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Case Note: Massachusetts Federal District Court Grants Summary Judgment to Reinsurer on Question of Policy Renewal

by ~ Susan A. Hartnett (Email) (Web Site)

One Beacon Am. Ins. Co. v. Commercial Union Assur. Co. of Canada
No. 10-10164-JLT (D. Mass. Aug. 18, 2011) (Tauro, J.)

A recent decision issued by the federal district court in Massachusetts illustrates the potential for evidentiary problems when issues in dispute are not ones with which any current company witness was personally involved but, rather, concern business decisions made decades earlier. Given the extended life of long-tail claims, this is not an uncommon scenario for cedents and reinsurers alike.

At the heart of this dispute was whether two policies that OneBeacon America Insurance Company (�OneBeacon￁) issued to its insured in 1981 and 1982 were �renewals￁ of a 1980 OneBeacon policy that the parties agreed was covered by a 1980 facultative certificate issued to OneBeacon by Commercial Union Assurance Company of Canada (�Aviva￁). While it was undisputed that Aviva had agreed to reinsure 100% of OneBeacon�s 1980 policy and ￁any renewal thereof,￁ the parties disagreed on whether the later two policies were, in fact, �renewals￁ of the 1980 OneBeacon policy. This issue arose in 2007, almost 30 years after the policies were issued, after OneBeacon sought full indemnity under Aviva�s 1980 facultative certificate for sums it had paid under all three policies for personal injury asbestos claims against its insured.

Both parties moved for summary judgment. The only contract between the parties was the 1980 facultative certificate, which specifically referenced only the 1980 OneBeacon policy. While the 1981 and 1982 OneBeacon policies chronologically followed the 1980 OneBeacon policy period, the later two policies were not identified as �renewals￁ of the 1980 on their face, bore a different policy number sequence and producer code, and contained different premium information. Thus, the underwriting intent was a key issue in dispute. The court made no reference to testimony of employees or brokers who had been personally involved in the 1980 transactions, and procuring such testimony may have been difficult given the length of time since the policies were issued.

In moving for summary judgment and arguing that the two later policies were clearly �renewals￁ of the 1980 Policy, OneBeacon relied on the affidavit of one of its current senior reinsurance analysts who unequivocally stated that the 1981 and 1982 policies issued by OneBeacon to its policyholder were renewals of the 1980 policy. However, this same senior reinsurance analyst had testified as OneBeacon�s Rule 30(b)(6) deposition witness on issues relating to the negotiation, underwriting and issuance of the 1980 policy. At his deposition, he stated that he had not contacted current or former OneBeacon employees or any broker who had been involved in the underwriting of the OneBeacon policies, had not reviewed the underwriting files, and had no personal knowledge about the payment of a premium to Aviva related to the 1981 and 1982 policies.

Ruling on the parties￁ cross-motions, the federal district court characterized the statement in OneBeacon�s affidavit that the two later policies were �renewals￁ of the 1980 policy as an impermissible �conclusory allegation￁ that would be stricken, noting that whether the policies were renewals was a question of law for the court. (The court, thus, also struck portions of Aviva�s expert testimony that opined that the later policies were not renewals of the 1980 OneBeacon policy.) The court further supported its decision to strike OneBeacon�s affidavit testimony based on its conclusion that the witness￁ Rule 30(b)(6) deposition testimony demonstrated that his affidavit statement was not based on his personal knowledge.

In addition, the court held that the statement in his affidavit that Aviva received a premium in exchange for its agreement to reinsure the two later policies violated the First Circuit�s �sham affidavit rule,￁ which precludes a witness from contradicting prior answers under oath to unambiguous questions absent a �satisfactory explanation￁ of why the testimony changed. Since the witness had earlier testified that he had no knowledge of any premium payments to Aviva, and did not explain why his affidavit testimony differed, the court concluded that that testimony should be stricken, as well.

With this key testimony stricken, OneBeacon�s motion for summary judgment was denied. The district court then granted Aviva�s cross-motion for summary judgment, noting that the only reasonable interpretation of the facultative certificate at issue, �the only contract between the Parties,￁ was that it was limited to the 1980 OneBeacon policy. While not expressly relying on extrinsic evidence, the court also observed that additional evidence in the record, such as the different policy number sequences in the 1981 and 1982 policies, different producer codes, and omission of a key endorsement in the 1981 policy, further supported Aviva�s position that Aviva had terminated its reinsurance relationship with OneBeacon after 1980, and that only the 1980 OneBeacon policy was reinsured by the facultative certificate. There are many online and offline shops offer gucci bags,gucci replica watches,iwc replica watches and panerai replica watches.

Susan A. Hartnett may be reached at hartnett@srbc.com.
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