## United States Court of App eals

F O R T H E E I G H T H C I R C U I T

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No. 1 0- 30 99

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Em pl oyers Re in su ran ce Co m pa ny, *

* App el la nt

, *
* App eal fro m

th e Uni te d S ta te s

v. * Dis tri ct Co ur t fo r th e

* W es te rn Dis tri ct of M is so ur i.

Mas sa ch us et ts Mu tu al Life I ns ur an ce *
Co m pa ny, *

* App el le e. *

__ __ __ __ __ _

Su bm it te d: Ju ne 14 , 20 11
Fi le d: Sep te m

be r 7, 2 01 1

__ __ __ __ __ _

Befo re BYE an d M ELLOY, Cir cu it Ju dg es , and ERICKSEN, Dis tri ct Ju dg e. 1

__ __ __ __ __ _
ERICKSEN, Dis tri ct Ju dg e.

The pri m ary is su e in th is ap pe al is whet he r a rei ns ur an ce ag reem en t b et ween

Em pl oyers Rei ns ur an ce Co m pa ny (“ E RC ”) an d Ma ssa ch us et ts Mu tu al Life In su ran ce

Co m pa ny (“ Mas s Mu tu al ”) co nt ai ns a fo ll ow- t h e

- se tt le m en ts pr ov is io n. Gran ti ng

The Hon or ab le Jo an N. Eric ks en , Uni te d St at es Dis tri ct Ju dg e fo r th e Dis tri ct 1

of Mi nn es ot a, si tt in g b y

de si gn at io n.pa rti al su m

m ary jud gm en t in Mas s Mu tu al ’s fav or , th e di st ric t co ur t co nc lu de d th at 2

it do es

. The di st ric t co ur t al so co nc lu de d th at ERC h ad br each ed th e ag reem en t by

of fs et ti ng di sp ut ed da m ag es

. Late r, th e di st ric t co ur t co nc lu de d th at th e st at ut e of

li m it at io ns ba rred m os t of ERC’s ch al le ng es th at su rv iv ed th e co nc lu si on reg ard in g

th e fo ll ow- th e-s et tl em en ts pro vi si on . W e aff irm.

I.

In la te 19 92 an d e a r l y 1 9 93

, ERC an d Co nn ect ic ut Mu tu al Life In su ran ce

Co m pa ny (“ CML”) di sc us se d en te rin g in to a rei ns ur an ce ag reem en t, bu t th ey di d no t

reac h an ag reem en t at th at ti m e. Late r in 19 93

, ERC an d CML en te red in to an Exc es s
Dis ab il it y In co m e Rei ns ur an ce Agr eem en t (“ Treat y ”). In 19 96

, Mas s Mu tu al m erg ed

wit h C ML an d a ss um ed CML’s ri gh ts an d o bl ig at io ns un de r th e Treat y

.

Arti cl e I of th e Treat y pr ov id es th at t h e “ ag reem en t ap pl ie s to lo ss su st ai ne d
by th e Rei ns ur ed [Ma ss Mu tu al ] un de r th e di sa bi li ty in co m e po li ci es de sc rib ed in th e
Sch ed ul e

. . . (h erei na fte r c a l l e d po li ci es or po li cy ) as a res ul t of di sa bi li ti es

co m m en ci ng on or aft er th e effe ct iv e da te an d pr io r to th e te rm in at i o n d a t e o f th is

ag reem en t.” I t al so pr ov id es th at “ [t]he da te each di sa bi li ty co m m en ces sh al l be

de te rm in ed by the Rei ns ur ed in acco rd an ce wi th po li cy pro vi si on s.”

Und er Arti cl e II, Mas s Mu tu al ret ai ns a pa rt of th e lo ss , an d ERC in de m ni fie s

Mas s M ut ua l fo r a p art of t he lo ss :

RE T E N T IO N AND REINSU RA N CE

. A s re spe ct s los s pe rt ai nin g
to each pe rs on as a res ul t of each di sa bi li ty reg ard le ss of th e nu m be r of

po li ci es in vo lv ed

, th e Rei ns ur ed sh al l r e ta in as it s own ne t ret en ti on

un de r th is ag reem en t th e pa rt th ereo f in di cat ed in Sch ed ul e Ite m 5, an d

The Hon or ab le Fern an do J. Gait an , Jr

., Ch ie f Ju d g e , Uni te d St at es Dis tri ct 2

Co ur t fo r th e Weste rn Dis tri ct of M is so ur i.

-2

-th e Co rp or at io n wil l in d e mn i f y th e Rei ns ur ed ag ai ns t th e pa rt of su ch
lo ss in di cat ed in Sch ed ul e It em 6.

. . . .

As res pe ct s each di sa bi li ty pe rta in in g to e a c h p ers on , th e Co rp or at io n sh al l in d e mn ify th e Rei ns ur ed fo r da m ag es to whi ch th is

ag reem en t m ay ap pl y by vi rtu e of su bp arag rap h (b ) of Arti cl e IV in th e

sa m e pr op or ti on th at th e a m ou nt of th e lo ss ul ti m at el y bo rn e by th e Co rp or at io n be ars to th e to ta l a mo un t of th e lo ss ex cl us iv e of su ch
da m ag es

.

Acco rd in g to Sch ed ul e Ite m s 5 an d 6, Mas s Mu tu al ret ai ne d 10 0% of th e lo ss fo r an

in it ia l pe rio d, Mas s Mu tu al ret ai ne d 10 % of th e lo ss aft er th e in it ia l pe rio d, an d ERC

in de m ni fie d M as s M ut ua l fo r th e rem ai ni ng 90 % of t he lo ss aft er t he in it ia l p eri od

.

Arti cl e IV d efi ne s “ lo ss ”:

DEFINITION OF LOSS. The wor d “ lo ss ” sh al l m ean on ly su ch

am ou nt s as are act ua ll y pa id by th e R ei ns ur ed fo r di sa bi li ty be ne fit s affo rd ed un de r th e po li ci es , in se tt le m en t of cl ai m s fo r di sa bi li ty be ne fit s

un de r th e po li ci es , or in sa ti sf act io n of jud gm en ts fo r di sa bi li ty be ne fit s

un de r th e po li ci es

. The wor d “ lo ss ” i n c lu de s th e am ou nt of pr em iu m

cu rren tl y waiv ed un de r th e po li ci es

. The wor d “ lo ss ” sh al l no t in cl ud e:

(a) cl ai m

ex pe ns es or s al ari es pa id to em pl oyees o f th e Rei ns ur ed ;

(b ) pu ni ti ve , ex em

pl ary or co m

pe ns at or y da m ag es ari si ng ou t of th e

co nd uc t o f th e Rei ns ur ed in th e in ve st ig at io n, t ria l or se tt le m en t of an y cl ai m or fai lu re to pa y or de la y in pa y m en t of an y be ne fit s

un de r an y po li cy ; pr ov id ed th at

, th is su bp arag rap h (b ) sh al l no t

ap pl y if th e Co rp or at io n co nc ur s in th e Rei ns ur ed ’s co ur se of

co nd uc t;

(c) an y st at ut or y pe na lt y im po se d up on th e Rei ns ur ed on acco un t of

an y un fai r tr ad e p ract ic e o r an y un fai r cl ai m

pra ct ic e.

