Vigilant Ins. Co. v. MF Glob. Fin. Inc.

• Decision Date: 25 April 2023
• Docket Number: Index No. 601621/09,s. 37,38,Case Nos. 2022-03714,2022-03737
• Citation: 2023 NY Slip Op 02088
• Parties: Vigilant Insurance Company, et al., Plaintiffs, v. MF Global Finance USA Inc., Defendant-Appellant-Respondent. Axis Reinsurance Company, et al., Plaintiffs-Respondents-Appellants,
• Court: New York Supreme Court — Appellate Division

2023 NY Slip Op 02088

Vigilant Insurance Company, et al., Plaintiffs, Axis Reinsurance Company, et al., Plaintiffs-Respondents-Appellants, v. MF Global Finance USA Inc., Defendant-Appellant-Respondent.

Index No. 601621/09, Appeal Nos. 37, 38, Case Nos. 2022-03714, 2022-03737

Supreme Court of New York, First Department

April 25, 2023

Mintz Levin, Cohn, Ferris Glovsky and Popeo, P.C., New York (Therese M. Doherty of counsel), for appellant-respondent.

Clyde & Co U.S. LLP, New York (Nicholas L. Magali and Gabriela Richeimer of the bar of the District of Columbia, admitted pro hac vice, of counsel), for AXIS Reinsurance Company respondent-appellant.

Kaufman Dolowich & Voluck, LLP, New York (Kevin M Mattessich of counsel), for Liberty Mutual Insurance Co., respondent-appellant.

Selendy Gay Elsberg PLLC, New York (Caitlin J. Halligan of counsel), for New Hampshire Insurance Company, respondent-appellant.

Before: Renwick, A.P.J., Moulton, Shulman, Rodriguez, Pitt-Burke, JJ.

Judgment Supreme Court, New York County (Melissa A. Crane, J.), entered August 16, 2022, in favor of defendant MF Global Finance USA Inc. and against plaintiffs New Hampshire Insurance Company, Axis Reinsurance Company, and Liberty Mutual Insurance Co. (collectively, the excess insurers) in the amounts of $5,517,649.33 against New Hampshire, $2,520,840.01 against Axis, and $3,781,260.00 against Liberty, and bringing up for review an order, same court and Justice, entered on or about July 12, 2022, which, to the extent appealed from as limited by the briefs, allowed the excess insurers to reduce their excess insurance liability based on above-limit settlement payments made by other insurers; calculated prejudgment interest owing from Liberty and Axis as running from March 17, 2022, the date this Court issued its decision holding the underlying insurers liable; and, with respect to MF Global's recovery for its counterclaim, assessed prejudgment interest during the period of the bankruptcy stay, unanimously affirmed, without costs. Appeal from aforesaid order unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

This action arises out of financial losses of approximately $141 million that MF Global incurred as a result of fraudulent commodity futures trading activity by Evan Dooley, then a trader associated with MF Global, on or about February 26 and 27, 2008. In accordance with its obligations as a clearing member of the Chicago Mercantile Exchange, MF Global immediately paid the loss and sought coverage under a primary insurance bond issued by New Hampshire, as well as under excess insurance bonds issued by the excess insurers. There were four layers of excess bonds; three of the excess bonds were issued by the plaintiffs that are nonparties to this appeal, all of which have previously settled with MF Global (the settling plaintiffs).

Supreme Court properly decreased the loss attributable to the excess plaintiffs by the full amount of the $117,020,287 that MF Global had received from the settling plaintiffs from the loss attributable to the excess plaintiffs. The valuation provision in § 6.7 of the primary bond and incorporated into each of the excess bonds mandated deduction of the settlements, including the above-limits settlement payments, from MF Global's recovery. The valuation provision in the bond provided, "[i]n determining the amount collectable under this bond for any loss, deductions shall be made in respect of any property (including money and securities) received from any source whatsoever, including payments and receipt of principal, interest, dividends, commissions and the like, whenever received, in connection with any matter from which an indemnifiable loss has arisen." This valuation provision unambiguously includes the amounts the settling plaintiffs paid in settlement, and the plain text of the settlement agreements leaves no doubt that the settlement payments, including above-limits payments, were made in connection with the loss.

We reject MF Global's...