United States District Court, S.D. New York
For Greenlight Reinsurance, Ltd., Verdant Holding Company, LTD, Plaintiffs: Daniel Mumford Perry, Jed Mastren Schwartz, Linda Dakin-Grimm, Milbank, Tweed, Hadley & McCloy LLP, Los Angeles, CA.
For Appalachian Underwriters, Inc., Insurance Services Group, Inc., Defendants: Ronald Lee Daugherty, LEAD ATTORNEY, Salmanson Goldshaw, P.C., Two Penn Center, Philadelphia, PA.
OPINION AND ORDER
J. PAUL OETKEN, United States District Judge.
Plaintiff Greenlight Reinsurance, Ltd. (Greenlight Re) sues Appalachian Underwriters, Inc. (AUI) and Insurance Services Group, Inc. (ISG) for breach of guarantees of payment and breach of contract, seeking both money damages and declaratory relief. Greenlight Re has moved for summary judgment on all claims. For the reasons that follow, Greenlight Re's motion is granted in part and denied in part.
The following facts are unconstested unless otherwise noted. Greenlight Re is a reinsurance company based in the Cayman Islands. (Defs.' 56.1 Stmt. ¶ 1, Dkt. No. 41.) This action concerns multiple agreements between Greenlight Re and other parties including ISG, AUI, and Appalachian Reinsurance (App Re), an affiliate of ISG and AUI. ( Id. ¶ ¶ 4-6, 27-28, 53, 58-59.) The agreements fall into three general types, each of which the Court will discuss in turn.
A. Reinsurance Agreements
The first type of agreement is a reinsurance agreement. By such agreements, an insurance company shares some of the risk associated with its policies with a reinsurance company; in exchange, the reinsurance company receives a portion of the premiums from the underlying policies. ( Id. ¶ 9.) That portion is called a " ceded premium." ( Id. ¶ 10.) The reinsurance agreements in this case also involve a managing general agent: a company responsible for writing the underlying insurance policies, collecting ceded premiums from the insurance companies, and paying the reinsurance company. ( Id. ¶ 8.) The managing general agent keeps a portion of all ceded premiums as a commission. ( Id. ¶ 11.) The percentage commission that the managing general agent may retain depends on the performance of the underlying insurance policies. ( Id. ¶ 15.)
There are three reinsurance agreements at issue in this case. ( Id. ¶ ¶ 4-6.) For all agreements, Greenlight Re was the reinsurance company, and AUI was the managing general agent. ( Id. ¶ ¶ 4-6, 8.) The first agreement was effective July 1, 2008 (2008 Reinsurance Agreement) (Pl.'s Ex. 1, Dkt. No. 33-1), the second was effective July 1, 2010 (2010 Reinsurance Agreement) (Pl.'s Ex. 2, Dkt. No. 33-2), and the third was also effective July 1, 2010 (California Reinsurance Agreement) (Pl.'s Ex. 3, Dkt. No. 33-3). (Defs.' 56.1 Stmt. ¶ ¶ 4-6.) Each agreement was effective for one-year periods spanning July 1 to June 30, an " agreement year." (2008 Reinsurance Agreement § 8.06(g); 2010 & California Reinsurance Agreements § 8.06(h).) The agreements allow AUI to take a provisional commission of all ceded premiums, on a temporary basis, throughout each agreement year. (Defs.' 56.1 Stmt. ¶ 11.) AUI then has an adjustment period following each agreement year, during which AUI must calculate the adjusted commission for that year, based on the performance of the underlying insurance policies, and report its calculation to Greenlight Re. (2008 Reinsurance Agreement § § 8.06(c), 8.06(d); 2010 & California Reinsurance Agreements § § 8.06(d), 8.06(e).) If the adjusted commission is less than the provisional commission AUI kept during the agreement year, AUI is required to pay the excess money it kept to Greenlight Re " with its report." (2008 Reinsurance Agreement § § 8.06(c), 8.06(d); 2010 & California Reinsurance Agreements § § 8.06(d), 8.06(e).) Greenlight Re claims, and Defendants dispute, that AUI owes an aggregate $16,986,156 under the Reinsurance Agreements.
B. Retrocession Agreements
The second type of agreement is a retrocession agreement. A retrocession agreement is like a secondary reinsurance agreement: the reinsurance company shares its own risk exposure with another company. The company accepting some of the risk does so by posting collateral--giving the primary reinsurer money--to cover a portion of its anticipated losses over a given period of time. (Barry Decl. ¶ 31, Dkt. No. 33; Defs.' Opp at 4, Dkt. No. 40.) The amount of collateral that must be posted varies depending on the reinsurer's anticipated losses under reinsurance
agreements. (Barry Decl. ¶ 53; Defs.' Opp. at 4.)
