Global Reinsurance Corporation of America, successor in interest to Constitution Reinsurance Corporation, Respondent,
Century Indemnity Company, successor in interest to CCI Insurance Company, successor in interest to Insurance Company of North America, Appellant.
Jonathan D. Hacker, for appellant.
C. Frederick, for respondent.
Continental Casualty Company, et al.; Aon Benfield U.S., et
al., amici curiae.
narrow issue before us pertains to the scope of our prior
ruling in Excess Insurance Co. Ltd. v Factory Mutual
Insurance Co. (3 N.Y.3d 577');">3 N.Y.3d 577 ). Pursuant to Rule
500.27 of this Court, the United States Court of Appeals for
the Second Circuit has certified the following question to
the decision of the New York Court of Appeals in [
Excess ] impose either a rule of construction, or a
strong presumption, that a per occurrence liability cap in a
reinsurance contract limits the total reinsurance available
under the contract to the amount of the cap regardless of
whether the underlying policy is understood to cover expenses
such as, for instance, defense costs?" (Global
Reinsurance Corporation of America v Century Indemnity
Company, 843 F.3d 120, 128 [2d Cir 2017]) . We now
answer the certified question in the negative. Under New York
law generally, and in Excess in particular, there is
neither a rule of construction nor a presumption that a per
occurrence liability limitation in a reinsurance contract
caps all obligations of the reinsurer, such as payments made
to reimburse the reinsured's defense costs.
is the insurance of one insurer by another (see Matter of
Union Indem. Ins. Co. of N.Y., 89 N.Y.2d 94, 105-106
). "When entering into a reinsurance contract, an
insurance company agrees to pay a particular premium to a
reinsurer in return for reimbursement of a portion of its
potential financial exposure under certain direct insurance
policies it has issued to its customers" (Travelers
Cas. & Sur. Co. v Certain Underwriters at Lloyd's of
London, 96 N.Y.2d 583, 587 ). "Through this
indemnity relationship, the reinsured seeks to 'cede'
or spread its risk of loss among one or more reinsurers"
(id.). Through this process, reinsurance permits the
cedent insurer to "minimize its exposure to catastrophic
loss, " "reduce the amount of the legally required
reserves held for the protection of policyholders, " and
"increase [its] ability to underwrite other policies or
make other investments" (Matter of Midland Ins.
Co., 79 N.Y.2d 253, 258 ).
are two types of reinsurance: treaty and facultative. Under a
reinsurance treaty, the cedent transfers to the reinsurer its
risk under an entire line of business spanning multiple
insurance policies (see Travelers, 96 N.Y.2d at
587-588; Sumitomo Marine & Fire Ins. Co., Ltd.-U.S.
Branch v Cologne Reinsurance Co. of America, 75 N.Y.2d
295, 301 ). By contrast, in facultative reinsurance,
the reinsurer agrees to indemnify the cedent for all or a
portion of the cedent's risk under a single policy in the
event of loss (see 1A Couch on Ins. § 9:3 [3d
ed. 2016]; Travelers, 96 N.Y.2d at 587). In other
words, "[f]acultative reinsurance is
policy-specific" (Travelers, 96 N.Y.2d at 587).
For purposes of this certified question, we are concerned
only with facultative reinsurance. 
coverage provided under a facultative reinsurance contract is
"memorialized in a certificate" (Barry R. Ostrager
& May Kay Vyskocil, Modern Reinsurance Law and
Practice § 1:03 [3d ed. 2014]; accord
William Hoffman, Facultative Reinsurance Contract
Formation, Documentation and Integration, 38 Tort Trial
& Ins Prac L J 763, 809 [Spring 2003] ["By a
certificate, the reinsurer attests that the facultative
reinsurance placement is complete and the contract in
effect"]). These certificates are usually "standard
forms" (North River Ins. Co. v CIGNA Reinsurance
Co., 52 F.3d 1194, 1199 [3d Cir 1995]), "short and
concise, using terms of art rather than lengthy, legalistic
explications to define the obligations of the parties"
(Ostrager & Vyskocil, § 2:02; see Sumitomo,
75 N.Y.2d at 302).
the facultative reinsurer is obligated to indemnify the
cedent up to a stated upper limit (see Travelers, 96
N.Y.2d at 588). For example, one of the certificates relevant
to the underlying dispute, which the parties refer to as
"Certificate X, " reads:
"Item 1 - Type of Insurance
Blanket General Liability, excluding Automobile Liability
Item 2 - Policy Limits and Application
$1, 000, 000. each occurrence as original.