-3

-Arti cl e IX ad dr es s e s Mas s Mu tu al ’s ob li ga ti on to in ve st ig at e, pa y , se tt le

, or

de fen d cl ai m s, an d to gi ve no ti ce to ERC of cert ai n cl ai m s; ERC’s ob li ga t i on to

rei m bu rs e Mas s Mu tu al up on rece ip t of pr oo f of pa y m en t; ERC’s rig ht to pa rti ci pa te

in th e in ve st ig at io n, ad

jus tm en t, or de fen se of cert ai n cl ai m s; Mas s M u t u a l ’s

ob li ga ti o n t o se nd to ERC qu art erl y su m m ari es ; an d th e al lo cat io n of lu m p su m

se tt le m en ts :

CLAIMS

. The Rei ns ur ed ag rees th at it wil l cau se to be
in ve st ig at ed

, pa id

, se tt le d or de fen de d al l cl ai m s ari s i n g u n d er th e
po li ci es an d th at it wil l gi ve p r o mp t no ti ce to th e Co rp or at io n of an y

ev en t or de ve lo pm en t whi ch

, in th e jud g men t of th e Rei ns ur ed

, m ig ht

res ul t in a cl ai m up on th e C o r po rat io n he reu nd er, an d wil l fo rward

pr om pt ly to th e Co rp or at io n co pi es of su ch cl ai m do cu m en ta ti on as m ay be req ue st ed by the Co rp or at io n.

The Co rp or at io n sh al l re i m bu rs e th e Rei ns ur ed or it s le ga l

rep res en ta ti ve pr om

pt ly fo r lo ss ag ai ns t whi ch in de m n i t y i s he rei n
p r o v i d e d

, up on rece ip t in th e ho m e of fic e of th e Co rp or at io n of

sa ti sf act or y ev id en ce o f pa y m en t o f su ch lo ss

.

The Co rp or at io n sh a l l h a v e th e rig ht

, at it s own ex pe ns e, to

pa rti ci pa te joi nt ly wit h th e Rei ns ur ed in th e in ve st ig at io n, ad jus tm en t or de fen se of an y cl ai m whi ch

, in th e jud gm en t of th e Co rp or at io n, it is or

m ig ht be co m e ex po se d.

W i t h i n 35 da y s aft er th e en d of each cal en da r qu art er, th e Rei ns ur ed sh al l m ai l to th e Co rp or at i o n a su m m ary of th e es ti m at ed

va lu es fo r th e ou ts ta nd in g clai m s rein su red by thi s ag reem en t as of th e la st da y of t he qu art er.

As res pe ct s lu m

p su m se tt le m en ts

, th e am ou nt of each se tt le m en t sh al l be d iv id ed by the pe rs on ’s m on th ly ben efi t and th e qu ot ie nt sh al l
be ex pr es se d in m on th s. Los s sh al l th en be al lo cat ed be twee n th e Rei ns ur ed an d th e Co rp or at io n ba se d on th is nu m be r of m on th s in

acco rd an ce wi th Ite m s 5 an d 6 of t he Sch ed ul e.

-4

-Arti cl e XII s et s fo rth th e ab il it y of e it he r Mas s M ut ua l o r ERC t o o ffs et :

OFFSET. The Re i n s u red or th e Co rp or at io n m ay of fs et an y ba la nc e, whe th er on acco un t of pr em iu m s, co m m is si o n s , lo ss or cl ai m

ex pe ns es du e fro m on e pa rty to th e ot he r un de r th is ag reem en t or un de r

an y ot he r rei ns ur a n c e ag reem en t he ret of or e or he reaf

te r en te red in to be twee n th e Rei ns ur ed an d th e Co rp or at io n, whe th er act in g as as su m in g rei ns ur er o r ced in g c om

pa ny.

Afte r Mas s Mu tu al ha d as su m e d C M L’ s rig ht s an d ob li ga ti on s un de r th e

Treat y , ERC ex pr es se d c on cern s ab ou t i ts ab il it y to pa rti ci pa te in th e in ve st ig at io n,
ad jus tm en t, or de fen se of cl ai m s, an d ab ou t Mas s Mu tu al ’s cl ai m ad jud ic at io n. In

19 99

, Mas s Mu tu al a n d ER C ag reed to a Pi lo t Pro ject in whi ch ERC an d it s

rep res en ta ti ve , Dis ab il it y Man ag em en t Serv ic es (“ DMS”)

, rev ie wed di sa bi li ty cl ai m

fil es th at were su bjec t to th e Treat y an d pr ov id ed reco m m en da ti on s to Mas s Mu tu al

. Mas s M ut ua l an d ERC di d n ot ex te nd th e Pi lo t Pr ojec t p as t i ts si x- m on th ter m

.

In 20 02

, Mas s Mu tu al an d ERC en te red in to a Cl ai m s Rev ie w Agr eem en t (“ 20 02 CRA”)

. Und er th e 20 02 CRA, Mas s Mu tu al an d ERC ag reed to al lo w ERC’s

rep res en ta ti ve , DMS, to rev ie w cl ai m s an d to m ak e no n- bi nd in g reco m m en da ti on s to

Mas s Mu tu al

. Mas s Mu tu al an d ERC ag reed th at th e pr oc es s en vi si on ed by th e 20 02
CRA, kn own as th e Eng ag em en t, di d “ no t co ns ti tu te a waiv er of an y ri g h ts or

pr iv il eg es of ei th er pa rty un de r The Treat y .” In th ei r “ Eng ag em en t Gui de li ne s,” th ey

al so ag reed th at Mas s Mu tu al “ sh al l be th e fin al de ci si on -m ak e r i n al l be ne fit

de te rm in at io ns ” an d th at th e “ ag reem en t as to pr oc ed ur es fo r ‘T he Eng ag em en t’ do es

no t affe ct th e co nt ract ua l rig ht s, du ti es an d/ or ob li ga ti on s of ei th er pa rty un de r th ei r
Rei ns ur an ce Agr eem en t, no r li m it an y rem ed i e s a v a i la bl e fo r ei th er pa rty.” Mas s

Mu tu al ter m in at ed th e 2 00 2 C RA.

