Bellefonte Re Ins. Co. v. Argonaut Ins. Co.

• Decision Date: 27 January 1984
• Docket Number: 82 Civ. 8069(RLC).,No. 82 Civ. 8068(RLC),82 Civ. 8068(RLC)
• Citation: 581 F. Supp. 241
• Parties: BELLEFONTE RE INSURANCE COMPANY, Plaintiff, v. ARGONAUT INSURANCE COMPANY, Defendant. UNIVERSAL REINSURANCE COMPANY, Plaintiff, v. ARGONAUT INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

581 F. Supp. 241

BELLEFONTE RE INSURANCE COMPANY, Plaintiff, v. ARGONAUT INSURANCE COMPANY, Defendant.

UNIVERSAL REINSURANCE COMPANY, Plaintiff, v. ARGONAUT INSURANCE COMPANY, Defendant.

Nos. 82 Civ. 8068(RLC), 82 Civ. 8069(RLC).

United States District Court, S.D. New York.

January 27, 1984.

Miller, Singer, Michaelson & Raives, P.C., New York City, for plaintiffs; Robert M. Raives, Lawrence I. Brandes, Clifford H. Schoenberg, Steven S. Honigman, New York City, of counsel.

Butler, Rubin, Newcomer, Saltarelli & Boyd, Winston & Strawn, Chicago, Ill., Donovan, Leisure, Newton & Irvine, New York City, for defendants; James J. Rubin, New York City, of counsel.

ROBERT L. CARTER, District Judge.

In 1974, plaintiffs in these consolidated actions, Bellefonte Re Insurance Company ("Bellefonte") and Universal Reinsurance Company ("Universal" or "URC") contracted to reinsure defendant Argonaut Insurance Company ("Argonaut" or "AIC") on business generated by Resources Facilities, Inc. ("RFI"), a managing general agent of Argonaut. Both plaintiffs signed Quota Share contracts whereby they agreed to reinsure defendant for 5% of the first $100,000 of loss on each risk. Subsequently, Bellefonte also agreed to reinsure 5% of the losses in excess of $100,000, up to $1,000,000. Plaintiffs allege that these contracts should be rescinded because defendant failed to disclose material facts which it had a duty to disclose at the time plaintiffs were solicited to provide the reinsurance. Specifically, plaintiffs allege that defendant agreed to use RFI as a managing general agent only after demanding and receiving a letter from Integrated Resources, Inc., a company which at that time was planning to acquire RFI, which purported to indemnify Argonaut "for any financial loss or expense in connection with the business written by RFI...." Exh. 27 to Brandes Aff. Plaintiffs also contend that Frank Rovere, a vice president of Argonaut, recommended to his superiors that Argonaut not sign a managing agency agreement with RFI because he had heard rumors casting doubt upon the honesty of RFI's president. Plaintiffs maintain that the existence of the indemnification letter and the fact that Rovere made such a recommendation were both material to the risk to be reinsured and, therefore, that defendant's failure to disclose them entitles plaintiffs to recission of the contracts.

The issue presently before the Court on cross motions for summary judgment is whether plaintiffs' actions are barred by the settlement agreements both plaintiffs admittedly entered into with defendant, Universal in December, 1976 and Bellefonte in January, 1978. Defendant moves to dismiss the complaints and plaintiffs move for judgment that the settlement agreements do not apply to these claims or, alternatively, for judgment rescinding the settlement agreements on the ground that they were fraudulently induced.

Discussion

A careful reading of the two settlement agreements, styled as covenants not to sue, convinces the Court that, if valid, they bar plaintiffs from suing to rescind these reinsurance contracts or to contest their liability thereunder.

Both agreements carefully designate the contracts at issue. They are the same contracts plaintiffs seek to rescind here. Both agreements then state:¹

URC on the one side and AIC on the other side, each to each other, on behalf of themselves, and each of their respective successors and assigns, if any, hereby covenants and agrees, apart from the rights and obligations created by or continued under this Agreement, not to demand arbitration or commence litigation of any kind any where in the world and agrees to refrain forever from instituting, prosecuting, collecting or in any way aiding or proceeding directly or indirectly, subject to the reservation relating to agents of the persons or entities named or otherwise identified herein, against one another or any of their respective officers, directors, employees, affiliated companies, stockholders, parents, predecessors, successors and assigns upon any and all claims, demands and liability of every kind and nature, known and unknown, arising from or relating to any act, omission to act or transaction which occurred prior to the execution of this Agreement in connection with any and all matters arising out of the dispute regarding the Quota Share contract of reinsurance.

Exh. 6 to Brandes Aff. (Court's emphasis). The "dispute regarding the Quota Share contract" is defined in the Universal contract as "a dispute regarding URC's liability to AIC under the contract of reinsurance described above." Id. It is defined in the Bellefonte agreement as "a dispute regarding the validity of such contracts of reinsurance and the balances due to AIC thereunder." Exh. 5 to Brandes Aff.

In clear and unambiguous language of remarkable breadth, these agreements, which were negotiated and drafted by experienced insurance executives and their attorneys, prohibit the parties from commencing any and all litigation over their liability under these contracts. Plaintiffs do not deny that this litigation is over their liability under the reinsurance contracts covered by the settlement agreements, but argue that they can prove that the parties did not intend those agreements to forestall litigation based on the specific claims stated in their complaints. Such an excursion into the parol evidence is unwarranted, however. When, as here, sophisticated counsel in a commercial context draft a contract that presents no interpretive difficulties, the Court will not look beyond the four corners of the document to discern what the parties meant. Locafrance U.S. Corp. v. Intermodal System Leasing, Inc., 558 F.2d 1113, 1115 (2d Cir.1977); see, Dart Industries Co. v. Westwood Chemical Co., 649 F.2d 646, 648 (9th Cir.1980); Crow v. P.E.G. Construction Co., 156 Cal.App.2d 271, 319 P.2d 47, 50-51 (2d Dist.1957); Oxford Commercial Corp. v. Landau, 12 N.Y.2d 362, 239 N.Y.S.2d 865, 190 N.E.2d 230 (1963).² Although the parties may not have been considering defendant's failure to disclose the indemnification or the Rovere recommendation at...