Travelers Ins. Co. v. Buffalo Reinsurance Co.
| Decision Date | 09 February 1990 |
| Docket Number | No. 86 Civ. 3369 (JMC).,86 Civ. 3369 (JMC). |
| Citation | 735 F. Supp. 492 |
| Parties | The TRAVELERS INSURANCE COMPANY, Plaintiff, v. BUFFALO REINSURANCE COMPANY, Fremont Syndicate, Inc., Maiden Lane Syndicate, Inc., Pan Atlantic Investors, Ltd., Republic Insurance Company and South Place Syndicate, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Dennis G. Jacobs, Simpson Thacher & Bartlett, New York City, for plaintiff Travelers.
Philip J. Walsh, Wilson Elser Moskowitz Edelman & Dicker, New York City, for defendant Buffalo Re.
Clifford H. Schoenberg, Miller Singer Raives & Brandes, P.C., New York City, for defendants Fremont Syndicate, Maiden Lane Syndicate, Pan Atlantic Investors, Republic Ins. Co., and South Place Syndicate.
Defendants' motion for summary judgment is granted. Fed.R.Civ.P. 56. Plaintiff's motion for leave to file a sur-reply memorandum in further opposition to defendants' motion for summary judgment is denied. Defendants' cross-motion to strike plaintiff's sur-reply memorandum as improperly submitted is granted. Defendants' request for costs and attorneys' fees in connection with the cross-motion is denied.
Plaintiff, Travelers Insurance Company "Travelers", seeks a declaration that defendants are obligated to indemnify Travelers pursuant to certain reinsurance contracts for a portion of the losses Travelers paid to one of its insureds.
Koppers Company, Inc. "Koppers" is a diversified manufacturing corporation that marketed a variety of roofing products, including several different kinds of prefabricated laminate sheets known as Koppers Multipurpose Membranes "KMM". Travelers issued a series of comprehensive general liability insurance policies to Koppers covering the period May 1, 1981 through January 1, 1985 the "Koppers policies". Each Koppers policy provides $5 million of coverage for each occurrence and in the aggregate for products liability property damage claims. In pertinent part, the policies furnish coverage for "all sums which the insured becomes legally obligated to pay as damage because of bodily injury or property damage to which this insurance applies caused by an occurrence...." Affidavit of Clifford H. Schoenberg in Support of Motion for Summary Judgment, Exh. 21, at T20295, 86 Civ. 3369 (JMC) (S.D.N.Y. Aug. 25, 1988) (emphasis added) "Schoenberg Affidavit".
Shortly after Travelers issued the Koppers policies, Travelers made arrangements to reinsure portions of its Koppers risk in the reinsurance market. Reinsurance generally denotes "that undertaking whereby one insurer agrees to protect another insurer, known as the reinsured, either wholly or partially from a risk which it has undertaken, both policies being in effect at the same time, and the original insured having no interest in the reinsurance." J.A. Appleman & J. Appleman, 13A Insurance Law & Practice § 7681, at 484-85 (1976). Through the use of O'Connor Associates "O'Connor", a reinsurance intermediary, Travelers obtained certificates of facultative reinsurance the "Certificates" from defendants Buffalo Reinsurance Company "Buffalo Re", Fremont Syndicate, Inc. "Fremont", Maiden Lane Syndicate, Inc. "Maiden Lane", Pan Atlantic Investors, Ltd. "Pan Atlantic", Republic Insurance Company "Republic", and South Place Syndicate, Inc. "South Place" collectively, the "Reinsurers". Buffalo Re was the principal reinsurer of Travelers' primary policies with Koppers, providing the highest layer of per occurrence continuing excess coverage for each of the policy years. See Buffalo Reinsurance Company's Statement Pursuant to S.D.N.Y. Civil Rule 3(g), at ¶ 4, 86 Civ. 3368 (JMC) (S.D.N.Y. Sept. 15, 1988). Each of the remaining Reinsurers provided varying amounts of facultative reinsurance to Travelers under their respective Certificates for covered losses on a per occurrence basis where any single occurrence produced a covered loss that exceeded $500,000. See Certain Defendants' Statement Pursuant to S.D.N.Y. Civil Rule 3(g), at ¶ 4, 86 Civ. 3368 (JMC) (S.D.N.Y. Aug. 25, 1988) "Certain Defendants' 3(g) Statement".
The Reinsurers employed two different forms of facultative reinsurance Certificates. The standard notice of loss clause in the Certificates provides that Travelers:
will notify the Reinsurer promptly of any event or development which the Company Travelers reasonably believes might result in a claim against the Reinsurer.
