Sumitomo Marine & Fire Ins. Co., Limited-U.S. Branch v. Cologne Reinsurance Co. of America

Decision Date25 April 1989
Citation539 N.Y.S.2d 947,149 A.D.2d 377
PartiesThe SUMITOMO MARINE & FIRE INSURANCE CO., LTD.--U.S. BRANCH, Plaintiff-Appellant, v. The COLOGNE REINSURANCE COMPANY OF AMERICA, Defendant, Buffalo Reinsurance Company, Defendant-Respondent, Firemen's Insurance Company of Newark, New Jersey, et al., Defendants, Philadelphia Reinsurance Corporation, Defendant-Respondent, Highlands Insurance Company, et al., Defendants, and Thomas A. Greene & Company, Inc., Defendant.
CourtNew York Supreme Court — Appellate Division

T. Haley, plaintiff-appellant.

T.R. Newman, defendants-respondents, Buffalo Reinsurance Co., Philadelphia Reinsurance Corp.



Order and judgment of the Supreme Court, New York County (Beatrice Shainswit, J.), entered June 7, 1988 and July 7, 1988, respectively, which granted the motions of defendants-respondents The Philadelphia Reinsurance Corporation and the Buffalo Reinsurance Company and dismissed the complaint as against them, reversed, on the law, without costs, and the complaint reinstated against these defendants.

Supreme Court erred in granting summary judgment to defendants-respondents The Philadelphia Reinsurance Corporation (Philadelphia) and The Buffalo Reinsurance Company (Buffalo). The court incorrectly found that there had been a modification of the "original contract" between plaintiff-appellant, The Sumitomo Marine & Fire Insurance Co., Ltd. (Sumitomo), and its insured, Auburn Steel Co., Inc. (Auburn), by Sumitomo's addition of Amendment 3 which, the court found, had not been accepted by respondents.

The all risk insurance coverage provided by Sumitomo for Auburn's buildings and other property expressly excluded losses resulting from war and nuclear incidents. Amendment 3, however, extended coverage to radioactive contamination, as follows: "Sudden and accidental Radioactive Contamination, including resultant radiation damage ... from material used or stored or from processes conducted on the described premises...." The policy became effective on February 1, 1983, and shortly thereafter Auburn sustained a loss due to nuclear contamination from a load of scrap metal delivered to its premises.

Sumitomo indemnified its insured and sought reimburseme from respondents in accordance with their respective reinsurance agreements. These agreements had been negotiated with respondents through Sumitomo's agent, Thomas A. Greene & Company, Inc. (Greene & Company). The agreement with respondent Philadelphia contains a multi-paragraph clause excluding coverage for "any loss or liability by radioactive contamination". The reinsurance certificate issued by respondent Buffalo after it had received notice of the loss also contains a typewritten notation "excluding Radioactive Contamination". Based on these provisions, respondents sought summary judgment after depositions had been taken of the parties' witnesses.

In its cross motion for summary judgment, Sumitomo maintained that respondents knew or should have known of the incidental risk of nuclear contamination because all steel processing plants use cesium, a radioactive element, in a device that measures steel output. Sumitomo's assistant manager averred that "radioactive contamination coverage is normal for a steel plant." He also asserted that Amendment 3 was inserted in the policy to provide the same coverage to Auburn as had been previously provided by another insurer, and that this amendment "was issued together with the policy form to Auburn". As to respondents' claim that they were not informed of the nuclear contamination coverage in their discussions with Sumitomo's agent, the attorney for Greene & Company submitted an affidavit stating that his client took no position with respect to the motion and cross motion and, without specifically addressing the merits, his client neither admitted nor adopted any of the statements in either of the movant's papers.

