Mercantile & General Reinsurance Co., plc. v. Colonial Assur. Co.

• Decision Date: 29 December 1992
• Citation: 184 A.D.2d 177,591 N.Y.S.2d 1015
• Court: New York Supreme Court — Appellate Division
• Parties: The MERCANTILE & GENERAL REINSURANCE CO., plc, Plaintiff-Respondent, v. COLONIAL ASSURANCE COMPANY, et al., Defendants, and Spanno Corporation, Defendant-Appellant, and Island Helicopter Corporation, Defendant.

Page 1015

591 N.Y.S.2d 1015

184 A.D.2d 177

The MERCANTILE & GENERAL REINSURANCE CO., plc, Plaintiff-Respondent, v. COLONIAL ASSURANCE COMPANY, et al., Defendants and Spanno Corporation, Defendant-Appellant and Island Helicopter Corporation, Defendant.

Supreme Court, Appellate Division First Department.

Dec. 29, 1992.

Andrew C. Hall, Miami, FL, of counsel (Ira E. Garr New York City, and Marc Cooper, Miami, FL, with him on the brief, Stein & Garr, Hall, O'Brien & Sack, P.A., New York City, and Cooper & Wolfe, Miami, FL, attorneys) for defendant-appellant.

Stuart Cotton, New York City, of counsel (Andrew Maneval, Marilu Cain and Guy P. Dauerty, with him on the brief, Mound, Cotton & Wollan, attorneys) for plaintiff-respondent.

Before MILONAS, J.P., and ROSENBERGER, ROSS and ASCH, JJ.

ROSENBERGER, Justice.

The defendant Spanno Corporation ("Spanno") was engaged in the "residual guarantee" business. It guaranteed prospective purchasers of capital equipment that the equipment would have a stated value at a given future date. Since Spanno's business required insurance to assure its customers that it would be able to make good its guarantees, Spanno obtained such insurance from the defendants Colonial Assurance Company ("Colonial") and Union International Insurance Company ("Union"). Reinsurance was obtained from the plaintiff.

The plaintiff later refused to continue providing reinsurance coverage. It instituted this proceeding seeking a judgment declaring that all reinsurance provided by it with respect to coverage of Spanno was null and void ab initio and that the plaintiff had no liability under policies purporting to insure Spanno. It further sought judgment rescinding any purported agreements on its part to reinsure Union and Colonial with respect to policies issued to Spanno, and a judgment declaring that it had no liability to the defendants, or any other party, with respect to any claim based on any policy issued to Spanno. Spanno counterclaimed for damages suffered as a result of the plaintiff's refusal to provide coverage. Colonial and Union were liquidated and did not participate in the trial.

The jury found in favor of the defendant Spanno, concluding that Spanno was an intended third party beneficiary of the reinsurance contracts between Colonial and Union and the plaintiff, and that the contracts had been breached. The jury further determined that John Dunn, the plaintiff's underwriter, had authority to bind the plaintiff to the contracts and that the plaintiff had authorized his actions. The jury also concluded that Spanno was not barred from recovery by material misrepresentations alleged to have been made by it to the plaintiff, and that the plaintiff intentionally interfered with Spanno's contracts. The jury awarded Spanno damages totalling $14,708,779.00, representing judgments held by seven creditors and the loss Spanno had incurred in establishing its business.

The Supreme Court, however, granted the plaintiff's motion to set aside the jury verdict and granted judgment notwithstanding the verdict to the plaintiff on the second and seventh causes of action in the complaint, 151 Misc.2d 311, 573 N.Y.S.2d 102, rescinding ab initio the reinsurance agreements. The court concluded, as a matter of law, that Spanno was not a third party beneficiary of the reinsurance contracts. It further determined that Spanno had made material misrepresentations justifying the plaintiff's rescission of the reinsurance policies and that the plaintiff had not intentionally interfered with Spanno's insurance contracts with Colonial and Union. The court dismissed Spanno's counterclaims.

We reverse. It is well settled that "(f)or a court to conclude as a matter of law that a jury verdict is not supported by sufficient evidence ... (i)t is necessary to first conclude that there is simply no valid line of reasoning and permissible inferences which could possibly lead rational men (sic) to the conclusion reached by the jury on the basis of the evidence presented at trial" (Cohen v. Hallmark Cards, 45 N.Y.2d 493, 499, 410 N.Y.S.2d 282, 382 N.E.2d 1145; Nicastro v. Park, 113 A.D.2d 129, 132, 495 N.Y.S.2d 184).

The Supreme Court erred in substituting its determination that the defendant was not an intended third party beneficiary of the reinsurance contracts for that of the jury, which, based upon papers and documents executed by the plaintiff in connection with the contracts of reinsurance between the plaintiff and Colonial Union and the testimony introduced at trial, concluded that Spanno was a third party beneficiary of those agreements. The language employed in these documents, to the effect that the plaintiff would handle claims directly with the original assured in the event the original reassureds failed, created an ambiguity as to the parties' intent which was for the jury, not the court to resolve ( State of New York v. Home Indemnity, 66 N.Y.2d 669, 495 N.Y.S.2d 969, 486 N.E.2d 827; Hartford Accident & Indemnity Co. v. Wesolowski, 33 N.Y.2d 169, 350 N.Y.S.2d 895, 305 N.E.2d 907; O'Neil Supply Co., Inc. v. Petroleum Heat & Power, 280 N.Y. 50, 19 N.E.2d 676).

As the Supreme Court noted, in general, an insured is not considered a third party beneficiary of reinsurance policies despite the insolvency of the insurers, since these are contracts of indemnity of the insurer and there is no privity between the original insured and the reinsurer (see, Turner...