Republic Insurance Company Certificate of Casualty Facultative Reinsurance, at ¶ 5(a), in Schoenberg Affidavit, Exh. 2. However, as to those Reinsurers who were underwriting members of the New York Insurance Exchange — Fremont, Maiden Lane, Pan Atlantic, and South Place — the Certificates provided that Travelers:
shall advise the Underwriter(s) promptly of any claim and any subsequent developments pertaining thereto which, in the opinion of the Company Travelers, may involve the reinsurance hereunder.
New York Insurance Exchange Certificate of Casualty Facultative Reinsurance, at ¶ 2, in Schoenberg Affidavit, Exh. 2. In addition to the notice provisions, both forms provide that the Reinsurers shall have the right to associate with the full cooperation of Travelers in the defense or control of any claim involving the reinsurance.
Beginning in early 1983, Koppers experienced an increasing number of product liability claims arising from premature failures of the KMM roofing system. By March of 1984, overwhelmed by the volume of the claims, Koppers sought outside claims-handling assistance. Koppers contacted a Travelers subsidiary engaged in claims adjusting, Constitution State Service Company "CSSC", which in turn advised Travelers of the existing KMM claims. Although Koppers believed that these claims were not covered under its policies, Travelers determined that it was bound by ethical claims-handling practices to apprise its insured that indemnity coverage may exist. Moreover, based upon further investigation of the KMM claims, Travelers determined that the widespread and invariable pattern of premature failure in virtually all KMM roofs evinced a single cause of the failures and, therefore, the hundreds of KMM claims constituted but one "occurrence" per policy year. Accordingly, in late March or early April 1984, Travelers advised Koppers that coverage may exist for the KMM claims on a single occurrence per policy year basis.1
On June 18, 1984, the Travelers claim representative handling the Koppers account determined that the Reinsurers should be placed on notice. Subsequently, on June 22, 1984, Travelers advised O'Connor, the reinsurance intermediary, to notify the Reinsurers of the KMM claims. See Schoenberg Affidavit, at Exh. 10. While the notice to O'Connor disclosed the approximate number of pending and anticipated claims along with the estimated cost to replace the defective product, it did not disclose any coverage decision made by Travelers, including the single occurrence determination. On December 19, 1984, O'Connor forwarded the initial notice of the KMM claims to the Reinsurers. It was not until April 17, 1985, however, that O'Connor forwarded subsequent status reports prepared by Travelers disclosing the single occurrence determination. See Schoenberg Affidavit, at Exh. 11.
The Reinsurers now move for summary judgment as a result of Travelers' failure to provide timely notice of the KMM claims. Travelers opposes the motions and moves to file a sur-reply memorandum in further opposition to the Reinsurers' motion for summary judgment. The Reinsurers oppose the motion and cross-move to strike Travelers' sur-reply memorandum as improperly submitted and to recover costs and attorneys' fees incurred in connection with the cross-motion.2
Travelers moves to file a sur-reply in further opposition to the Reinsurers' motion for summary judgment. The Reinsurers oppose the motion and cross-move to strike Travelers' sur-reply memorandum as improperly submitted and to recover costs and attorneys' fees in connection with the cross-motion.
Travelers' motion for leave to file a sur-reply memorandum suffers from a fundamental procedural defect. Since neither the Federal Rules of Civil Procedure nor the Local Civil Rules address the standard for submission of sur-reply papers, the Court finds that a sur-reply memorandum shall not be accepted without prior leave of court. However, Travelers submitted its sur-reply memorandum contemporaneously with its request for leave to file such a memorandum. As one court in this district has noted:
The proposed ... papers should not accompany the request for leave to submit them. To permit the ... papers to accompany the request, as they do in the instant case, is to enable the requesting party to accomplish its goal of placing the papers before the court, thereby reducing the question of whether the papers should be accepted for filing to relative unimportance. Therefore, the ... papers themselves shall not be submitted until the court, having received and reviewed the application to file, invites them.
United States v. International Business Machines Corp., 66 F.R.D. 383, 385 (S.D.N. Y.1975) ().
In addition to this procedural defect, Travelers' request to file a sur-reply memorandum is simply not warranted under the circumstances. Travelers contends that sur-reply papers are justified since defendants' reply papers address numerous issues for the first time. Such an argument, however, misconstrues the very purpose of reply papers. The moving party may address in his reply papers new issues raised in the opposition papers so as to avoid giving an unfair advantage to the answering party who took it upon himself to argue those previously unforeseen issues. See id. at 384. Although defendants'...
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