Court Opinion

ID: 3029683
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:43:15.00737+00
Date Added: 2024-06-11T11:48:03.495869
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 01-3287
                                   ___________

ReliaStar Life Insurance Company,       *
                                        *
               Appellee,                *
                                        *
        v.                              *
                                        * Appeal from the United States
IOA Re, Inc.; Swiss Re Life Canada,     * District Court for the
                                        * District of Minnesota.
               Appellants.              *
                                        *
--------------------------------        *
                                        *
The Reinsurance Association,            *
                                        *
        Amicus on Behalf of Appellants. *
                                  ___________

                             Submitted: June 13, 2002

                                  Filed: September 9, 2002
                                   ___________

Before HANSEN, Chief Judge, FAGG, and BOWMAN, Circuit Judges.
                              ___________

BOWMAN, Circuit Judge.

      ReliaStar Life Insurance Company sued IOA Re, Inc. and Swiss Re Life
Canada (collectively, the retrocessionaires) for breach of contract arising out of an
alleged failure to pay under reinsurance contracts. IOA Re and Swiss Re
counterclaimed, alleging that they were entitled to rescind the reinsurance contracts,
and that in any case ReliaStar committed a breach of contract by failing to remit
premiums to the retrocessionaires. The parties filed cross-motions for summary
judgment in the District Court,1 and the court denied the retrocessionaires' motion for
partial summary judgment and granted ReliaStar's motion for summary judgment.
The retrocessionaires appeal. We affirm, but remand for clarification of one issue
related to the District Court's award of damages to ReliaStar.

                                          I.

       ReliaStar is a reinsurance company based in Minnesota. For the 1996 to 1997
policy year, ReliaStar reinsured the risk of Canada Life Assurance Company on a
product commonly called "snowbird" insurance. This type of insurance provides
"short-term medical insurance for individual Canadians traveling out of their home
provinces [including out of country], where Canadian provincial medical coverage
did not extend." Br. of Plaintiff-Appellee at 3. Canada Life ceded to ReliaStar its
risk for seventy-five percent of the first $100,000 (Canadian) of each claim under the
program; in exchange, ReliaStar was to receive seventy-five percent of the net
premium collected.2 This variety of risk sharing is known as a quota-share
arrangement.

      ReliaStar then sought to spread the risk ceded to it by Canada Life through
quota-share reinsurance from IOA Re, a Delaware corporation, and Swiss Re, a
Canadian company. Reinsurers of a reinsurer, such as IOA Re and Swiss Re in this

      1
       The Honorable James M. Rosenbaum, Chief Judge, United States District
Court for the District of Minnesota.
      2
       For reasons not made clear to this Court, the formal written reinsurance
contract between ReliaStar and Canada Life was not executed until January 30, 1998.
According to ReliaStar, this is not an uncommon practice in the reinsurance industry.
Br. of Plaintiff-Appellee at 10 n.7.

                                         -2-
case, are known in the industry as retrocessionaires, and the coverage they provide
is known as retrocessional coverage. Swiss Re's participation was arranged through
a company called Reinsurance Management Associates (RMA), a managing general
underwriter which "accepted risk and performed various administrative and
management functions for insurance carrier clients." Br. of Plaintiff-Appellee at 6.
Swiss Re issued a retrocessional placement slip for this coverage sometime in
December 1996, and ReliaStar ceded one-third of its exposure under the Canada Life
reinsurance policy (amounting to twenty-five percent of the total insurance liability
of Canada Life) to Swiss Re. In return, Swiss Re was to receive twenty-five percent
of the net premium collected by Canada Life.

       IOA Re is also a managing general underwriter, and it accepted the
retrocessional coverage from ReliaStar on behalf of the pool of other companies for
which IOA Re provided services. Answer and Counterclaim of Defendants at 3. IOA
Re signed a retrocessional placement slip for this coverage in early 1997, also
assuming one-third of ReliaStar's liability in exchange for twenty-five percent of the
net premium collected.

       The snowbird insurance program for the 1996 to 1997 policy period paid out
more than expected on claims and ended in a loss position. Before the end of the
policy period, Canada Life began to bill losses to ReliaStar that exceeded the net
premiums paid to ReliaStar. On October 2, 1997, ReliaStar submitted the first bills
to the retrocessionaires for their portion of the losses. ReliaStar submitted these
losses for payment despite the fact that it had not forwarded any premium payments
to either retrocessionaire. ReliaStar maintains that it deducted the net premium
payments to which the retrocessionaires were entitled from the amount of losses
billed to them.