There are two retrocession agreements at issue in this case. The first agreement was effective July 1, 2008 (2008 Retrocession Agreement) (Pl.'s Ex. 5, Dkt. No. 33-5), and the second was effective July 1, 2010 (2010 Retrocession Agreement) (Pl.'s Ex. 6, Dkt. No. 33-6). (Defs.' 56.1 Stmt. ¶ ¶ 27-28.) Greenlight Re and App Re are the parties to both Retrocession Agreements. ( Id.) Greenlight Re claims, and Defendants dispute, that the Retrocession Agreements require App Re to post collateral to cover a portion of Greenlight Re's projected losses under the Reinsurance Agreements. ( Id. ¶ ¶ 31-32.) Defendants also dispute Greenlight Re's claim that App Re owes an aggregate of $29,775,690 under the Retrocession Agreements. ( Id. ¶ 43.)
Because Greenlight Re and App Re disagreed over the amount of collateral App Re was required to post under the Retrocession Agreements, Greenlight Re initiated arbitration in November 2012. (Defs.' 56.1 Stmt. ¶ 33.) The arbitration panel ultimately awarded Greenlight Re $24,456,213 in collateral due under the Retrocession Agreements and $460,354 in costs. (Pl's Ex. 11 (Arbitration Award), Dkt. No. 33-11.)
The final type of agreement is a guarantee. A guarantee is a promise to pay the debt of another. Greenlight Re claims, and Defendants dispute, that both Defendants guaranteed AUI's debt under the Reinsurance Agreements and App Re's debt under the Retrocession Agreements. ( Id. ¶ ¶ 46, 55, 57-69.) The first purported guarantee is a letter labeled " Parental Guarantee," printed on ISG letterhead, promising that AUI and ISG will keep App Re solvent, thereby ensuring that App Re will be able to meet its obligations under the Retrocession Agreements. (Pl.'s Ex. 14 (Parental Guarantee), Dkt. No. 33-14.) The letter is signed, but there is no printed name under the signature; Defendants dispute that the letter was executed by an agent of AUI or ISG. (Defs.' 56.1 Stmt. ¶ ¶ 46, 48-50.) The second guarantee was executed in 2009 by William M. Arowood as Vice President of AUI and President of ISG. (Pl.'s Ex. 15 (2009 Guarantee) at 18, Dkt. No. 33-15.) By this agreement, Defendants guaranteed " full and prompt payment . . . as and when the same becomes due . . . strictly in accordance with the . . . Relevant Contracts," " absolutely, unconditionally and irrevocably[,] . . . as primary obligors and not merely as sureties." (2009 Guarantee § § 2(a), 2(a)(ii).) Defendants also agreed that they would not permit themselves or their affiliates to breach any Relevant Contract. (2009 Guarantee § 10(a).) Greenlight Re claims, and Defendants dispute, that the Reinsurance and Retrocession Agreements are " Relevant Contracts" covered by the 2009 Guarantee.
Greenlight Re claims that Defendants have breached the Parental Guarantee and the 2009 Guarantee by refusing to pay debts owing under the Reinsurance and Retrocession Agreements. Greenlight Re seeks to enforce the guarantees against Defendants, and also seeks damages for violation of the 2009 Guarantee's covenant not to permit breach of the agreements. Greenlight Re also seeks an accounting and a declaratory judgment that Defendants must satisfy present and future debts owing under the agreements.
A. Legal Standard
Summary judgment is proper when " there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. A fact is material if it " might affect the outcome of the suit under the governing law," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and a dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party, Ricci v. DeStefano, 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
On a motion for summary judgment, the party bearing the burden of proof at trial must come forward with evidence on each element of its claim or defense illustrating its entitlement to relief. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). It cannot rely upon mere " conclusory statements, conjecture, or speculation" to meet its burden. Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996) (citations omitted). If the party with the burden of proof makes the requisite initial showing, the burden shifts to the opposing party to identify specific facts creating a genuine issue for trial, i.e., evidence creating a factual issue about which reasonable minds could disagree. Fed.R.Civ.P. 56(f); Anderson, 477 U.S. at 250-51. The facts must be truly specific--it is not enough to speculate or to " vaguely assert the existence of some unspecified disputed material facts." Aetna Cas. & Surety Co., 404 F.3d 566, 574 (2d Cir. 2005) (citing W. World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1980)). The court should view all evidence " in the light most favorable to the nonmoving party and draw all ...