Benham v. Pryke

• Decision Date: 29 October 1981
• Docket Number: No. FTL001623 and FTL00945 and C,No. 80CA0926,FTL001623 and FTL00945 and C,80CA0926
• Citation: 636 P.2d 1339
• Parties: Robert S. BENHAM, as Receiver of Manufacturers and Wholesalers Indemnity Exchange, Plaintiff-Appellant, v. John William PRYKE, as lead Underwriter, personally, and as representative of those certain Underwriters at Lloyd's London, Under Lloyd's Policiesover Notes U73167A and U73167B; and Excess Insurance Company, Ltd., Defendants-Appellees, and Taubert Wood Industries, Inc., a Tennessee corporation; Motor Rentals, Inc., a Missouri corporation; Evel Knievel d/b/a Evel Knievel Enterprises; and Big M Oilfield Service, Inc., a Montana corporation, Intervenors. . II
• Court: Colorado Court of Appeals

Page 1339

636 P.2d 1339

Robert S. BENHAM, as Receiver of Manufacturers and Wholesalers Indemnity Exchange, Plaintiff-Appellant, v. John William PRYKE, as lead Underwriter, personally, and as representative of those certain Underwriters at Lloyd's London, Under Lloyd's Policies No. FTL001623 and FTL00945 and Cover Notes U73167A and U73167B; and Excess Insurance Company, Ltd., Defendants-Appellees and Taubert Wood Industries, Inc., a Tennessee corporation Motor Rentals, Inc., a Missouri corporation; Evel Knievel d/b/a Evel Knievel Enterprises; and Big M Oilfield Service Inc., a Montana corporation, Intervenors.

No. 80CA0926.

Colorado Court of Appeals, Div. II.

Oct. 29, 1981.

Holmes & Starr, Kenneth L. Starr, Sidney DeLong, Denver, for plaintiff-appellant.

Kenneth C. Groves, Denver, for defendants-appellees.

PIERCE, Judge.

Plaintiff, the receiver of Manufacturers and Wholesalers Indemnity Exchange (M&W), appeals a dismissal for failure to state a claim for relief granted in favor of defendants underwriters of Lloyd's of London (the reinsurers). This is an action to recover proceeds allegedly due under assessment liability reinsurance policies issued by the reinsurers to some former subscribers of M& W. We reverse.

M&W was an interinsurance exchange governed by § 10-13-101, et seq., C.R.S.1973. M&W subscribers, consequently, were subject to contingent assessment liability if M&W's liabilities in a given year exceeded its assets. Some subscribers, to insure against this risk, purchased reinsurance certificates from the defendants to cover possible assessment liability. M&W was placed into receivership in 1975, and the trial court in 1977 ordered the receiver to levy assessments against all M&W subscribers whose policies were in effect during 1974 and 1975.

The terms of reinsurance coverage were provided for in a "Master Agreement" from which Article 1 of that agreement read that coverage was "for assessment made during the currency of this agreement ...." The Master Agreement terminated on June 30, 1974. An assessment was not levied before June 30, 1974, but rather in February 1977. Accordingly, the trial court held that the assessment of the subscribers was not made "during the currency" of the reinsurance agreement because it terminated on June 30, 1974.

Plaintiff contends that since the attorney-in-fact was authorized to issue certificates of reinsurance to any subscriber who wanted to purchase assessment liability coverage and since Article 14 stated that the Master Agreement's termination had no effect on the coverage afforded in issued certificates of reinsurance, the "currency" of the agreement extended until the termination of outstanding reinsurance certificates, rather than until the termination of the Master Agreement itself. We agree with this argument.

The loss insured against was an assessment. Assessment was a prerequisite to any liability of the reinsurers. The risk assumed was liability of assessment and not risk of actual loss to individual subscribers from payment or recovery of judgment. The impaired financial condition of M&W did not create actual liability but rather the liability flowed from assessments. The subscribers could suffer no loss and the reinsurers could be under no liability until an assessment was made. In re International Re-Insurance Corp., 32...