       In November 1998, IOA Re notified ReliaStar that it was "canceling the
Certificate of Reinsurance" and "rescinding the retrocessional coverage therein," for

                                         -3-
reasons that included non-payment of premium and failure to provide requested
documentation of claims. Letter from Walter A. Dorosz, Chief Operating/Audit
Officer, IOA Re, Inc., to Stephen J. Dvorak, Director of Reinsurance, ReliaStar
Reinsurance Group (Nov. 11, 1998). Swiss Re, although it had reconfirmed its
intention to pay in a May 1998 fax to ReliaStar, similarly refused to make any
payments to ReliaStar, and eventually claimed that they owed no payment to
ReliaStar. Br. of Plaintiff-Appellee at 13.

       ReliaStar filed this diversity action in December 1999, bringing breach of
contract claims under Minnesota law against the retrocessionaires for failure to pay
under the retrocessional contracts. The District Court, on cross-motions for summary
judgment, held that ReliaStar was entitled to judgment as a matter of law on its breach
of retrocession contract claims. The District Court awarded ReliaStar $2,606,684
(Canadian) from each defendant for the amounts ReliaStar paid to Canada Life, and
awarded ReliaStar $541,779 from each defendant based on ReliaStar's evidence of
lost investment income attributable to the retrocessionaires' refusal to pay. The court
ordered the retrocessionaires to pay the judgment in U.S. dollars at the currency
exchange rate as of the date the retrocessionaires first refused to pay the losses billed
to them on October 2, 1997.

                                           II.

      Reinsurance relationships are governed by the traditional principle of "utmost
good faith." Unigard Sec. Ins. Co. v. N. River Ins. Co., 4 F.3d 1049, 1054 (2d Cir.
1993). The duty of good faith is essential to the industry, inasmuch as "[r]einsurers
depend on ceding insurers to provide information concerning potential liability on the
underlying policies." Travelers Indem. Co. v. Scor Reinsurance Co., 62 F.3d 74, 76
(2d Cir. 1995). Reinsurers must rely on this principle because they generally do not
duplicate the functions of the ceding insurers, such as evaluating risks and processing

                                          -4-
claims. Unigard, 4 F.3d at 1054. To arrange their business otherwise would result
in greatly increased costs for both reinsurance and the underlying policies themselves.

      Flowing from this duty of good faith is a doctrine, widely recognized in the
insurance industry, known as the "follow-the-fortunes" doctrine. Essentially, this
doctrine posits that if the cedent has acted in good faith in handling the claims
presented to it and in providing coverage of the claims, "the reinsurer may not second
guess the coverage decisions of the cedent." Br. of Appellants at 22; see also, e.g.,
Am. Bankers Ins. Co. v. Northwestern Nat'l Ins. Co., 198 F.3d 1332, 1335 (11th Cir.
1999).3

       The District Court, applying the follow-the-fortunes doctrine to the contracts
at issue, held that ReliaStar had fulfilled its obligations under the contracts because
it had not acted in bad faith, with gross negligence, or recklessly in paying the losses
billed to it by Canada Life and in subsequently billing an appropriate portion of those
losses to the retrocessionaires. The retrocessionaires take issue with the District
Court's conclusion. They argue that their retrocessional contracts with ReliaStar
expressly denied the application of the follow-the-fortunes doctrine. Moreover, they
claim that the factual record contains "substantial material evidence of ReliaStar's
gross negligence and recklessness in its claims handling processes, as well as

      3
        We note that the case law and the analysis of certain scholarly works disagree
as to the exact scope and meaning of the "follow-the-fortunes" doctrine. Compare
Am. Bankers Ins. Co. v. Northwest Nat'l Ins. Co., 198 F.3d 1332, 1335 (11th Cir.
1999) (explaining that follow-the-fortunes doctrine requires reinsurer to generally be
"bound by the reinsured's decision to pay the claim and must refrain from second
guessing a good faith decision to do so") with Graydon S. Staring, Law of
Reinsurance § 18:1 (1993) (noting that some courts have confused following fortunes
with following settlements doctrine). Because the retrocessionaires agree with
ReliaStar as to the nature of the doctrine as it may apply to them, and disagree only
as to whether they have written it out of their insurance contracts, we do not endeavor
to resolve the ambiguities noted in these sources.