ERC so ug ht an ot he r ag reem en t th at wou ld al lo w a th ird pa rty to rev ie w cl ai m

fil es , an d Mas s Mu tu al ag reed so lo ng as ERC di d no t us e DMS. In Sep te m be r 20 03

,

-5

-Mas s Mu tu al an d ERC en te red in to a Cl ai m s Rev ie w Agr eem en t (“ 20 03 CRA”) th at

was si m il ar to th e 20 02 CRA. Und er the 20 03 CRA, Mas s Mu tu al an d ERC ag reed

to al lo w ERC’s rep res en ta ti ve , th is ti m e Dis ab il it y In su ran ce Sp eci al is ts

, LLC
( “D IS”)

, to rev ie w cl ai m s an d to m ak e no n- bi nd in g reco m m en da ti on s to Ma s s

Mu tu al

. Mas s Mu tu al an d ERC ag reed th at th e Eng ag em en t un de r th e 20 03 CRA di d

“ no t co ns ti tu te a waiv er of an y rig ht s or pr iv il eg es of ei th er pa rty un de r The Treat y .”

As in 20 02

, th e Eng ag em en t Gui de li ne s pr ov id ed th at Mas s Mu tu al “ sh al l be th e fin al

de ci si on -m ak er in al l be ne fit de t erm in at io ns ” an d th at th e “ ag reem en t as to

pr oc ed ur es fo r ‘T he Eng ag em en t’ do es no t affe ct th e co nt ract ua l rig ht s, du ti es an d/ or
ob li ga ti on s of ei th er pa rty un de r th ei r Rei ns ur an ce Agr eem en t, no r li m it an y rem ed ie s

av ai la bl e fo r ei th er p art y .”

Af t e r i mp l em en ti ng a ne w res erv e syste m an d a ne w cl ai m ad m in is tra ti on

s y st em , Mas s Mu tu al no ti fie d ERC in Sep te m be r 20 04 th at it (Ma ss Mu t u a l ) h a d

,

ov er th e s p a n o f th e rei ns ur an ce rel at io ns hi p, ov erch arg ed ERC $6 m il li on du e

pr im ari ly to m is id en ti fic at io n of so m e cl ai m s as “ co nt in ui ng ” in st ead of “ ne w.” Mas s

Mu tu al al so rev eal ed th at it ha d m is cal cu la te d, an d th us un de r c h a r g e d fo r, res id ua l

be ne fit s un de r cert ai n po li ci es

. Mas s Mu tu al m ad e of fs et s acco rd in g to th e $6 m il li on
cal cu la te d o ve rch arg e an d t he un de rch arg e, whi ch am ou nt ed to $7 12 ,30 5.

A cc or din g to E RC ’ s Cl ai m s Co un se l, th e 20 03 CRA rev eal ed “ se rio us brea ch es

o f th e Treat y by Mas s Mu tu al

, in cl ud in g m is ha nd li ng of cl ai m s, se ek in g
rei m bu rs em en t fo r cl ai m s th at were no t su bjec t to th e Treat y , an d se ek in g
rei m bu rs em en ts fo r ot he r am ou nt s no t rei m bu rs ab le un de r th e Treat y .” In Decem be r

20 05

, ERC pr es en te d twel ve cl ai m s th at it qu es ti on ed fo r rei m bu rs em en t to Mas s

Mu tu al

. In vo ki ng “ fo ll ow th e fo rtu ne s” an d “ fo ll ow th e se tt le m en ts ,” Mas s Mu tu al
reject ed ERC’s req ue st for rei m bu rs em en t i n l at e Ja nu ary 20 06

.

In earl y Mar ch 20 06

, ERC su ed Mas s Mu tu al

. ERC cl ai m ed th at Mas s Mu tu al

ha d br each ed th e Treat y an d th e i mp l i e d d u t y of go od fai th an d fai r de al in g. ERC

-6

-al so so ug ht an acco un ti ng an d a de cl arat io n th at “ ERC is no t ob li ga te d un de r th e

. . .

Treat y to fo ll ow Mas s Mu tu al ’s se tt le m en t act io ns .” ERC st op pe d rei m bu rs in g Mas s

Mu tu al fo r al l cl ai m s un de r th e Treat y sh or tl y aft er t h e act io n’s co m m en cem en t.

Mas s Mu tu al as se rte d co un te rcl ai m s, in cl ud in g on e fo r br each of co nt ract an d on e fo r
br each of th e im

pl ie d du ty o f go od fai th an d fai r de al in g ba se d on ERC’s ces sa ti on

of rei m bu rs em en ts

.

Mas s Mu tu al m ov ed fo r su m m ary jud gm en t on it s co un te rcl ai m fo r br each of

co nt ract ; m ov ed fo r su m m ary jud gm en t on ERC’s cl ai m s b a s e d on Co nn ect ic ut ’s

st at ut e of li m it at io ns , wa i v e r , e s to pp el , a nd la ch es ; an d m ov ed fo r pa rti al su m m ary jud gm en t on ERC’s cl ai m s on th e gr ou nd th at ERC m us t fo l l o w t h e fo rtu ne s an d

se tt le m en ts of Mas s Mut ua l un de r th e Treat y

. Seek in g a de cl arat io n th at th e Treat y
do es no t co nt ai n a fo ll ow- th e-s et tl em en ts pr ov is io n, ERC m ov ed fo r pa rti al su m m ary jud gm en t. The di st ric t co ur t co nc lu de d th at th e Treat y co nt ai ne d an ex pr es s fo ll owth e-s et tl em en ts pr ov is io n, and de ni ed ERC’s m ot io n fo r pa rti al su m m ary jud gm en t,

gr an te d Mas s Mu tu al ’s m ot i o n f o r pa rti al su m

m ary jud gm en t, an d de ni ed as m oo t

Mas s Mu tu al ’s m ot io n fo r su m m ary jud gm en t ba se d on Co nn ect ic ut ’s st at ut e of

li m it at io ns , waiv er, es to pp el

, an d la ch es

. The di st ric t co ur t st at ed th at “ ERC m ay no t

qu es ti on th e cl ai m s ha nd li ng pr act ic es of Mas s Mu tu al ” an d th at “ ERC m ay on ly no w

qu es ti on th os e cl ai m s th at are no t co ve red un de r th e Treat y or th at were m ad e in ba d

fai th .” Co nc lu di ng th at ERC ha d br eac h e d t h e Treat y whe n it st op pe d

rei m bu rs em en ts to Mas s Mu tu al in Apr i l 20 06

, th e di st ric t co ur t gr an te d Mas s

Mu tu al ’s m ot io n for su m m ary jud gm en t on it s cou nt ercl ai m fo r br each of co nt ract

. The di st ric t co ur t a l s o g r an te d su m m ary jud gm en t in Mas s Mu tu al ’s fav or on it s

co un te rcl ai m fo r br each of th e im pl ie d du ty of go od fai th an d fai r de al in g, an d sh or tl y
th erea fte r ERC re im

bu rs ed Mas s M ut ua l fo r th e am ou nt s wi th he ld

.

