581 F.Supp. 241 (S.D.N.Y. 1984), 82 Civ. 8068, Bellefonte Re Ins. Co. v. Argonaut Ins. Co.

Docket Nº:82 Civ. 8068(RLC), 82 Civ. 8069(RLC).
Citation:581 F.Supp. 241
Party Name:BELLEFONTE RE INSURANCE COMPANY, Plaintiff, v. ARGONAUT INSURANCE COMPANY, Defendant. UNIVERSAL REINSURANCE COMPANY, Plaintiff, v. ARGONAUT INSURANCE COMPANY, Defendant.
Case Date:January 27, 1984
Court:United States District Courts, 2nd Circuit, Southern District of New York
 
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Page 241

581 F.Supp. 241 (S.D.N.Y. 1984)

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.

Jan. 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

Page 242

$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 Plaintiffs allege that these contracts should be rescinded because defendant failed to disclose material facts which it had a duty to disclose at the time plaintiffs were solicited to provide the reinsurance.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

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