                                          -5-
significant evidence that ReliaStar had misrepresented the nature of the underlying
insurance program." Br. of Appellants at i. In addition, they argue that the District
Court erred in converting the damages award to U.S. dollars and in failing to clearly
identify the applicable exchange rate for such a conversion.

      We review a district court's grant or denial of a summary judgment motion de
novo, applying the same standards that governed the district court's decision.
Jaurequi v. Carter Mfg. Co., 173 F.3d 1076, 1085 (8th Cir. 1999). Summary
judgment is appropriate if "there is no genuine issue as to any material fact and . . .
the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

                                         III.

       IOA Re and Swiss Re first find error in the District Court's rejection of their
claim that they were entitled to rescind the retrocessional coverage they provided to
ReliaStar because ReliaStar induced IOA Re and Swiss Re to enter the arrangements
through misrepresentation. The District Court held that ReliaStar had not
misrepresented any material fact and that IOA Re and Swiss Re therefore were not
entitled to rescind their retrocessional coverage.

      The usual rules of contract law apply to our examination of reinsurance
contracts. Under Minnesota law,4 "[o]ne who has been induced to enter a contract by
fraudulent misrepresentations may elect to rescind the contract." Anders v. Dakota
Land & Dev. Co., 289 N.W.2d 161, 163 (Minn. 1980). IOA Re and Swiss Re argue
that ReliaStar failed to disclose or misrepresented to them various facts and thus they
are permitted to rescind the retrocessional coverage they agreed to provide. They

      4
       The District Court applied Minnesota law to the substantive issues in the case.
Neither party contends that the law of some other jurisdiction should govern the case
and therefore we have no need to explore any choice-of-law question.

                                         -6-
argue that the record contains "substantial evidence supporting their right to rescind
the contract." Br. of Appellants at 20.

       Upon careful examination of the record, we must disagree. The alleged
"substantial evidence" cited by the retrocessionaires fails to adequately support their
rescission claim. For example, IOA and Swiss argue that ReliaStar knew the
snowbird program would be a "losing proposition" but failed to disclose this to either
retrocessionaire. The portions of the record they cite to do not, however, support this
assertion. In fact, in deposition testimony the retrocessionaires claim supports their
argument, the witness admits that to his knowledge ReliaStar did not know the
insurance was going to be in a loss position at the time that statements about the
program's profitability were made to IOA Re and Swiss Re personnel. Joint App.
Vol. IV at A1385. The evidence cited in support of the other supposed
misrepresentations, taken in the light most favorable to IOA Re and Swiss Re, also
does not sustain the retrocessionaires' position. Their citations to the record do not
point to any specific instances where ReliaStar, at the time it solicited reinsurance
coverage from IOA Re and Swiss Re, misrepresented material facts regarding the
snowbird insurance program. See S. Sur. Co. v. Fid. & Cas. Co., 50 F.2d 16, 19 (8th
Cir. 1931) (holding that promise of insured as to what would happen in the future
"was not a representation of a present fact or condition" and therefore "could not form
the basis of a claim of false or fraudulent representations"). We cannot see how this
evidence could be construed, even in the most generous light, as constituting
misrepresentations made by ReliaStar to either of the retrocessionaires. Cf. Sec. Mut.
Cas. Co. v. Affiliated FM Ins. Co., 471 F.2d 238, 245-46 (8th Cir. 1972) (holding that
substantial evidence of material misrepresentations supported jury verdict where
defendant, at the time defendant sought reinsurance from plaintiff, hid from reinsurer
the dangerous nature of the insured's business, affirmatively misstated the insured's
previous loss history, and did not reveal the nature of the underlying insurance). The
District Court rightly concluded that the retrocessionaires failed, as a matter of law,
to put forth sufficient evidence in support of their claims to survive summary

                                         -7-
judgment on the question of whether the retrocessionaires had the right to rescind
their contracts with ReliaStar on the basis of material misrepresentations.

                                          III.

       IOA and Swiss Re next argue that the District Court erroneously applied the
follow-the-fortunes doctrine to the facts of this case. The District Court held that the
doctrine "requires a reinsurer to follow-the-fortunes [sic] of the ceding company and
pay all reinsurance obligations." Joint App. Vol. V at A1813 (citing Am. Bankers
Ins., 198 F.3d at 1335; Nat'l Am. Ins. Co. v. Certain Underwriters at Lloyd's London,
93 F.3d 529 (9th Cir. 1996); Aetna Cas. & Sur. Co. v. Home Ins. Co., 882 F. Supp.
1328, 1346-47 (S.D.N.Y. 1995)). IOA and Swiss Re contend that the terms of their
reinsurance contracts with ReliaStar "required strict proof of the claims paid by
ReliaStar" and therefore the contracts did not incorporate the customary follow-the-
fortunes doctrine. Br. of Appellants at 22. They contend that their reinsurance
contracts "incorporated the terms and conditions of the underlying reinsurance
contract which required strict proof of coverage" and thus that under the terms of
their contracts the follow-the-fortunes doctrine does not apply to their retrocessional
coverage of ReliaStar's risk. Id. at 23.