Af te r de te rm ini ng that th e Treat y co nt ai ne d a fo ll ow- th e-s et tl em en ts pr ov is io n,

th e di st ric t co ur t or de red ERC to di sc lo se whe th er it in te nd ed to ch al le ng e in di vi du al

rei ns ur ed cl ai m s on a cas e-b y -ca s e ba si s an d, if so , to id en ti fy th em an d th e

-7

-un de rlyin g th eo ry of li ab il it y

. Of th e cl ai m s th at ERC in te nd ed to ch al le ng e on a

cas e-b y -cas e ba si s, th e di st ric t co ur t co nc lu de d th at ei gh t pr es en te d “ a ge nu in e is su e

of m at eri al f

act as to whe th er Mas s Mu tu al ex erci se d it s di sc ret io n ou ts id e of th e

Treat y .” Late r, th e di st ric t cou rt con cl ud ed th at Co nn ect ic ut ’s st at ut e of li m it at io ns
ba rred si x of th e ei gh t. ERC ab an do ne d th e rem ai n i ng two

. Afte r de te rm in in g th e

am ou nt of in te res t d ue on th e rei m bu rs em en ts wit hh el d by ERC from Apr il 20 06 to Aug us t 20 08

, th e di st ric t co ur t en te red ju d g men t. On ap pe al

, ERC as se rts th at th e
d is tri ct co ur t erro ne ou sl y co nc lu de d th at th e Treat y ha s a fo ll ow- th e-s et tl eme n t s

pr ov is io n; th at th e di st ric t co ur t erro ne ou sl y co nc lu de d th at Co nn ect ic ut ’s st at ut e of

li m it at io ns ba r r e d s i x of it s ch al le ng es ; an d th at th e di st ric t co ur t erro ne ou sl y

co nc lu de d th at ER C h a d b reac he d th e Treat y by st op pi ng rei m bu rs em en ts to Mas s

Mu tu al in Apri l 2 00 6.

II.

“ In a di ve rs it y act io n su c h a s th is

, we ap pl y st at e su bs ta nt iv e la w.” Eng v.

Cu mmin gs
, McCl or ey, Dav is & Ach o, PLC

, 61 1 F.3 d 42 8, 43 2 (8 th Ci r. 20 10 ). The

di st ric t cou rt det erm in ed

, an d th e pa rti es ag ree, th at Co nn ect ic ut la w go ve rn s. “ W e

rev ie w de no vo a di st ric t co ur t’s gr an t o f s u mm ary jud gm en t, as well as it s

in te rp ret at io n o f st at e la w and th e te rm s o f a co nt ract .” Ace Ele c. Co nt ra ct or s, In c.

v. In t’l Bh d

. o

f El e c

. W

or ker s, Lo ca l Uni on No

. 29 2

, 41 4 F.3 d 89 6, 89 9 (8 th Ci r.

20 05 ).

A.

ERC as se rts th at th e di st ric t co ur t erro ne ou sl y co nc lu de d th at th e Treat y ha s a

fo ll o w

- t h e

- s et tl em en ts pr ov is io n. ERC m ai nt ai ns th at su ch a pr ov is io n is ne it he r

ex pr es sl y no r im

pl ie dl y in th e Treat y , an d th at th e di st ric t co ur t im pr op erl y res or te d

to ex tri ns ic ev id en ce.

-8

-Und er Co nn ect ic ut la w, a co ur t co ns tru es a rei ns ur an ce tre at y to effe ct ua te th e

in te nt of th e pa rti es as ex pr es se d by th ei r wor ds an d pu rp os es

. Har tf or d Acci de nt &

In de m. Co

. v. Ace Am

. Rein su ra nc e Co

. , 93 6 A.2d 22 4, 23 1 (Co nn

. 20 07 ).

Una m bi g u o u s t erm s rece iv e th ei r pl ai n an d or di na ry m ean in g. Id

. A rei ns ur an ce

tre at y ’s pr ov is io n is am

bi g u ou s whe n it is reas on ab ly su sc ep ti bl e to m or e th an on e
read in g. Id

. The i ss ue of wh et he r an am bi gu it y ex is ts is on e o f la w. Id

.

Pri m ary in su rers r e i n s u re to di ve rs ify ris k. The m ech an ic s of
rei ns ur an ce ca n b e si m

pl y de sc rib ed . On e in su rer (a “ ced in g i ns ur er”)

“ ced es ” al l or pa rt of th e ris k rel at in g to a po li cy , or a gr ou p of po li ci es , to a rei ns ur er. A po rti on of ris k no t “ ced ed ” is “ ret ai ne d.” The rei ns ur er in de m ni fie s th e ced in g in su rer fo r an y li ab il it y in cu rred th at is co ve red by th e rei ns ur an ce. The rel at io ns hi p c r e a t ed is st ric tl y on e of
in de m ni fic at io n. The rei ns ur er ha s no pr iv it y wit h, an d is ge ne ral ly no t li ab le to , th e o rig in al pu rch as er o f th e u nd erl y in g p ol ic y

.

Tr av el er s In de m. Co

. v. Sc or Rein su ra nc e Co

. , 62 F.3 d 74

, 76 ( 2 d C i r. 19 95 ). A

fo ll ow- th e

- fo rtu ne s cl au se req ui res “ a rei ns ur er to acce pt th e ced en t’s go od fai th

de ci si on s on al l th in gs co nc ern in g th e un de rlyin g in su ran ce te rm s an d cl ai m s ag ai ns t

th e un de rlyin g in su red .” N. Rive r In s. Co

. v. Ace Am. Rein su ra nc e Co

. , 36 1 F.3 d 13 4,

13 9- 40 (2 d Ci r. 20 04 ). A fo ll ow- th e-s et tl em en ts cl au se “ r e q u i res a rei ns ur er to

in de m ni fy a ced en t fo r a se tt le m en t as lo ng as th at se tt le m en t is reas on ab le an d m ad e

in go od fai th .” Id

. at 13 9. The wor di ng of fo ll ow- th e-s et tl em en ts cl au se s m ay va ry

. Se e ge ne ra ll

y W il li am C. Hof

fm an , Co mmon La w of Rein su ra nc e Lo ss Se tt le men t

C l a us es : A Co mpa ra ti ve Ana ly si s of th e Ju di ci al Rul e Enf or ci ng th e Rein s u r e r ’

s

Co nt ra ct ua l Obl ig at io n to In de mni fy th e Rein su re d f

o r S et tl emen ts

, 28 Tort & In s.

