Opinion ID: 2670791
Heading Depth: 2
Heading Rank: 1

Heading: Interrelated Contracts Doctrine

Text: Defendants first argue on appeal that the District Court erred in its construction of the relevant agreements by failing to apply the “interrelated contracts doctrine,” under which separate writings must be read and interpreted together when they form part of the same transaction. Commander Oil Corp. v. Advance Food Serv. Equip., 991 F.2d 49, 53 (2d Cir. 1993). Defendants contend that, when read together, the “excess of loss” reinsurance contracts (the “XOL Contracts”) and the “reinstatement premium protection” contracts (the “RPP Contracts”) are best understood as equivalent to each participant in the reinsurance pool effectively having its own, single contract with defendants. 2 It is well settled, however, that even where separate agreements are meant to be construed together, the “primary objective” in contract interpretation “is to give effect to the intent of the parties as revealed by the language they chose to use.” Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992); see also 11 Williston on Contracts § 30:26 (4th ed.) (“The rule that separate writings executed at the same time and relating to the same subject matter are to be considered together and construed as a single contract is to be employed only to give effect to the intention of the parties . . . .”). In rejecting defendants’ argument, the District Court noted that plaintiff’s interpretation of the RPP Contracts—under which plaintiff was responsible only for 48 percent of the total amount of reinstatement premiums that defendants actually paid—best comported with the parties’ intent, even assuming the relevant provisions were meant to be read in conjunction with the XOL Contracts. In any event, the District Court also found that the RPP Contracts were negotiated as independent, separately-priced transactions, and were not intended to function as an amendment or supplement to the XOL Contracts, a finding inconsistent with defendant’s claim that the RPP and XOL Contracts were intended to be interrelated. These conclusions were neither clearly erroneous findings of fact nor misapplications of law.1 II. Commutations as Reinstatement Premium Payments Defendants next contend that, even under plaintiff’s interpretation of the RPP Contracts, they should prevail. According to defendants, the “commutation” agreements with the other participants in the reinsurance pool—whereby defendants were paid a lump sum, in exchange for which the two reinsurers who executed the commutations were discharged of their obligations under all the reinsurance contracts among the parties—included the payment of reinstatement premiums under the XOL Contracts. The District Court rejected that argument, finding that the commutations were mere cancellations of the contracts, not settlements of claims. After careful review, we agree. As the District Court noted, defendants owed no reinstatement premiums to the other participants at the time of the commutations, and plaintiff never viewed the commutations in the fashion now advanced by defendants. We also reject defendants’ argument that the commutations comprised reinstatement premium payments in the form of accelerated potential future obligations. The 1 In a related vein, defendants argue that the District Court failed to consider relevant extrinsic evidence— namely, that four other insurers had rejected plaintiff’s interpretation of identical RPP Contracts. Yet the probative value of this evidence is suspect, insofar as the supposedly corroborating interpretations may amount to self-serving readings made solely in the course of litigation, and even assuming that the District Court failed to consider this evidence, its failure was at most harmless. 3 commutations consisted of a lump sum, which was based on a variety of considerations and amounted to substantially less than defendants’ internal estimates of its net recoveries. Indeed, at the time the commutations were executed, defendants did not present a claim to plaintiff for indemnity of the reinstatement premiums allegedly paid in the context of these commutations.