       The District Court rejected the argument that the retrocessional agreements
incorporate any limiting language that might be found in the Canada Life/ReliaStar
reinsurance agreement. The court concluded that IOA Re and Swiss Re failed to
introduce any evidence "indicating that ReliaStar consented to adopting the
limitations included in the reinsurance contract between Canada Life and ReliaStar."
Joint App. Vol. V at A1818. The court explained that the retrocessional placement
slips merely identify the "pertinent insurance contract." Id.

                                          -8-
       Under Minnesota law, construction of a contract, including deciding whether
it is ambiguous, is a legal determination. Kauffman Stewart, Inc. v. Weinbrenner
Shoe Co., 589 N.W.2d 499, 501 (Minn. Ct. App. 1999). If after examining the entire
contract it is not subject to more than one reasonable interpretation, then there is no
ambiguity. Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 34
(Minn. 1979); In re Info Tel Communications, LLC v. U.S. WEST Communications,
Inc., 592 N.W.2d 880, 884 (Minn. Ct. App. 1999). We give the policy terms "their
plain, ordinary, and popular meaning," Ostendorf v. Arrow Ins. Co., 182 N.W.2d 190,
192 (Minn. 1970), without resort to parol evidence, ICC Leasing Corp. v. Midwestern
Machinery Co., 257 N.W.2d 551, 554 (Minn. 1977). See generally LaSociete
Generale Immobiliere v. Minneapolis Cmty. Dev. Agency, 44 F.3d 629, 635-36 (8th
Cir. 1994), cert. denied, 516 U.S. 810 (1995).

       IOA Re and Swiss Re rely on affidavits from their employees that state they
understood that the underlying Canada Life/ReliaStar agreement would "form a part
of the retrocessional agreement." Joint App. Vol. III at A1016, A1018. This
"understanding" is not sufficient as a matter of law to create ambiguity in the contract
and thus create a material issue of fact precluding summary judgment on this issue.
Looking to the plain language of the reinsurance agreements, we fail to see any
ambiguity in the contract terms. The retrocessionaires seize upon language in the
retrocessional placement slips that states, "Conditions: See attached ETFS Travel
Health Medical Reinsurance Agreement," to argue that the retrocession contracts
incorporated the loss notice and settlement procedures agreed to between Canada Life
and ReliaStar. Id. at A1103, A1105; Br. of Appellants at 24. We disagree. The plain
purpose of these slips is to set out the parties to the retrocession agreement, the period
of coverage, and the coverage that the retrocessionaire is to provide, among other
details. These other details include identifying the portion of the insured risk that is
being ceded to the retrocessionaire. Taken as a whole, the language of these slips,
and in particular the conditions clause, cannot reasonably be interpreted as sweeping
under its scope a set of specific procedures agreed to between Canada Life and

                                           -9-
ReliaStar in a separate agreement to which neither of the retrocessionaires were a
party. See Short v. Van Dyke, 52 N.W. 643, 644 (Minn. 1892) (holding that under
Minnesota law, if the reference to another contract or writing in the contract at issue
is "made for a particular purpose, expressed in the contract, it becomes part of it only
for that purpose"). The language in question certainly does not make explicit that the
retrocessional contract incorporates those specific terms. Cf. Progressive Cas. Ins.
Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 46 (2d Cir. 1993)
(holding that language "Subject to Facultative Reinsurance Agreement [FRA]" is
sufficient to incorporate FRA arbitration clause into reinsurance policy). We
conclude that the loss settlement procedures of the underlying insurance policy did
not form part of the operative terms of the retrocessional contracts at issue. Thus, we
reject the argument that the parties entered into any express contractual undertakings,
as between the retrocessionaires and ReliaStar, to preempt application of the
customary follow-the-fortunes doctrine.