L.J. 6 59 , 66 0 n .1 (1 99 3)

.

-9

-Dis cern in g no am bi gu it y in th e Treat y , we co nc lu de th at it co nt ai ns a fo ll owth e-s et tl em en ts pr ov is i o n

. A r ti cl e I of th e Treat y pr ov id es th at th e “ ag reem en t 3

ap pl ie s to lo ss su st ai ne d by [Ma ss Mu tu al ] un de r th e di sa bi li ty in co m e p o l ic ie s
de sc rib ed in th e S c h ed ul e

. . . (h erei na fte r cal le d po li ci es or po li cy ) as a res ul t of

di sa bi li ti es co m

m en ci ng on or aft er th e effe ct iv e da te an d pr io r to th e te rm in at io n da te

of th is ag reem en t.” Und er Arti cl e II, ERC “ wil l in de m ni fy [Ma ss Mu tu al ] ag ai ns t th e

pa rt of su ch l o s s i n d i c a te d in Sch ed ul e Ite m 6.” Arti cl e IX st at es th at ERC “ sh al l

rei m bu rs e [Ma ss Mu tu al ] pr om pt ly fo r lo ss ag ai ns t whi ch in de m ni ty is he rei n

pr ov id ed

, up on rece ip t in th e ho m e of fic e of th e Co rp or at io n of sa ti sf act or y ev id en ce

of pa y m en t o f su ch lo ss .” Arti cl e IV d efi ne s “ lo ss ” to “ m ean on ly suc h am ou nt s as

are act ua ll y pa id by [Ma ss Mu tu al ] fo r di sa bi li ty be ne fit s affo rd ed un de r th e po li ci es , in se tt le m en t of cl ai m s fo r di sa bi li ty be ne fit s un de r th e po li ci es , or in sa ti sf act io n of
jud gm en ts fo r di sa bi li ty be ne fit s un de r th e po li ci es .” Thu s, ERC ag reed to pr om pt ly

rei m bu rs e Mas s Mu tu al fo r a pa rt of a mo un ts act ua ll y pa id by Mas s Mu tu al fo r
di sa bi li ty b en efi ts affo rd ed un de r th e po li ci es , i n se tt le m en t of cl ai m s fo r di sa bi li ty

be ne fit s un d e r t h e po li ci es , or in sa ti sf act io n of jud gm en ts fo r di sa bi li ty be ne fit s

un de r th e p ol ic ie s.

W e ha ve no oc cas io n he re to pr eci se ly di st in gu is h “ fo ll ow th e fo rtu ne s” fro m 3

“ fo ll ow th e se tt le m en ts .” Cf . Re li aS ta r L if

e In s. Co . v . I

OA Re, In c. , 3 03 F.3 d 87 4,
87 8 n.3 (8 th Ci r. 20 02 ) (“ We no te th at th e cas e la w an d th e an al y si s of cert ai n

sc ho la rly wor ks di sa gr ee as t o t he ex act sc op e an d m ean in g of th e ‘foll ow- th e-fo rtu ne s’ do ct rin e.

. . . [W ]e do no t en de av or to res ol ve th e am bi gu it ie s

no te d i n t he se so ur ces .”); 1A St ev en Pl it t et al

., Co uc h o n In su ra nc e § 9 :2 5 n .1 (3 d
ed

. 20 10 ) (n ot in g th at m an y co ur ts refe r to th e co n c e p t of fo ll owi ng se tt le m en ts

,

“ so m ewh at co nf

us in gl y , as p a r t o f t he ‘foll ow th e fo rtu ne s cl au se ’”). Befo re th e di st ric t co ur t, ERC no te d th at “ [c]ou rts ha ve freq ue nt ly us ed th e te rm s ‘foll ow th e fo rtu ne s’ an d ‘foll ow th e s et tl em en ts ’ in te rch an ge ab ly, al th ou gh ‘foll ow th e

se tt le m en ts ’ is m or e pr eci se ly a su bs et of th e ‘foll ow th e fo rtu ne s ’ d o c t rin e.” ERC

us ed “ fo ll ow th e se tt le m en ts ” to refe r to bo th “ fo ll ow th e se tt le m en ts ” an d “ fo ll ow th e f o r t u ne s” be fo re th e di st ric t co ur t an d on ap pe al

. Si m il arl y , M as s Mu tu al ha s u s e d

“ fo ll ow th e fo rtu ne s” to refe r to b o t h “ fo ll ow th e se tt le m en ts ” an d “ fo ll ow th e fo rtu ne s.”

-1 0-W e are no t pe rs ua de d by ERC’s as se rti on th at rei m bu rs ab le lo s s d o e s n ot

ex te nd to pa y

men ts or se tt le m en ts m ad e by Mas s Mu tu al to it s in su red s th at are
be y on d th e be ne fit s affo rd ed un de r th e po li ci es

. “ Los s” un de r th e Treat y do es in cl ud e

am ou nt s th at Mas s Mu tu al pa y s “ fo r di sa bi li ty be ne fit s affo rd ed un de r th e po li ci es ,”

bu t it al so in cl ud es am ou nt s th a t Mas s Mu tu al pa y s “ in se tt le m en t of cl ai m s fo r
di sa bi li ty be ne fit s un de r th e po li ci es .” A cl ai m fo r di sa bi li ty be ne fit s un de r a po li cy

m ig ht be co ve red by th e po l i c y, or it m ig ht no t. Am ou nt s pa id by Mas s Mu tu al in

se tt l em en t of su ch a cl ai m un am bi gu ou sl y co ns ti tu te rei m bu rs ab le lo ss , su bjec t to

ERC’s well es ta

bli she d, lim ite d ab ili ty to ch al le nge Ma ss Mut ua l’s co ve rag e de ci si on

. Se e, e.g

. , Tr av el er

s Ca s. & Su r. Co

. v. In s. Co

. of N. Am.

, 60 9 F.3 d 14 3, 14 9 (3 d Ci r.

20 10 ) (“ [A] rei ns ur er se ek in g to av oi d p ay m en t m us t s ho w eit he r th at th e co ve rag e
de ci si on s th at le d to th e rei ns ur er’s li ab il it y to th e in su rer were m ad e in ba d fai th

, or

th at th e co ve rag e pr ov id ed cl earl y fel l ou ts id e th e sc op e of th e po li ci es th e rei ns ur er

ag reed to rei ns ur e.”); Am. Empl oy er s’ In s. Co

. v. Sw is s Rein su ra nc e Am. Co rp

. , 41 3

F.3 d 12 9, 13 2 (1 st Ci r. 20 05 ) (“ The cert ifi cat es al so co nt ai ne d ‘foll ow- th e-fo rtu ne s’

pr ovisio ns, of

te n de sc rib ed as ‘foll ow- th e-s et tl em en ts ’ pr ov is io ns

. The y pr ecl ud e th e
rei ns ur er fro m ch al le ng in g a ced en t’s de ci si on to se t t l e s o lo ng as th e se tt le m en t is

‘reaso na bl y wit hi n th e te rm s of th e [ced en t’s] po li cy , ev en if no t te ch ni cal ly co ve red
by it ’ an d so lo ng as th e ced en t h as act ed in go od fai th .” (al te rat io n i n ori gi na l)) ; N.

