Nationwide Mut. Ins. Co. v. Home Ins. Co.
| Decision Date | 06 August 1998 |
| Docket Number | Nos. 97-3325,97-3405,s. 97-3325 |
| Citation | 150 F.3d 545 |
| Parties | NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellee (97-3325)/Cross-Appellant (97-3405), v. HOME INSURANCE COMPANY, Defendant, Insurance Company of North America; INA Corporation; Cigna Corporation; Cigna International Corporation, Defendants-Appellants (97-3325)/Cross-Appellees (97-3405). |
| Court | U.S. Court of Appeals — Sixth Circuit |
Randolph Carson Wiseman, Bricker & Eckler, Columbus, OH; Irene C. Keyse-Walker (argued and briefed), Arter & Hadden, Cleveland, OH; Michael L. Cohen, Scanlan, Rosen & Shar, Baltimore, MD, for Plaintiff-Appellee/Cross-Appellant.
Gerald P. Ferguson (briefed), Vorys, Sater, Seymour & Pease, Columbus, OH; Clifford H. Schoenberg (argued and briefed), Harry P. Cohen (briefed), Philip J. Loree (briefed), Rosenman & Colin, New York City, for Defendants-Appellants/Cross-Appellees.
Before: MERRITT, BOGGS, and SUHRHEINRICH, Circuit Judges.
Nationwide Mutual Insurance Company ("Nationwide") sued Home Insurance Company ("Home"), INA Corporation, Insurance Company of North America ("INA"), CIGNA Corporation, and CIGNA International Corporation. 1 In its complaint, Nationwide alleged that Home and the CIGNA defendants had breached reinsurance contracts under which they were responsible for paying certain claims filed against Nationwide. Nationwide sought declaratory relief as well as compensatory and punitive damages. The district court stayed Nationwide's claims against Home pending arbitration. The parties do not appeal this ruling.
After the claims against Home were dismissed pending arbitration, the CIGNA defendants sought summary judgment on the claims against them. The district court denied the CIGNA defendants' motion, referred the claims against the CIGNA defendants to arbitration, and dismissed the entire case. This is the ruling that is the subject of the CIGNA defendants' appeal. Nationwide cross-appeals the district court's rejection of its third-party beneficiary argument, which it claims provides an alternative basis for holding that it can bring an action directly against the CIGNA defendants.
In the 1960s, Nationwide entered into a reinsurance pool managed by the London firm of M.E. Rutty Underwriting Agency Limited ("Rutty"). As a member of this reinsurance pool, Nationwide authorized Rutty to get, underwrite, and administer direct insurance and reinsurance business. Rutty issued policies and contracts in the name of one of the pool members. The pool member whose name was on the insurance policy or reinsurance contract was directly responsible to the insured. However, the premiums and losses arising from the insurance policies and reinsurance contracts Rutty entered into on behalf of the pool members were divided proportionately among all of the pool members.
Nationwide and some other members of the Rutty Pool withdrew from the pool in 1966. After it withdrew from the pool, Nationwide still had ongoing obligations for continuing and contingent liabilities under insurance policies and reinsurance contracts Rutty issued in its name while it was a member of the pool. To "cut off" its potential future liabilities for insurance and reinsurance obligations arising from its participation in the pool, on June 22, 1977, Nationwide entered into a reinsurance agreement with Home. Under the agreement, Home reinsured 2 Nationwide for "all losses which [Nationwide] may be or may become liable to pay arising out of risks written for" Nationwide through the Rutty Pool. This reinsurance agreement contained a broad arbitration clause, permitting either party to compel arbitration as to any disputes relating to the agreement.
On December 31, 1983, the CIGNA defendants entered into purchase and assumption agreements with Home and the other members of AFIA. Under Section 1.1 of the purchase agreement, entitled "Purchase and Sale," the CIGNA defendants agreed to purchase all interests in and rights to the policies and contracts that Home and the other AFIA members entered into through the AFIA pool. This included Home's reinsurance contract with Nationwide for the Rutty Pool liabilities.
In fulfillment of its obligations under Sections 1.1 and 1.4 of the purchase agreement, CIGNA International Corporation caused its subsidiary, INA, to enter into an Insurance and Reinsurance Assumption Agreement ("Assumption Agreement") with Home and the other AFIA members. Under this Assumption Agreement, INA assumed "as its direct obligation and agree[d] to pay on behalf of [Home] when payment thereof is due all insurance and reinsurance liabilities ... included in the AFIA obligations." The Assumption Agreement further provided that "none of the [AFIA members] shall make any payments of any AFIA liability without the prior written approval of INA unless under order of a court...."
The Assumption Agreement between the CIGNA defendants and the AFIA members also contained an arbitration clause nearly identical to the one in the reinsurance agreement between Home and Nationwide, and it included a choice of law clause providing that New York law would govern the agreement. Finally, the Assumption Agreement also stated:
Nothing in this Assumption Agreement, express or implied, is intended, or shall be construed, to confer upon or give to any person, firm or corporation (other than the parties hereto ... ) any rights or remedies under or by reason of this Assumption Agreement, or any term, provision, condition, undertaking, warranty, representation, indemnity, covenant or agreement contained herein....