        The retrocessionaires further challenge the District Court's application of the
follow-the-fortunes doctrine to this case because they claim that the existence of an
industry custom is a question of fact that should be left to a jury. We note that the
record does not reflect any dispute between the two sides as to the existence of this
custom. To the contrary, the retrocessionaires' expert admits that "[a] reinsurer has
the duty to 'follow the fortunes' of the cedent or retrocedent as long as the losses paid
are covered under the underlying contract or policy and fall within the terms and
conditions of the reinsurance treaty." Expert Report of James W. Schacht at 6. He
further agrees that the "follow-the-fortunes" obligation is "customary with
reinsurance contracts." Id. at 12. He explains that this custom applies unless "the
reinsured has not dealt with the reinsurer or retrocessionaire in the 'utmost good faith'
[or] . . . the reinsured fails to prove reinsured losses." Id. at 13. ReliaStar's expert
agrees that follow-the-fortunes is a "key principle[]" of the reinsurance business, and
means "when the ceding company has paid claims in good faith, the reinsurer may not
second guess such payment but must fulfill its own payment obligations." Expert

                                          -10-
Report of Ronald L. Wobbeking at 6. Thus, there does not appear to be a dispute
between the parties as to the nature of the follow-the-fortunes doctrine and as to its
customary application in the reinsurance business. The real dispute appears to be
whether the language of the parties' contracts rendered this industry custom
inapplicable to their insurance arrangement. Having concluded that the contracts did
not contain "anti-follow-the-fortunes" provisions, the District Court, we believe, was
correct to apply the customary follow-the-fortunes doctrine to the dispute at hand.

      The retrocessionaires next argue that if the follow-the-fortunes doctrine applies
to them, then the District Court erred in concluding that ReliaStar had not acted in
bad faith, because ReliaStar had not shown it "acted in a reasonable, businesslike
fashion, and that it submitted legitimate, reinsured losses." Br. of Appellants at 28.
They contend that the District Court erred in interpreting "bad faith" to require proof
of "deliberate deception, gross negligence, or recklessness," or even fraudulent
behavior. Id.

       In American Bankers Insurance v. Northwestern National Insurance, the
Eleventh Circuit discussed the question of what constitutes good faith in the context
of a ceding insurer's payment or settlement of claims. American Bankers, 198 F.3d
at 1336. In that case, the court concluded that "simple negligence cannot be enough
to establish bad faith," because otherwise "every decision by the ceding insurance
company could be second-guessed and litigated under a simple negligence standard."
Id. The court therefore concluded "that the proper minimum standard for bad faith
should be deliberate deception, gross negligence or recklessness." See id.; accord
Unigard, 4 F.3d at 1069. One court has even described this standard as requiring "an
extraordinary showing of a disingenuous or dishonest failure to carry out a contract."
North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1216 (3d Cir. 1995).
We agree with the formulation of "bad faith" adopted by other circuits in the just-
cited cases, and we adopt the same standard as our own. We therefore hold that the

                                         -11-
District Court did not err in applying this standard to the "bad faith" question in this
case.

       Moreover and despite IOA Re's and Swiss Re's arguments to the contrary, a
thorough review of the record convinces us that the retrocessionaires have not
presented evidence sufficient to make a submissible case on their allegations of bad
faith. The record reflects problems with the snowbird insurance program and with
the claims documentation (as noted in the IIAS audit report), among other issues. It
also reflects efforts by ReliaStar to provide information to the retrocessionaires and
to determine how it could change the snowbird program to prevent similar losses in
future policy terms. We conclude that, as a matter of law, the evidence the
retrocessionaires point to does not amount to evidence of "deliberate deception, gross
negligence or recklessness." Summary judgment on this issue in favor of ReliaStar
was appropriate.

       Finally, the retrocessionaires argue that they are not obligated to pay ReliaStar's
loss claims because ReliaStar failed to comply with the loss-notice and claims
deadlines contained in the underlying insurance. Because we already have concluded
that these terms were not incorporated into the retrocessional coverage contracts with
IOA Re and Swiss Re, we conclude that summary judgment was appropriate on these
disputed claims.

                                           IV.

       The retrocessionaires raise several challenges to the damages awarded by the
District Court to ReliaStar. They argue that any judgment in favor of ReliaStar must
be awarded in Canadian dollars, because that is "the currency in which the parties
chose to do business." Br. of Appellants at 35. Moreover, they argue that if ordering
the award in U.S. dollars is appropriate, the District Court erroneously failed to state
a specific rate of exchange at which to determine the amount of the award.