Rive r In s. , 36 1 F.3 d at 13 9- 40 (s ta ti ng th at fo ll ow- th e-fo rtu ne s do ct rin e “ in su la te s a
rei ns ur ed ’s li ab il it y de te rm in at io ns fro m ch al le ng e by a rei ns u r er un le ss th ey are

frau du le nt

, in ba d fai th

, or th e pa y m en ts are ‘clear ly be y on d th e sc op e of th e or ig in al

po li cy ’ or “ in ex ces s of [th e rei ns ur er’s] ag reed -to ex po su re’” (al te rat io n in or ig in al )
(q uo ti ng Ch ri st ia ni a Gen

. In s. Co rp

. of N.Y

. v. Gre at Am. In s. Co

. , 97 9 F.2 d 26 8, 28 0
(2 d C ir. 1 99 2) )).

W e reject ERC’s as se rti o n t h a t th e di st ric t co ur t im pr op erl y res or te d to

ex tri ns ic ev id en ce. In co nc lu di ng th at th e Treat y co nt ai ns a fo ll ow- th e-s et tl em en ts

pr ov is io n, th e di st ric t co ur t st at ed th at th e Treat y was un am bi gu ou s an d th at ex tri ns ic

-1 1-ev id en ce was un ne ces sa ry

. Fi na ll y , ha vi ng co nc lu de d th at th e Treat y un am bi gu ou sl y

req ui res ERC to fo ll ow th e se tt le m en ts of Mas s Mu tu al

, we ex pr es s no op in io n as to

whe th er fo ll ow th e se tt le m en ts i s an im pl ie d te rm of th e Treat y un de r Co nn ect ic ut

la w.

B.

ERC co nt en ds th e di st ric t co ur t erro ne ou sl y co nc lu de d th at Co nn ect ic ut ’s si xy ear l i mi t a t i o ns pe rio d, Co nn

. Gen

. St at

. § 52 -5 76 (a), ba rred ERC’s ch al le ng es to

se ve ral cl ai m s su bm it te d by Mas s Mu tu al

. “ ‘T he qu es ti on of whe th er a pa rty’ s cl ai m 4

is ba rred by th e st at ut e of li m it at io ns is a qu es ti on of la w, whi ch [ w e r e v i e w] de

no vo .” W

at ts v. Ch it te nd en , 22 A.3 d 12 14

, 12 19 (Co nn

. 20 11 ) (q uo ti ng Cer ta in

Und er wr it er

s at Ll oy d’

s, Lon do n v. Coo

pe rma n , 95 7 A.2d 83 6, 85 0 (Co nn

. 20 08 )).

ERC fir st co n t e n ds th at Arti cl e VII of th e Treat y co ns ti tu te s a to ll in g

ag reem en t. The di st ric t co ur t fo un d no am bi gu it y in Arti cl e VII and co nc lu de d th at

th e art ic le ’s pl ai n la ng ua ge rev eal ed no in te nt to to ll th e st at ut e of li m it at io ns

. Arti cl e VII p ro vi de s:

REINSURANCE PREMI UM ADJUSTMEN T. The fir st rei ns ur an ce pr em iu m ad

jus tm en t fo r each li ab il it y pe rio d sh al l be m ad e

on e y ear aft er th e cl os e o f th e li ab il it y pe rio d. Rei ns ur an ce pr em iu m ad jus tm en t fo r each l i ab il it y pe rio d sh al l be m ad e an nu al ly th erea fte r

un ti l al l lo ss es res ul ti ng fro m di sa bi li ti es co m m en ci ng du rin g t h e li ab il it y pe rio d an d du rin g each pr eced in g li ab il it y pe rio d an d fo r whi ch [ERC] is li ab le sh al l h av e b een pa id

.

W e de cl in e to co ns id er ERC’s as se rti on th at th e st at ut e of li m it at io ns do es no t 4

ba r it s ch al le ng es “ as a m at te r of fact ” be cau se ERC rai se d th e is su e fo r th e fir st ti m e

on ap pe al in it s rep ly br ie f. Se e Ban k of Am., N.A. v. UMB Fin

. Se rv s., In c. , 61 8 F.3 d
90 6, 9 11 n.4 (8t h C ir. 2 01 0)

.

-1 2-. . . .

Rei ns ur an ce pr em iu m ad jus tm en ts sh al l co nt in ue a fte r th e
te rm in at io n da te of th is ag reem en t an d th e ev en t of te rm in at io n of th is

ag reem en t sh al l no t affe ct [ERC’s] ob li ga ti on un de r th is art ic le to ret ur n rei ns ur an ce pr em iu m or [Ma ss Mu tu al ’s] ob li ga ti on un de r th is art ic le to

pa y ad di ti on al rei ns ur an ce p rem iu m

.

Arti cl e VII pr ov id es fo r an nu al rei ns ur an ce pr em iu m ad jus tm en ts th at co nt in ue aft er

th e Treat y ’s ter m in at io n, b ut we ag ree wi th th e d is tri ct co ur t t ha t n ot hi ng in Arti cl e
VII in di cat es th at th e p art ie s ag reed to to ll th e st at ut e o f li m it at io ns

. 5

ERC n ex t argu es th at Mas s M ut ua l’s co nt in ui ng co ur se of c on du ct to ll ed th e

st a t u t e o f li m it at io ns

. The di st ric t co ur t co nc lu de d th at to ll in g of th e st at ut e of

li m it at io ns pu rs ua nt to a co nt in ui ng co ur se of co nd uc t wou ld no t be pr op er un de r

Co nn ect ic ut law.

“ Co nn ect ic ut co ur ts

. . . ha ve reco gn iz ed th at whe re th ere is a co nt in ui ng co ur se

of co nd uc t co ns ti tu ti ng a br each of du ty, th e li m it at io ns pe rio d do es no t be gi n to ru n,

or is to ll ed , un ti l t ha t co nd uc t t erm in at es .” Ci ty of W . Ha ven v. Co mmerc ia l Uni on

In s. Co

. , 89 4 F.2 d 54 0, 54 5 (2 d Ci r. 19 90 ). “ To su pp or t a fin di ng of a ‘con ti n u i ng

co ur se of co nd uc t’ th at m ay

to ll th e st at ut e o f li m it at io ns th ere m us t b e ev id en ce of

th e br each of a du ty th at rem ai ne d in ex is te nc e aft er co m m is si on of th e or ig in al wro ng
rel at ed th eret o.” Fich er a v. Min e Hil l Co rp

. , 54 1 A.2d 47 2, 47 4 (Co nn

. 19 88 ).

