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ALLENDALE MUT. INS. CO. v. EXCESS INS. CO.

July 8, 1997

ALLENDALE MUTUAL INSURANCE COMPANY, Plaintiff, against EXCESS INSURANCE COMPANY, LTD. et al., Defendants.


The opinion of the court was delivered by: SCHEINDLIN

 SHIRA A. SCHEINDLIN, U.S.D.J.:

 This law suit, brought under diversity jurisdiction, rises from the ashes of a fire that destroyed a warehouse in Seclin, France during the summer of 1991. Plaintiff Allendale Mutual Insurance Company ("Allendale") seeks to recover $ 7,000,000 in unpaid reinsurance, $ 5,000,000 in "loss adjustment expenses" and interest, and an unspecified amount for legal fees and expenses incurred in the defense of a prior action for declaratory relief brought by defendants against Allendale in England. Defendants, all British reinsurers, now move for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. *fn1" For the reasons set forth below, defendants' motion is granted in part.

 I. Applicable Legal Standard

 A party is entitled to summary judgment when there is "no genuine issue of material fact" and the undisputed facts warrant judgment for the moving party as a matter of law. See Fed. R. Civ. P. 56(c); Celotex v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The burden of demonstrating the absence of a material factual dispute rests on the moving party. See Gallo v. Prudential Residential Svcs., Ltd., 22 F.3d 1219, 1223 (2d Cir. 1994). Once that burden is met, the non-moving party must present "significant probative supporting evidence" that a factual dispute exists. Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 249.

 The court's role is not to try issues of fact, but rather to determine whether issues exist to be tried. See Balderman v. United States Veterans Admin., 870 F.2d 57, 60 (2d Cir. 1989); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 58 (2d Cir. 1987). All ambiguities must be resolved and all inferences drawn in favor of the party against whom summary judgment is sought. See Anderson, 477 U.S. at 255; Donahue, 834 F.2d at 57, 60. If there is any evidence in the record from which a reasonable inference could be drawn in favor of the non-moving party on a material issue of fact, summary judgment is improper. See Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d Cir. 1994).

 II. Factual and Procedural Background

 The following facts are not in dispute. In December of 1990, Allendale insured the contents of a warehouse leased to Bull Data Systems ("Bull Data") in Seclin, France. This policy was replaced on January 1, 1991, by a policy issued by FM Insurance Company Ltd. ("FMI"), an insurer partially-owned and entirely controlled by Allendale (the "direct insurance policy"). Allendale then reinsured 100% of FMI's policy. *fn2" The limit of FMI's liability and Allendale's under these policies was $ 48,000,000.

 In turn, Allendale arranged for the placement of facultative reinsurance *fn3" of 100% of the fronting cession. The disputes in this case relate to Allendale's reinsurance agreement with defendants in the amount of $ 7,000,000 for the portion of the reinsurance layer between $ 25,000,000 and $ 38,500,000. *fn4" The reinsurance agreement was initially issued on January 1, 1991, and was renewed for the year commencing June 1, 1991. In pertinent part, the reinsurance agreement stated as follows:

 REASSURED : ALLENDALE INSURANCE COMPANY

 ASSURED : BULL DATA CORPORATION and/or as original.

 PERIOD : Twelve months at 1st June, 1991 and/or as original. Both days inclusive.

 LOCATIONS : Bull Data Corporation, Seclin, France as original.

 INTEREST : Goods and/or Merchandise incidental to the Assured's business consisting principally of personal computers and/or as original.

 LIMIT : US$ 7,000,000 any one occurrence p/o US$ 13,500,000 any one occurrence excess of US$ 25,000,000 any one occurrence.

 CONDITIONS : As original and subject to the same valuation, clauses and conditions as contained in the original policy or policies but only to cover risks of All Risks of Physical Loss or Damage but excluding Inventory Shortage.

 Including Strikes, Riots, Civil Commotions and Malicious Damage risks and as original.

 Premium payable as in original.

 Reinsurers agree to follow the settlements of the Reassured in all respects and to bear their proportion of any expenses incurred, whether legal or otherwise, in the investigation and defense of any claim hereunder.

 Service of Suit Clause (U.S.A.).

 Insolvency Clause.

 Affidavit of Bernard London, Counsel for Plaintiff ("London Aff."), dated May 5, 1997, Ex. E (emphasis added). *fn5"

 In June of 1991, a fire completely destroyed Bull Data's warehouse. When Bull Data subsequently presented a claim to FMI and Allendale, they refused payment on the grounds that the fire was the result of arson. Bull Data and its affiliates commenced an action before the courts of France to recover under the direct insurance policies (the "French action"). Allendale and FMI also commenced an action against Bull Data in the United States District Court for the Northern District of Illinois. Specifically, defendants sought a declaration that they were not liable to the insured (the ...


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