Court Opinion

ID: 5787349
Source: CourtListenerOpinion
Date Created: 2022-01-12 18:02:50.659495+00
Date Added: 2024-06-11T08:42:08.726537
License: Public Domain

Tom, J.P.,
dissents in part in a memorandum as follows: Plaintiff obtained general liability and marine insurance from nonparties Employers Liability Assurance Corp. and Appalachian Insurance Co. These underlying policies each provide an “annual aggregate” limit of liability. Reinsurance (denominated “excess policies” by defendants) was provided by appellant insurers under a second tier of policies, each having a three-year duration. Each such excess policy, issued by a group of participating insurers, includes a “follow the form” clause, stating that it “shall follow all the terms, insuring agreements, definitions, conditions and exclusions” of the applicable underlying insurance policy.
Unlike the underlying policies, the excess policies do not expressly state that the aggregate liability of the participating insurers is annual, limiting liability to, for example, “$30,000,000 each occurrence and in the aggregate.” The signature page recites, “This policy being for $30,000,000, each of the signatories assumes for its account their indicated quota share amount of the total $30,000,000 limit of liability.”
It is the majority’s position that despite the provision contained in each excess policy that it reflect the terms and definitions of the underlying policy providing for an annual limit of liability, the aggregate liability limitation of such excess policy is not annual, but extends over its three-year duration. While, standing alone, an aggregate limit of $30,000,000 contained in a three-year insurance policy might logically be construed as a limit to be applied over the life of the policy, the explicit expression of the parties’ intent that the excess policy mirror the terms of the underlying insurance coverage dispels any doubt that the limitation on the coverage afforded is meant to be annualized. As stated in Commercial Union Ins. Co. v Swiss Reins. Am. Corp. (413 F3d 121, 128 [1st Cir 2005], quoting Aetna Cas. & Sur. Co. v Home Ins. Co., 882 F Supp 1328, 1337 [SD NY 1995]), “ £[w]here a following form clause is found in the reinsurance contract, concurrency between the policy of reinsurance and the reinsured policy is presumed, such that a policy of reinsurance will be construed as offering the same terms, conditions and scope of coverage as exist in the reinsured *538policy, i.e., in the absence of explicit language in the policy of reinsurance to the contrary.’ ” The language on the signature page does not detract from this analysis, merely indicating each insurer’s partial share of the total liability, without specifying whether such total is to be aggregated annually or over the duration of the policy.
The unreported case relied upon by the majority, Maryland Cas. Co. v W.R. Grace & Co. (1996 WL 169326, 1996 US Dist LEXIS 4500 [SD NY 1996]), is distinguishable in respect of the exception contained in the follow the form clause in the reinsurance policies, which reads: “ ‘Except as otherwise provided herein the insurance afforded by this policy shall follow the terms, conditions and definitions as stated in the policies of underlying insurance, except for limits of liability, any renewal agreement and any obligation to investigate or defend’ ” (1996 WL 169326, *3, 1996 US Dist LEXIS 4500, *9-10). The court noted that “while the policies ‘follow form’ to the underlying insurance in certain respects, this does not include limits of liability, which are set forth as $5 million for ‘each occurrence’ and $5 million ‘aggregate’ ” (1996 WL 169326, *3, 1996 US Dist LEXIS 4500, *10). In view of the explicit exception, it is hardly remarkable that the court applied the aggregate limit over the multiyear duration of the excess policies rather than applying an annual limit, as provided in the underlying insurance.
The facts of the matter at bar are consonant with those of Travelers Cas. & Sur. Co. v Ace Am. Reins. Co. (392 F Supp 2d 659 [SD NY 2005], affd 201 Fed Appx 40 [2d Cir 2006]), in which the court noted that the inclusion of a follow the form clause in a three-year reinsurance certificate creates a presumption of concurrency with the terms of the underlying policy that can only be overcome “through the placement of explicit liability limitations in the certificate itself’ (id. at 665). Thus, the court annualized the aggregate limit of liability, holding that because, as here, “the certificates do not clearly or explicitly limit the coverage terms of the underlying policy, the presumption of concurrency between the excess policy and the Three-Year Certificates is not overridden” (id.).
Plaintiff has submitted an expert’s affidavit stating that it is industry custom that liability be aggregated annually, and that “unless a multi-year policy clearly states otherwise, its aggregate limits are understood to apply on an annual basis.” However, because the parties’ intent to harmonize the terms of the excess policies with those of the underlying policies is apparent and unequivocal, it is unnecessary to consider extrinsic evidence (see R/S Assoc. v New York Job Dev. Auth., 98 NY2d *53929, 33 [2002]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 163 [1990]). Even if an ambiguity could be said to be presented and the proffered affidavit is deemed to be conclusory, “the ambiguity must be resolved against the insurer which drafted the contract” (State of New York v Home Indem. Co., 66 NY2d 669, 671 [1985]).
Accordingly, the order should be affirmed to the extent it granted plaintiffs motion for partial summary judgment.