“ W he re [th e Co nn ect ic ut Su pr em e Co ur t ha s] up he ld a fin di ng th at a du ty co nt in ue d

to ex is t aft er th e ces sa ti on of th e ‘act or om is si on ’ rel ie d up on , th e r e h a s b e e n

ev id en ce of ei th er a sp ec i a l rel at io ns hi p be twee n th e pa rti es gi vi ng ris e to su ch a

The la ng ua ge of Arti cl e VII di ffer s su bs ta nt ia ll y fro m th e la ng ua ge consi dered 5

in th e cas es on whi ch ERC rel ie s. Se e Pho to pa in t Tech s. , L LC v. Sma rt le ns Co rp

. , 33 5 F.3d 15 2, 16 0- 61 (2 d Cir. 20 03 ); SEC v. DiBel la

, 40 9 F. Sup p. 2d 12 2, 12 9 (D.
Co nn . 20 06 ).

-1 3-co nt in ui ng du ty or so m e la te r wro ng fu l co nd uc t of a de fen da nt rel at ed to th e pr i o r

act .” Id

. “ The is su e

. . . of whe th er a pa rty en ga ge d in a co nt in ui ng co ur se of co nd uc t

th at to ll ed th e ru nn in g of th e st at ut e of li m it at io ns is a mi x ed qu es ti on of la w an d

fact .” Giu li et ti v. Giu li et ti , 78 4 A.2 d 9 05 , 92 5 (C on n. Ap p. Ct . 20 01 ).

The di st ric t co ur t care fu ll y an al y zed th e is su e o f w he th er th e st at ut e of

li m it at io ns co ul d be to ll ed un de r Co nn ect ic ut la w on th e ba si s of a co nt in ui ng co ur se

of co nd uc t by Mas s Mu tu al

. W e ag ree wit h th e di st ric t co ur t’s an a l ys is of

Co nn ect ic ut la w an d it s read in g of Van li ne r In su ra nc e Co

. v. Fay

, 90 7 A

. 2d 12 20
(Co nn . Ap p. Ct

. 2 0 0 6 ), whe re th e de fen da nt ’s c on du ct pr ev en te d th e pl ai nt iff fro m

ta ki ng act io n to rem ed y th e in it ia l br each

. 90 7 A.2d at 12 31

. ERC do es no t co nt es t

th e di st ric t co ur t’s co nc lu si on th at th ere was no sp eci al rel at io ns hi p be twee n ERC an d

M a s s M u t u a l

, an d we do no t di sc ern a tri ab le is su e of fact wit h res pe ct to whe th er

Mas s Mu tu al en ga ge d in su bs eq ue nt wro ng fu l co nd uc t th at wou ld to ll th e st at ut e of

li m it at io ns un de r Co nn ect ic ut la w. W e a g r e e w i t h th e di st ric t co ur t th at Mas s

Mu tu al ’s co nd uc t– no ne of whi ch wou ld ha ve pr ev en te d an earl ie r co m m en cem en t of

a la wsu it –d oe s no t gi ve ris e to to ll in g un de r Co nn ect ic ut la w. Cf

. Bla nc he tt e v.

Bar re tt

, 64 0 A.2d 74

, 85 (Co nn

. 19 94 ) (“ The co nt in ui ng co ur se of co nd uc t do ct rin e
refl ect s th e po li cy th at

, du rin g an on go in g rel at io ns hi p, la wsu it s a r e p r em at ur e
be cau se sp eci fic to rti o u s act s or om is si on s m ay be di ffi cu lt to id en ti fy an d m ay y et

be rem ed ie d.” ), ov er ru le d on ot h e r g r o u nd s by Gre y v. St amf

or d Hea lt h Sy s., In c. , 92 4 A.2d 83 1 (Co nn

. 20 07 ); Sa nb or n v. Gre en wa ld

, 66 4 A.2d 80 3, 80 8 (Co nn

. App

. Ct . 19 95 ) (“ The do ct rin e of co nt in ui ng co ur se of co nd uc t as use d to to ll a st at ut e o f

li m it at io ns is be tt er sui te d to cl ai m s whe re th e si tu at io n ke ep s ev ol vi ng aft er the act

co m pl ai ne d o f is co m

pl et e . . . rat he r th an on e whe re th e si tu at io n c an no t ch an ge

. . . .”).

Fi na ll y , ERC as se rts th at th e di st ric t co ur t erre d by co nc lu di ng th at a cau se of

act io n al le gi ng a br each of co n t r a c t on th e th eo ry th at th e cl ai m is no t rei ns ur ed

accr ue s whe n it is ced ed to th e rei ns ur er. Ana lo gi zi ng to in st al lm en t co nt ract s, ERC

as se rts th at a ne w cau se of act io n accr ue s e a c h t i me th at Mas s Mu tu al su bm it s a

-1 4-r e q u e s t fo r rei m bu rs em en t. W e do no t fin d a ba si s in Co nn ect ic ut la w fo r tre at i n g

ERC’s ch al le ng es to Mas s Mu tu al ’s rei m bu rs em en t req ue st s fo r accr ua l pu rp os es as

in st al lm en t co nt ract s. Cf

. Flee t Na t’l Ban k v. La hm

, 86 1 A.2d 54 5, 54 8 (Co nn

. App

. Ct . 20 04 ).

The Co nn ect ic ut Su pr em e Co ur t “ ha s st at ed th at ‘[i]n an act io n fo r br each of

co nt ract

. . . th e cau se of act io n is co m pl et e at th e ti m e th e br each of co nt ract oc cu rs , th at is

, whe n th e in

jury ha s be en in fli ct ed .’ Alt ho ug h th e ap pl ic at io n of th is ru le m ay

res ul t i n o ccas io na l h ard sh ip , ‘ [i]t i s wel l es ta bl is he d t ha t ig no ra nc e o f t he fa ct th at

da mag e ha s be en do ne do es no t pr even t th e ru nn in g of th e st at ut e , ex cep t whe re th ere
is so m et hi ng ta nt am ou nt to a frau du le nt co nc eal m en t of a cau se of act io n.’” To lb er t

v. Co nn

. Gen

. Li

fe In s. Co

. , 77 8 A

. 2 d 1, 5 (Co nn

. 20 01 ) (al te rat io ns in or ig in al )
(ci ta ti on s om it te d)

