Opinion ID: 804140
Heading Depth: 2
Heading Rank: 2

Heading: OneBeacon's Motion for Summary Judgment

Text: To prevail on summary judgment, OneBeacon must show that there are no material facts in dispute and that as a matter of law Aviva provided reinsurance coverage for both the 1981 OneBeacon Policy and the 1982 OneBeacon Policy. As the district court noted, the only direct agreement between OneBeacon and Aviva in the record is the Facultative Certificate, which clearly indicates that the term of Aviva's reinsurance obligation was from March 28, 1980 to April 1, 1981. OneBeacon argues that the agreement between it and Aviva was created by the 1980 OneBeacon and Aviva Policies rather than by the Facultative Certificate. OneBeacon contends that the 1980 Aviva Policy reinsures the 1980 OneBeacon Policy and any renewals, and that the Facultative Certificate, which was issued several months after the 1980 Policies, was a mere confirmation of the reinsurance relationship that already existed between the two insurance companies. -11- However, even if we assume arguendo that the 1980 Aviva and OneBeacon Policies formed the parties' agreement in 1980, this does not help OneBeacon. For if the various 1980 policies established the original agreement between the parties, the record makes clear that the parties changed the terms of their agreement in 1981. The 1981 Aviva Endorsement explicitly changed the scope of Aviva's obligations. The Differences in Condition Endorsement in the original 1980 Aviva Policy stated that Aviva would reinsure OneBeacon's coverage to Harrisons US. However, the 1981 Aviva Endorsement stated that Harrisons US was specifically excluded from this policy which shall not inure to [its] benefit in any way (emphasis added). OneBeacon suggests that the 1981 Aviva Endorsement only eliminated Aviva's direct insurance obligations to Harrisons US while leaving undisturbed Aviva's agreement to reinsure the 1980 OneBeacon policy and its renewals. But the 1981 Aviva Endorsement explicitly states that it form[s] part of Policy No. 6687287 (i.e., the 1980 Aviva Policy) and that it excludes Harrison US from that policy entirely. Moreover, OneBeacon claims in its reply brief that the very heart of [OneBeacon's] case is that Policy No. 6687287 and the 1980 OneBeacon policy combine to provide the terms of the Reinsurance Agreement between OneBeacon and Aviva. Yet given that Harrisons US is excluded from Policy No. 6687287, and given that Aviva is not a party to the 1980 -12- OneBeacon policy, it defies logic to say that the two policies in combination create an ongoing obligation that Aviva reinsure OneBeacon with respect to Harrisons US. As amended, Policy No. 6687287 has nothing to do with Harrisons US (Harrisons US is specifically excluded from this policy), and the 1980 OneBeacon policy on its own cannot bind Aviva (a non-party to that policy). Moreover, the 1981 OneBeacon Policy, which OneBeacon claims is a renewal of its 1980 Policy, does not contain the 1980 OneBeacon Endorsement Number 4 or any similar provision indicating that the 1981 OneBeacon Policy was reinsured by Aviva. This omission is consistent with Aviva terminating its reinsurance relationship with OneBeacon and OneBeacon taking on the ultimate insurance risk for Harrisons US in the 1981 policy period. Similarly, there is no indication that the 1982 OneBeacon Policy had the 1980 OneBeacon Endorsement Number 4 or any similar provision. Thus, in contrast to the 1980 OneBeacon policy, the 1981 and 1982 OneBeacon Policies did not tell Harrisons US that Aviva was standing behind OneBeacon as the reinsurer. Furthermore, if there is some ambiguity regarding the meaning of the 1981 Aviva Endorsement and the 1981 OneBeacon Policy, Massachusetts law allows us to examine the extrinsic evidence to determine whether the parties intended for the reinsurance arrangement to continue after the end of the first year. See Den norske Bank AS v. First Nat'l Bank, 75 F.3d 49, 52 -13- (1st Cir. 1996) (Although not admissible either to contradict or alter express terms, extrinsic evidence is admissible to assist the factfinder in ascertaining the intent of the parties as imperfectly expressed in ambiguous contract language. (citing Robert Indus., Inc. v. Spence, 291 N.E.2d 407, 410 (Mass. 1973))). Here, the extrinsic evidence on the record convinces us that the reinsurance arrangement did not continue. Firstly, the fact that there is no Facultative Certificate between Aviva and OneBeacon for the second and third policy years suggests that the relationship between the two companies changed after the first year. Secondly, and most importantly, the evidence regarding the flow of premium payments supports the view that Aviva terminated its reinsurance obligation after the first year. In the first year, in which both parties agree that Aviva reinsured OneBeacon, Aviva received a premium payment of $45,530 Canadian and remitted a 10% fee to OneBeacon. Moreover, the OneBeacon ledger shows that there was a reinsurer for the 1980 OneBeacon policy -- identified with the code C44. In the second year, however, the OneBeacon ledger reflects that OneBeacon directly received the full $24,000 U.S. premium payment. Furthermore, the ledger does not indicate that there was a reinsurer for the 1981 or 1982 OneBeacon Policies. Further, OneBeacon has not pointed to any evidence that it shared the second- or third-year premium with Aviva. OneBeacon would have -14- this Court reach a result that OneBeacon kept all of the premiums for the 1981 and 1982 policy years, but that it bore none of the risk. Such a conclusion would defy economic sense. Because there is no evidence that Aviva agreed to provide reinsurance beyond the term of the first policy year, OneBeacon is not entitled to judgment as a matter of law. Accordingly, we affirm the district court's denial of OneBeacon's summary judgment motion.