Excess Insurance Company Ltd. v. Factory Mutual Insurance Company

• Decision Date: 04 December 2003
• Docket Number: 2153.
• Citation: 2 A.D.3d 150,2003 NY Slip Op 19083,769 N.Y.S.2d 487
• Parties: EXCESS INSURANCE COMPANY LTD. et al., Appellants, v. FACTORY MUTUAL INSURANCE COMPANY, Formerly Known as ALENDALE MUTUAL INSURANCE COMPANY, Respondent.
• Court: New York Supreme Court — Appellate Division

2 A.D.3d 150

769 N.Y.S.2d 487

2003 NY Slip Op 19083

EXCESS INSURANCE COMPANY LTD. et al., Appellants, v. FACTORY MUTUAL INSURANCE COMPANY, Formerly Known as ALENDALE MUTUAL INSURANCE COMPANY, Respondent.

2153.

Appellate Division of the Supreme Court of the State of New York, First Department.

December 4, 2003.

Order, Supreme Court, New York County (Karla Moskowitz, J.), entered September 25, 2002, which denied plaintiffs' motion for partial summary judgment and granted defendant's cross motion for partial summary judgment, unanimously reversed, on the law, with costs, defendant's cross motion denied and plaintiffs' motion granted so as to declare that the portion of the reinsurance agreement between the parties requiring plaintiffs to bear their proportionate share of expenses incurred in the investigation and defense of any claim under the underlying policy is subject to the $7 million limit stated in the agreement.

Defendant Factory Mutual (formerly known as Allendale Mutual Insurance Company) insured a warehouse in Seclin, France. Defendant then obtained reinsurance from plaintiffs for a large portion of the risk. The reinsurance agreement contained a "Limit" provision limiting the reinsurance coverage to $7 million (U.S.) for any one occurrence. Immediately following this "Limit" provision were listed "Conditions," including the condition that "Reinsurers agree to follow the settlements of the Reassured in all respects and to bear their proportion of any expenses incurred, whether legal or otherwise, in the investigation and defence of any claim hereunder."

The warehouse burned down, and defendant commenced an unsuccessful litigation against the insured. After spending approximately $35 million in litigation expenses, defendant abandoned the litigation and settled with the insured for nearly $100 million.

The motion court concluded that the $7 million limit of the reinsurance coverage did not apply to the litigation expenses referred to in the "follow the settlements" clause contained in the agreement's "Conditions." We disagree, holding that the $7 million limit of the reinsurance policy is not superceded or overruled by the "follow the settlements" section of the policy, and so the expenses for which plaintiff reinsurers are obligated to reimburse defendant reinsured, including those pursuant to the "follow the settlements" section, cannot exceed the overall $7 million limit of the policy.

Initially, we conclude that New York law should be applied. In a conflicts of law analysis, the first consideration is whether there is any actual conflict between the laws of the competing jurisdictions. If no conflict exists, then the court should apply the law of the forum state in which the action is being heard (see Matter of Allstate Ins. Co. [Stolarz], 81 NY2d 219, 223 [1993]; Taylor v American Bankers Ins. Group, 267 AD2d 178 [1999]). Here, defendant's sole claimed difference in the laws of the two states is that it claims Rhode Island allows a court, when interpreting a contract, to consider extrinsic evidence. We disagree, and conclude that no such conflict exists.

Under Rhode Island law, as under New York law, "the clear and unambiguous language set out in a written instrument is controlling as to the intent of the parties thereto and governs the legal consequences of the contract provisions" (Theroux v Bay Assoc., Inc., 114 RI 746, 749, 339 A2d 266, 268 [1975]; see Chapman v Vendresca, 426 A2d 262 [RI 1981]; Supreme Woodworking Co. v Zuckerberg, 82 RI 247, 252, 107 A2d 287, 290 [1954]). We do not read ...