. “ [T]he oc cu rren ce of an act or om is si on —wh et he r it is a br each

of co nt ract or of du ty—th at cau se s a di rect in jury, ho wev er sl ig ht

, m ay st art th e

st at ut e of li mi t a t i o n s r u nn in g ag ai ns t th e rig ht to m ai nt ai n an act io n ev en if th e pl ai nt iff i s no t aware of th e in jury, an d ev en if al l res ul ti ng da m ag es ha ve no t y et

oc cu rred ; it is su ffi ci en t if no m in al da m ag es are reco ve rab le fo r th e br each or fo r th e

wro ng , an d whe re th at is th e cas e, it is un im po rta nt th at th e act ua l or su bs ta nt ia l

da m ag e is no t di sc ov ered or do es no t oc cu r un ti l la te r.” Bur ke v. Kl eva n , 23 A.3d 95

, 98 -9 9 (Co nn

. App

. Ct

. 20 11 ); se e Amoco Oil Co

. v. Li be rt y Au t o & El e c. Co

. , 81 0

A.2d 25 9, 26 6 (Co nn

. 20 02 ). The si x cl ai m s th at were di sm is se d pu rs u a n t t o th e

st a t u t e o f l im it at io ns were su bm it te d by Mas s Mu tu al to ERC m or e th an si x y ears
be fo re ERC br ou gh t th is act io n. W e ag ree th at th e st at ut e of li m it at io ns ba rs ERC’s

c h a l l e ng es to th e si x cl ai m s. Se e Co nn

. Gen

. St at

. § 52 -5 76 (a) (“ No act io n f o r a n

acco un t, or on an y si m

pl e or im pl ie d co nt ract

, or on an y co nt ract in writ in g, sh al l be

br ou gh t b ut wit hi n s ix y ears aft er t he rig ht of a ct io n a ccru es

. . . .”).

C.

Mas s Mu tu al as se rte d co un te rcl ai m s fo r br each of co nt ract an d fo r br each of

th e im pl ie d co ve na nt of go od fai th an d fa i r d e a l i ng ba se d on ERC’s ces sa ti on of

-1 5-rei m

bu rs em en ts sh or tl y aft er th is act io n’s co m m en cem en t. ERC as se rts th at th e
di st ric t co ur t err o n eo us ly gr an te d su m m ary jud gm en t to Mas s Mu tu al on th e two

co un te rcl ai m s.

ERC co nt en ds th at it di d no t br each th e Treat y

. Se e Kel le r v. Becke ns te in

, 97 9

A.2d 10 55

, 10 60 (Co nn

. App

. Ct

. 20 09 ) (s um m ari zi ng el em en ts of cau se of act io n fo r
br each of co nt ract ). It m ai nt ai ns th at

, whe n it st op pe d al l rei m bu rs em en ts to Mas s

M u t u a l in Apr il 20 06

, it was co m pl y in g wit h th e pl ai n an d un am bi gu ou s of

fs e t

pr ov is io ns of Arti cl e XII. Arti cl e XII in de ed pr ov id es th at ei th er ERC o r M a s s

Mu tu al “ m ay of

fs et an y ba la nc e, whe th er on acco un t of pr em iu m s, co m m is si on s, lo ss

or cl ai m ex pe ns es du e fro m on e p a r t y t o t h e ot he r.” The di st ric t co ur t de te rm in ed

, ho wev er, th at a ba la nc e is no t “ du e” un de r th is pr ov is io n if th e ba la nc e is in fact

co nt es te d. W e ag ree: no fai r read in g of th is pr ov is io n wou ld pe rm it ERC to ceas e al l

rei m bu rs em en ts on th e b as is of it s own un il at eral co nc lu si on th at Mas s M ut ua l h ad

im pr op erl y su bm it te d c la im s i n t he pa st

.

ERC al so m ai nt ai ns t h a t it di d no t br each th e im pl ie d du ty of go od fai th an d

fai r de al in g whe n it wit hh el d pa y m en ts

. Co nn ect ic ut reco gn iz es an im pl ie d co ve na nt

of fai r de al in g: “ It is ax io m at ic th at th e im pl ie d du ty of go od fai th an d fai r de al in g is

a co ve na nt im

pl ie d in to a co nt ract or a co nt ract ua l rel at io ns hi p.” Hos ki ns v. Ti ta n
Val ue Equ it ie s Grp

., In c. , 74 9 A.2d 11 44

, 11 46 (Co nn

. 20 00 ). “ In ot he r wor ds

, ev ery

co nt r a c t c a r r ie s an im

pl ie d du ty req ui rin g th at ne it he r pa rty do an y th in g th at wil l

in jure th e rig ht of th e ot he r to rece iv e th e be ne fit s of th e ag reem en t.” De La Co nc ha

o f H a r tf or d, In c. v. Aetn a Li

fe In s. Co

. , 84 9 A.2d 38 2, 38 8 (Co nn

. 20 04 ) (in t e r n a l

qu ot at io n m ark s om it te d)

. “ ‘T o co ns ti tu te a br each of [th e im pl ie d co ve na nt of go od

fai th an d fai r de al in g], th e act s by whi ch a de fen da nt al le ge dl y im pe de s th e pl ai nt iff ’s
rig ht to rece iv e be ne fit s th at he or sh e reas on ab ly ex pe ct ed to rece iv e un de r th e

co nt ract m

us t ha ve be en ta ke n in b a d f a i t h .’ ” Id

. (al te rat io n in or ig in al ) (q uo ti ng

Alex an dr u v. St ro n g , 8 3 7 A.2d 87 5, 88 3 (Co nn . Ap p. Ct . 2 00 4) ). “ [B]ad fai th m ay

in cl ud e on e pa rty’ s pe rfo rm an ce or in t e r p r e t a t i on of th e co nt ract in a m an ne r th at

ev ad es it s s pi rit an d i s un fai th fu l to it s p ur po se , res ul ti ng in a de ni al of t he jus ti fie d

-1 6-ex pe ct at io ns of th e ot he r pa rty.” La nd ry v. Sp it z , 92 5 A.2d 33 4, 34 5 (Co nn

. App

. Ct

. 20 07 ). “ W he th er a pa rty ha s act ed in ba d fai th is a qu es ti o n o f fact

. . . .”

Ren ai ss an ce Mgmt

. Co

. v. Co nn

. Hou s. Fin

. Aut h.

, 91 5 A.2d 29 0, 29 8 (Co nn

. 20 07 ).

ERC un il at eral ly wit hh el d al l rei m bu rs em en ts to Mas s M u t u a l fo r m or e th an two

y ears

. The di st ric t co ur t pr op erl y co nc lu de d th at th ere was no ge nu in e is su e th at th is

di d n ot co ns ti tu te go od fai th or f ai r de al in g.

III.

Acco rd in gl y , we affi rm

.

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