o t h a v e g ra n te d s u m m a ry ju d g m e n t in f a v o r o f e ith e r p a rt y . See P enn ba rr , 9 7 6 F .2 d a t 1 4 9 -5 0 . I V. Forthe r eas ons di s cus s ed above , the j udgm entof the D i s tr i ctC our tw i l l be v a c a ted , an d th e c a se w ill b e re m a n d e d f o r f u rth e r p ro c e e d in g s c o n sis ten t w ith th is o p in io n . E a c h p a rtysh a ll b e a r its o w n c o sts o n a p p e a l.