Some time after the Assumption Agreement was entered into, claims were made on policies Rutty had written in the name of Nationwide. These policies were among those reinsured by Home. The reinsurance on them had passed to the CIGNA defendants through the Assumption Agreement.
In 1995, Nationwide sued Home and the CIGNA defendants, alleging that they had breached contracts under which they were required to cover the claims against Nationwide arising from the policies and contracts from the Rutty Pool. After the claims against Home were stayed pending arbitration, the CIGNA defendants sought summary judgment on the claims against them.
The district court held that Nationwide was not a third-party beneficiary to the agreements between the members of AFIA and the CIGNA defendants. The district court did, however, conclude that Nationwide was an obligee-beneficiary of these agreements and, as such, could pursue a claim directly against the CIGNA defendants for breach of contract under the terms of the Assumption Agreement between Home and the CIGNA defendants. The court reasoned that the CIGNA defendants stood in the shoes of Home as a direct obligor to Nationwide for purposes of the reinsurance contract between Nationwide and Home. The district court further reasoned that the CIGNA defendants had assumed the reinsurance contract between Home and Nationwide and thus were bound by the arbitration provision in that agreement (the same one the district court relied upon to order arbitration of Nationwide's claims against Home). Therefore, the district court denied the CIGNA defendants' motion for summary judgment, referred Nationwide's claims against them to arbitration, and dismissed the entire case.
The central issue on appeal is whether the district court erred in concluding that Nationwide could bring a claim directly against the CIGNA defendants by virtue of the CIGNA defendants' assumption of the reinsurance contract between Nationwide and Home, or whether Nationwide is limited to exercising its rights against Home with respect to payments under this reinsurance contract. The CIGNA defendants argue that Nationwide is precluded from suing them for reinsurance coverage because of the following language:
Nothing in this Assumption Agreement, express or implied, is intended, or shall be construed, to confer upon or give to any person, firm or corporation (other than the parties hereto ... ) any rights or remedies under or by reason of this Assumption Agreement, or any term, provision, condition, undertaking, warranty, representation, indemnity, covenant or agreement contained herein....
The CIGNA defendants also contend that Nationwide's status as an obligee-beneficiary does not allow them to avoid the preclusive effect of the above-quoted disclaimer.
Nationwide cross-appeals the district court's ruling that it is not a third-party beneficiary of the agreements between Home and the CIGNA defendants. It raises the third-party beneficiary theory only as an alternative basis for allowing it to pursue a claim directly against the CIGNA defendants and does not seek to reverse the court's ruling that the CIGNA defendants are liable under an assumption theory. Nor does Nationwide challenge the district court's order submitting all of the claims against the CIGNA defendants to arbitration.
We hold that the CIGNA defendants are correct in asserting that Nationwide cannot bring suit directly against them (under either a third-party beneficiary theory or an assumption theory) to recover reinsurance benefits they assumed in their agreements with Home and the other members of AFIA.
Under New York law, "where a contract's language expressly bars any contractual liability to a third party, no third party right to enforce the contract may be found." Rosier v. Brown, 158 Misc.2d 748, 601 N.Y.S.2d 554, 557 (N.Y.Sup.Ct.1993) (citing Nepco Forged Prods., Inc., v. Consolidated, 99 A.D.2d 508, 470 N.Y.S.2d 680, 681 (N.Y.App.Div.1984)). This is exactly what the third-party disclaimer provision in the Assumption Agreement between the CIGNA defendants and the members of AFIA does.
...
To continue reading
Request your trial
-
Nationwide Mut. Ins. Co. v. Home Ins. Co.
...Sixth Circuit for review. The extensive procedural history and involvement of this Court is found at Nationwide Mut. Ins. Co. v. Home Ins. Co., 150 F.3d 545 (6th Cir.1998) (Nationwide I); Nationwide Mut. Ins. Co. v. Home Ins. Co., 278 F.3d 621 (6th Cir.2002) (Nationwide II); and Nationwide ......
-
Nationwide Mut. Ins. Co. v. Home Ins. Co., No. C2-95-880.
...reversed this Court's decision of March 25, 1997, and held that CIGNA could not be compelled to submit to arbitration. Nationwide v. Home, 150 F.3d 545 (6th Cir.1998), cert. denied, U.S. 1140, 119 S.Ct. 1030, 143 L.Ed.2d 39 (1999). The Court of Appeals also concluded that Nationwide could n......
-
In re Liquidation of the Home Ins. Co.
...direct dealing between [the ACE Companies] and [the] AFIA Cedents to circumvent Home." He argues that Nationwide Mutual Insurance. Co. v. Home Ins. Co., 150 F.3d 545 (6th Cir.1998), cert. denied, 525 U.S. 1140, 119 S.Ct. 1030, 143 L.Ed.2d 39 (1999), "left open the status of cut through" lit......
-
In Matter of Liquidation of Home Ins. Co., 2005-740.
...between [the ACE Companies] and [the] AFIA Cedents to circumvent Home." He argues that Nationwide Mutual Insurance. Co. v. Home Ins. Co., 150 F.3d 545 (6th Cir.1998), cert. denied, 525 U.S. 1140, 119 S.Ct. 1030, 143 L.Ed.2d 39 (1999), "left open the status of cut through" litigation, while ......