Opinion ID: 1436064
Heading Depth: 1
Heading Rank: 25

Heading: Century's Problems

Text: Century points to certain problems with Lloyd's's position that we should construe the retrocessional agreements to incorporate all of the reinsurance treaties' provisions, including their arbitration clause, as against Century and Lloyd's. First, applying each and every provision of the reinsurance treaties to the retrocessional agreements results in some duplication, because the agreements and the treaties both contain provisions giving each party access to the other's books, designating John F. Sullivan Co. as intermediary, and providing for interim loss payments upon request. In addition, Century asserts that applying all provisions produces absurd results. The reinsurance agreements' Article 8 refers to employer insurance. Century argues that it is preposterous to conclude that the parties intended through the incorporation clause to obligate Lloyd's on policies that Century issues directly to its own employees. Similarly, Century claims that it is absurd to construe the provisions covering lines of businesses through the incorporation clause to make Lloyd's liable on any policies Century directly issued. We note, however, that the effect of the parties' agreement on these provisions is not before us, and if it were the asserted absurdity possibly would be an argument against concluding that the parties incorporated these provisions against each other. On the other hand, it surely would not be absurd for the retrocessional agreements to incorporate the arbitration provisions of the reinsurance treaties. Moreover, Century has a more pointed problem of its own. In view of its position here, it is significant that Century's position during arbitration suggested that the incorporating provisions had broad effect. In this regard, Century in its prehearing brief during the arbitration proceedings directed the panel to the reinsurance treaties' follow-the-fortunes clauses: It cannot be disputed that the contracts at issue contain the follow the fortunes and settlements provisions. The contracts state that: `All loss settlements made by the Company [Argonaut], within the terms of this Agreement, shall be unconditionally binding upon INA [Century], and amounts falling to the share of INA [Century] shall be payable by them upon reasonable evidence of the amount paid[.]' (XOL Treaties, Exhibit `2', Article 10.) App. at 231-32 (immaterial footnote omitted) (quoting reinsurance treaties). Century then argued that this provision in the reinsurance treaties applied to Lloyd's vis-à-vis Century under the retrocessional agreements: That means that Underwriters [Lloyd's] are bound by Century's settlements with Argonaut and must pay Century when Underwriters [Lloyd's] are presented with `reasonable evidence of the amount paid' by Century. App. at 231-32 (immaterial footnote omitted). Consequently, Century's position is that at least some of the resinsurance agreements' provisions that were phrased restrictively by referring to the immediate parties were applied to the retrocessional agreements in a manner that involved transposing the parties' names  that is, provisions referring to Argonaut and Century can refer, through their incorporation into and then their application within the retrocessional agreements, to Century and Lloyd's. Indeed, Century continues before us to maintain that the retrocessional agreements contain follow-the-fortunes clauses. Appellant's opening br. at 47. [28] Century's position regarding the follow-the-fortunes clauses thus strongly undercuts its position that the parties did not provide for the incorporated arbitration clause to apply vis-à-vis Century and Lloyd's to their disputes.