Royal must pay the "Ultimate Net Loss" of any settlement remaining after Wyckoff pays its SIR of $ 1 million.
In order to argue whether Wyckoff's purchase of the $ 750,000 annuity met its SIR obligations, the parties rely most heavily on their competing interpretations of "Ultimate Net Loss" as defined in Section IV of the Policy. Wyckoff urges that the use of the words "paid or payable" in the above definition means that any method of payment of a claim, now or in the future, so long as the cumulative payments total $ 1 million, will satisfy its obligations. This position is untenable. If Wyckoff's interpretation were adopted, by its logic, it could satisfy its SIR at any time in the future, so long as cash payments totaled $ 1 million.
The annuity purchased by Wyckoff for $ 750,000 makes twelve annual payments of $ 83,334. Assuming that interest is compounded annually, this annuity gives a 4.7297% rate of return. Following Wyckoff's logic, an annuity purchased for $ 476,047 with the same rate of return, making thirty-six annual payments of $ 27,778 would satisfy its SIR obligations. Likewise, an annuity purchased for only $ 330,365 with the same rate of return, making sixty annual payments of $ 16,667 would satisfy its SIR obligations. This is not a reasonable reading of the Policy as a whole, the spirit of which was to have Wyckoff spend the first $ 1 million of any judgment or settlement. Wyckoff clearly has spent only $ 750,000.
Wyckoff counters this intuitive reading with the non-responsive argument that Eric Ploen, president and CEO of a risk management consulting service, testified at his deposition that the term "cash" was absent from the policy and that in his opinion, Wyckoff could satisfy its SIR with goods and services. (Wyckoff's Cross-Mot. for Summ. J. Ex. G at 18.) While this issue is not before the Court, even assuming arguendo that Wyckoff could satisfy its $ 1 million SIR with an "in kind" payment, it could not do so with goods and services worth only $ 750,000, even if those goods and services might cost $ 1 million twelve years in the future. Wyckoff has not found an ambiguity in the policy, but merely an unreasonable interpretation.
Wyckoff next urges that the judge in the underlying state court malpractice action felt that Wyckoff's scheme satisfied its SIR, implying that this Court is bound by the state judge's alleged remarks. To support this claim, Wyckoff submits Mr. Cullinan's handwritten notes which read, "The judge & II atty are friends. The judge has said that $ 1m Pd. over 18 yrs meets payment of underlying requirements." (Breitner Reply Decl. Ex. B.) The record in this case does not reflect any remarks even remotely resembling this. The only remarks by the state court judge in the record on this subject are:
For the purposes of this settlement, Wyckoff Heights Hospital and Royal Insurance have each done what they did, knowing fully what the consequences are, and each of them have reserved the right, if they choose, to assert the rightfulness of their respective claims, and that is not being waived by the payments being agreed to here, nor is it being asserted that they will -- such claims will be immediately pursued.