                                          -12-
       The District Court held that awards in actions "involving foreign currency must
be rendered in U.S. currency." The court relied on the Supreme Court's decision in
Hicks v. Guinness, 269 U.S. 71, 80 (1925), which held that when a debt is due and
is to be paid in the United States, the breaching debtor can be made to pay the debt
in U.S. dollars as of the time the breach occurred. We believe the District Court may
have somewhat overread Hicks. We infer from the Supreme Court's discussion in
Hicks that such awards may be ordered to be paid in U.S. dollars, if the plaintiff so
requests (as ReliaStar here apparently did), but that a district court is not required to
order the award to be paid in U.S. currency. Our reading of Hicks is supported
further by the position stated in the Restatement (Third) of Foreign Relations Law,
which suggests that United States courts ordinarily enter judgments in U.S. dollars,
but that nothing precludes a United States court from entering judgment in a foreign
currency. See Restatement (Third) of Foreign Relations Law § 823 (1987). Based
on these authorities, we conclude that although the District Court was not compelled
to make the award in U.S. dollars, it nevertheless was not error to do so.

       When a court makes an award in U.S. currency, "the conversion from foreign
currency to dollars is to be made at such rate as to make the creditor whole and to
avoid rewarding a debtor who has delayed in carrying out the obligation." Id. In this
instance, the District Court concluded that to make ReliaStar whole, the award should
be converted "at the rate of exchange at the time the defendants first refused to make
the payment owed in October 1997." Joint App. Vol. V at A1820. The court again
relied upon Hicks:

      When the contract was broken by a failure to pay, the American firm had
      a claim here, not for the debt, but, at its option, for damages in dollars.
      It no longer could be compelled to accept [foreign currency]. . . . The
      loss for which the plaintiff is entitled to be indemnified is "the loss of
      what the contractor would have had if the contract had been performed"
      . . . and the plaintiff's claim is for the amount of that loss valued in
      money at that time.

                                          -13-
Hicks, 269 U.S. at 80 (alteration in original) (quoting Chicago, Milwaukee & St. Paul
Ry. Co. v. McCaull-Dinsmore Co., 253 U.S. 97, 100 (1920)). The rule in Hicks is
often referred to as the "breach day" rule.

       The retrocessionaires argue for the application of a different rule. They cite
Deutsche Bank Filiale Nurnberg v. Humphrey, 272 U.S. 517, 519 (1926), in support
of their argument that the District Court should have fixed the exchange rate as that
applicable on September 14, 2001, the date on which the District Court entered
judgment against them. The Supreme Court held in Deutsche Bank that because the
judgment was to be paid on an obligation incurred in a foreign currency in a foreign
country, rate fluctuations in the meantime should not cause the court to award
damages as of the date of breach. Id. at 519-20. We conclude the District Court
correctly applied the rule in Hicks, rather than the rule in Deutsche Bank. As the First
Circuit has succinctly explained, "[t]he judgment day rule applies only when the
obligation arises entirely under foreign law. If, however, at the time of breach the
plaintiff has a cause of action arising in this country under American law, the breach
day rule applies." In re Good Hope Chemical Corp., 747 F.2d 806, 811 (1st Cir.
1984), cert. denied, 471 U.S. 1102 (1985). When IOA Re and Swiss Re failed to
make their payments to ReliaStar, ReliaStar accrued a cause of action against them
under Minnesota law for breach of contract.5 See Olson v. Rugloski, 277 N.W.2d
385, 387-88 (Minn. 1979). Even though the retrocessionaires had in the past made
payments to ReliaStar in Canadian dollars, that fact does not render the "breach day"
rule inapplicable. See Hicks, 269 U.S. at 80 (holding that even though payments
under contract were to be made in German marks, at time of breach American
company gained, as a matter of law, right to demand payment in U.S. currency).

      5
       As pointed out in footnote 4, supra, IOA Re and Swiss Re do not contest the
application of Minnesota law to the case.

                                         -14-
       Although we reject the retrocessionaires' argument that the "judgment day" rule
should apply, we agree that the District Court did not make clear whether under the
breach-day rule it meant to impose the exchange rate in effect on October 2, 1997, the
date on which ReliaStar made its first demand for payment, or on some other date.
Obviously, to apply the breach-day rule correctly, it is necessary to determine the day
on which the breach in question occurred. Thus, we remand to the District Court for
clarification of this point.

                                         VI.

      For the reasons stated, we affirm the judgment of the District Court, and we
remand for clarification as to the exchange rate applicable to the damages owed to
ReliaStar by IOA Re and Swiss Re.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                         -15-