Given this record, Supreme Court erred in resolving the factual issues in respondents' favor. The evidence establishes that respondents issued their certificates containing nuclear exclusion clauses after they had received copies of the Sumitomo policy which included Amendment 3. Under these circumstances, it was incumbent upon respondents to determine the scope of the coverage in the direct insurance policy before issuing their formal contract underwriting the risk of such coverage. The only question which remains is whether the unambiguous wording of the Nuclear Incident Exclusion Clause indeed places the risk of nuclear contamination such as occurred here, outside the scope of respondents' undertaking.

Respondents' construction of this multi-paragraph clause focuses on paragraph 4, which provides as follows:

Without in any way restricting the operations paragraphs (1), (2), and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

This language, respondents argue, excludes the nuclear contamination loss covered by Sumitomo under Amendment 3, inasmuch as such hazard is named in that Amendment and specifically insured against. However, paragraph 5 of the Nuclear Incident Exclusion Clause provides:

5. It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.

Respondents' reading of the nuclear exclusion clause founders on the fact that paragraph 5, unlike the preceding paragraph, is not prefaced with the phrase "[w]ithout in any way restricting the operations of paragraphs (1), (2) and (3) hereof". Paragraph 5, therefore, is meant to restrict the operation of the preceding provisions, paragraph 4 among them. Consequently, the exclusion of coverage in paragraph 4 when radioactive contamination is a named hazard specifically insured against in the direct policy is inoperative when, pursuant to paragraph 5, the risk of nuclear exposure from use of radioactive isotopes is not considered a primary hazard by the direct insurance carrier.

A question of fact remains as to whether Sumitomo considered the nuclear exposure from the use of cesium to be a primary or incidental hazard. The order and the judgment appealed from therefore should be reversed and the matter remanded for trial.

All concur except WALLACH, J. who dissents in a memorandum as follows:

WALLACH, Justice (dissenting).

I would affirm the order and judgment of the Supreme Court granting defendants' motion for summary judgment and dismissing the complaint against them. Plaintiff-primary insurer commenced this action for breach of contract against two of its reinsurers...

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4 cases
  • Curiale v. DR Ins. Co.
    • United States
    • New York Supreme Court
    • December 23, 1992
    ...supplants the placing slip. In Sumitomo Marine & Fire Insurance Co., Ltd. v. Cologne Reinsurance Company, supra, affirming 149 A.D.2d 377, 539 N.Y.S.2d 947 (1st Dept.), the reinsurance agreement was the dispositive factor in determining the rights of the parties, and reliance upon the equiv......
  • Sumitomo Marine & Fire Ins. Co., Ltd.-U.S. Branch v. Cologne Reinsurance Co. of America
    • United States
    • New York Court of Appeals Court of Appeals
    • February 13, 1990
    ...defendants were obliged to determine the actual scope of coverage before issuing their formal certificates of reinsurance. 149 A.D.2d 377, 539 N.Y.S.2d 947. A divided court went on to hold that the reinsurance certificate covered an incidental radioactive loss, and it remanded for a factual......
  • Curiale v. DR Ins. Co.
    • United States
    • New York Supreme Court — Appellate Division
    • February 14, 1995
    ...other syndicate members, is revealed upon examination of the final reinsurance agreements (see, Sumitomo Mar. & Fire Ins. Co. v. Cologne Reins. Co., 149 A.D.2d 377, 378, 380, 539 N.Y.S.2d 947, affd 75 N.Y.2d 295, 552 N.Y.S.2d 891, 552 N.E.2d 139), which refer only to the syndicate name. In ......
  • Sumitomo Marine & Fire Ins. Co., Ltd.-U.S. Branch v. Cologne Reinsurance Co. of America
    • United States
    • New York Supreme Court — Appellate Division
    • July 6, 1989
    ...REINSURANCE COMPANY OF AMERICA. Supreme Court of New York, Appellate Division, First Department. July 6, 1989 Prior report: App.Div., 539 N.Y.S.2d 947. Motion by defendants-respondents for (1) reargument denied, and (2) leave to appeal to Court of Appeals granted, as indicated; and cross-mo......

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