Court Opinion

ID: 6450466
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:32:51.711192+00
Date Added: 2024-06-11T15:52:59.064037
License: Public Domain

O’Connor, J.
(dissenting, with whom Lynch, J., joins). The court states that “[wjhere, as here, the contract language is ambiguous, evidence of trade usage is admissible to determine the meaning of the agreement.” Ante at 845. I agree that there is a rule that “[w]hen the written agreement, as applied to the subject matter, is in any respect un*847certain or equivocal in meaning, all the circumstances of the parties leading to its execution [including known trade custom and usage] may be shown for the purpose of elucidating, but not of contradicting or changing its terms.” Keating v. Stadium Management Corp., 24 Mass. App. Ct. 246, 249 (1987), quoting Robert Indus., Inc. v. Spence, 362 Mass. 751, 753-754 (1973). However, since the facultative reinsurance certificate at issue in this case, as applied to the subject matter, is not in any respect uncertain or equivocal in meaning, resort to evidence of trade usage is inappropriate. I would affirm the judgment.
“[T]he purpose of ascertaining the expressed intent of the parties is to be accomplished by examining the contract or policy as a whole. The intent of the parties is to be ascertained from the language of the entire policy considered as a whole in connection with the risk or subject matter. The context of the policy, at least such parts as are contractual, may always be looked" to for a proper construction of what was in the minds of the parties at the time they entered into the contract. All its words, parts, and provisions must be construed together as one entire contract. All of the terms and conditions of each part should be read and interpreted together in the light of all the other parts. The intent of the contracting parties is to be ascertained, not by a process of dissection in which words or phrases are isolated from their context, but rather from a process of synthesis in which the words and phrases are given a meaning in accordance with the obvious purpose of the insurance contract as a whole. It is not permissible to lift one sentence from a policy and try to attach a meaning to that sentence standing alone.” 2 G. Couch, Insurance, § 15.29 (2d ed. 1984).
The preamble of the certificate states that “[i]n consideration of the payment of the premium, and subject to the terms, conditions and limits of liability set forth herein . . . the Reinsurer [Constitution] does hereby reinsure the ceding company [Affiliated, the original insurer] ... in respect of the Company’s [Affiliated] policy (les). . . .” Clause A of the certificate provides in relevant part that “[t]he liability of *848the Reinsurer . . . shall follow that of the Company, subject in all respects to all of the terms, conditions and limits of the Company’s policy except when otherwise specifically provided herein . . . .” Read together, the preamble and clause A specify that the certificate is a contract of reinsurance and that the reinsurer is only assuming those risks specifically provided for in the reassured’s policy with its insured. In effect, the two sections spell out clearly in the certificate the essence of reinsurance described by this court in Friend Bros. v. Seaboard Sur. Co., 316 Mass. 639 (1944): Reinsurance is “an agreement to indemnify the assured, partially or altogether, against a risk assumed by . . . [it] in a policy issued to a third party.” Id. at 642, quoting Royal Ins. Co. v. Vanderbilt Ins. Co., 102 Tenn. 264, 267 (1899).
Thus, the meaning of the words in clause D of the certificate, “[i]n addition thereto, the Reinsurer shall pay its proportion of expenses . . . incurred by the Company [Affiliated] in the investigation and settlement of claims or suits,” is clear. Those words unambiguously refer to expenses incurred by Affiliated in the investigation and settlement of Campbell’s risks that Affiliated insured and Constitution re-insured. The expenses referred to are Affiliated’s expenses incurred in the discharge of obligations it undertook in its policy issued to Campbell. To say, as the court appears to say, that the “in addition to” provision in clause D may require Constitution to pay Affiliated’s legal expenses1 incurred in successfully maintaining its position that, as to the EEOC claim against Campbell, Affiliated’s original policy issued to Campbell did not impose any obligations or risks on Affiliated, is to isolate that single provision from its reinsurance context. As to the EEOC claim, Affiliated’s position, sustained by the New Jersey Supreme Court, was that it was not an insurer. Therefore, as to that claim, Constitution was not a reinsurer and it is abundantly clear from a reading of the entire facultative reinsurance certificate that Constitu*849tion’s obligations did not extend beyond reinsurance. “It is not permissible to lift one sentence from a policy and try to attach a meaning to that sentence standing alone.” Couch, Insurance, supra at § 15.29.
Since, as the Superior Court judge reasoned, the policy provision at issue is not uncertain or equivocal as applied to the subject matter,2 no extrinsic evidence is appropriate. The judgment therefore should be affirmed.
The Superior Court judge rightly concluded that the Nineteenth Century cases relied on by Affiliated do not support its contention that its legal expenses in connection with resisting Campbell’s coverage claim are covered by the reinsurance certificate. The court seems to agree, ante at 843 n.8, but says that “[tjhere is support for Affiliated’s position among the insurance treatises,” ante at 842, and purports to set forth that support in the margin. Ante at 842 n.6. The named treatises do not support Affiliated’s position. Indeed, they do not appear to address the issues presented by this case. In addition, they suffer from the same defect as do the cases relied on by Affiliated and rejected by the Superior Court judge; “the specific contract language relied on by the courts, if any, is not recited or discussed in any meaningful way.” See ante at 843 n.8. Furthermore, the treatises appear to rely in substantial measure on the very cases that the judge, and seemingly the court, have found wanting.
The Superior Court judge’s analysis and ruling were right. I would affirm the judgment.

Expenses incurred in litigation concerning coverage cannot reasonably be considered to be expenses incurred in “investigation and settlement.”

As the court points out, ante at 846, “At the hearing, although the parties submitted extrinsic evidence of Constitution’s practice, neither party offered evidence of the pertinent custom and usage.” It also appears that Affiliated has not argued on appeal that the Superior Court judge should have considered such evidence, and Affiliated does not ask this court to remand the case for such consideration to be given.