Opinion ID: 808087
Heading Depth: 2
Heading Rank: 2

Heading: Buffalo Forge Purchases Insurance; PEIC

Text: Purchases Reinsurance Our story begins when the Buffalo Forge Company (―Buffalo Forge‖), a manufacturing company located principally in Buffalo, New York, purchased insurance for itself and its affiliates. First, it bought a ―comprehensive general liability insurance policy‖ (the ―Primary Policy‖) from Utica Mutual Insurance Company. That policy had a $1 million limit. It also purchased an ―excess blanket catastrophe liability policy‖ (the ―Excess Policy‖), with the same policy period, from PEIC, then a California stock insurance company located in Los Angeles. The Excess Policy provided $9 million of coverage in excess of the Primary Policy‘s $1 million. Meanwhile, to spread some of the risk of the Excess Policy, PEIC purchased the Certificate (a facultative reinsurance contract) from Constitution, a New York corporation located in New York. Under the Certificate, PEIC retained the first $1 million of the Excess Policy and Constitution agreed to reinsure 25% of the next $4 million, with a $1 million limit. It does not appear that there was any direct ―negotiation‖ over the Certificate‘s terms and conditions. While preparing to issue the Excess Policy, PEIC — through its Buffalo underwriting office — asked a broker in Minnesota to make inquiries about reinsurance coverage. The broker then communicated with several reinsurers, including Constitution. It sent a telex, dated May 30, 1980, to Constitution in New York to confirm that it was seeking binding reinsurance effective June 1, 1980, with PEIC retaining the first $1 million and Constitution reinsuring a 25% share of the next $4 million, in exchange for a $15,000 gross premium. Constitution replied by telex on June 5, 7 1980, confirming its acceptance of PEIC‘s terms. The broker and Constitution had further exchanges in September 1980 about the payment of premiums and the issuance of the Certificate. Eventually Constitution caused the Certificate, according to its signature line, ―to be signed by its President and Secretary at New York, New York,‖ and sent it to PEIC‘s broker in Minnesota. In return, PEIC sent Constitution‘s share of the premiums from Buffalo Forge to PEIC‘s Minnesota broker, who forwarded it to Constitution in New York. To offset further the risk of the Excess Policy, three other reinsurers also participated in Constitution‘s reinsured layer. Of the four, two were New York companies, one an Illinois company, and one a Massachusetts company. Eighteen and nineteen years after the issuance of the Certificate, respectively, PEIC and Constitution underwent corporate reorganization. In 1998, Gerling Global Reinsurance Corporation acquired Constitution and merged it into a newly formed corporation that is now Global Reinsurance Corportion of America, the appellant here. Like its predecessor, Global is a New York corporation with its principal place of business in New York. PEIC underwent a more significant change in 1999. Previously a California company located in Los Angeles, that year PEIC became a Pennsylvania corporation with its primary place of business in Philadelphia.