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CONSTITUTION REINSURANCE CORP. v. STONEWALL INS. C

September 17, 1997

CONSTITUTION REINSURANCE CORPORATION, Plaintiff, against STONEWALL INSURANCE COMPANY, Defendant.

Peter K. Leisure, U.S.D.J.


The opinion of the court was delivered by: LEISURE

LEISURE, District Judge :

 In its action for a declaratory judgment, plaintiff Constitution Reinsurance Corporation ("Constitution") moves pursuant to Fed. R. Civ. P. 56(c) for summary judgment against defendant Stonewall Insurance Company ("Stonewall"). For the reasons stated below, plaintiff's motion is granted.

 BACKGROUND

 In the early morning hours of May 15, 1983, a drunken driver named Hugo Gomez caused a two-car collision in Hidalgo County, Texas, in which both parents of an infant girl were killed. See Plaintiff's Original Petition in Brown v. Economy Oil Company, No. C-2930-87-B)(93d Jud. Dist., Hidalgo Co., Tex.), annexed as Exhibit 42a to Documents Relied Upon by Plaintiff Constitution Reins. Corp. on Its Motion for Summary Judgment (the "Pl. Docs"). *fn1" The litigation before this Court concerns a reinsurance dispute arising out of that tragic accident.

 
Primary insurers reinsure to diversify risk. The mechanics of reinsurance can be simply described. One insurer (a "ceding insurer") "cedes" all or part of the risk relating to a policy, or group of policies, to a reinsurer. A portion of the risk not "ceded" is "retained." The reinsurer indemnifies the ceding insurer for any liability incurred that is covered by the reinsurance.

 The Travelers Indemnity Co. v. Scor Reins. Co., 62 F.3d 74, 76 (2d Cir. 1995).

 Or, as Judge McLaughlin noted more colorfully:

 
Reinsurance is not new. It dates back to the time the first bookie, fearful he could not cover all his bets in the event he were to lose, decided to spread his risk by "laying off" some of the risks by getting other bookies to share his exposure. In a more respectable vein, reinsurance is a device whereby an insurance company that has assumed uncomfortable levels of risk buys insurance from another insurance company to assume some of those risks . . . By contract, the reinsurer agrees to assume some or all of the risk that the ceding insurer has assumed.

 Continental Casualty Co. v. Stronghold Ins. Co., 77 F.3d 16, 17 (2d Cir. 1996)(internal citations omitted). The insurance agreement between Economy and Stonewall and the underlying reinsurance agreement between Stonewall and Constitution are at the heart of this action.

 After Stonewall denied coverage and refused to tender a defense for Economy in Brown, Economy commenced an adversarial action against Stonewall on March 27, 1991. See Pl.'s 3(g) at # 18. After settling Brown, the Brown family and Economy allied against Stonewall in hopes of generating funds to help satisfy the Brown judgment. See id. at # 24. On January 5, 1994, Stonewall agreed to pay Economy $ 3.25 million in exchange for Economy's dropping its suit. See Stonewall Ins. Co.'s Response to Constitution Reins. Corp.'s Rule 3(g) Statement (the "Def.'s 3(g) Response") at # 42. *fn2"

 Constitution commenced this action on March 18, 1994, seeking a declaratory judgment that it is not required to reimburse Stonewall under the reinsurance agreement for Stonewall's settlement with Economy. See Def.'s 3(g) Response at # 68. As the parties are citizens of different states and the amount in controversy exceeds $ 50,000 (exclusive of interest and costs), *fn3" jurisdiction over this action is appropriate pursuant to 28 U.S.C. Sect. 1332(a)(1). Sitting in diversity, the Court applies New York's choice-of-law rules. See Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021, 85 L. Ed. 1477 (1941). In contract cases, New York courts apply a "center of gravity" approach that takes into account a wide variety of factors, including the place of contracting, the places of negotiation and performance, the location of the subject matter, and the domiciles or places of business of the contracting parties. See Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d Cir. 1997). Here, the reinsurer is located in New York, the Reinsurance Certificate was issued in New York, the parties had discussions in New York, and performance was to occur in New York. See Affidavit of Roger M. Hughes, dated June 9, 1994, at Paragraphs 3-5. As New York thus has the most significant relationship with the dispute, New York law applies in this case. See id. ; see also Arkwright-Boston Mfrs. Mut. v. Calvert Fire Ins., 887 F.2d 437, 439 (2d Cir. 1989).

 DISCUSSION

 1. The Standard for Summary Judgment

 Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56. When considering a motion for summary judgment, it is this Court's responsibility "not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Insurance Co., 804 F.2d 9, 11 (2d Cir. 1986). Nonetheless, summary judgment "is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S. Ct. 2548, 2555, 91 L. Ed. 2d 265 (1986). Summary judgment is particularly appropriate in resolving insurance coverage disputes, because the interpretation of an insurance policy presents a question of law. See Freedom Gravel Prods., Inc. v. Michigan Mut. Ins. Co., 819 F. Supp. 275, 277 (W.D.N.Y. 1993) (citing McGinniss v. Employers Reinsurance Corp., 648 F. Supp. 1263, 1266 (S.D.N.Y. 1986)).

 "A party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion." Id. at 325, 106 S. Ct. at 2553 (internal citations omitted). "The burden on the moving party may be discharged by showing . . . that there is an absence of evidence to support the non-moving party's case." Id. at 325, 106 S. Ct. at 2554 (internal citations omitted). The burden of demonstrating the existence of a genuine issue of material fact then shifts to the non-moving party. See id. at 322-23, 106 S. Ct. at 2552-53. The non-moving party may not rely solely on its pleadings nor on conclusory factual allegations in satisfying this burden. See Gray v. Darien, 927 F.2d 69, 74 (2d Cir. 1991). The non-moving party instead must offer specific evidence supporting its claim that there exists a genuine issue of material fact. See Celotex, 477 U.S. at 324, 106 S. Ct. at 2553. In demonstrating that the factual issue in dispute is "genuine", the non-moving party must offer evidence to allow a reasonable jury to return a verdict in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986); see also Robbins v. Moore Medical, 894 F. Supp. 661, 667 (S.D.N.Y. 1995).

 2. Prompt Notice

 In the instant case, plaintiff is entitled to summary judgment on the ground that defendant failed to provide promptly a definitive statement of loss, in violation of an express condition of the reinsurance contract between Stonewall ...


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