As previously reported (3/17/08 post), this case involves the interpretation of the terms of a reinsurance contract and the duties of the parties under that contract. In the most recent development, the Eighth Circuit affirmed the Bankruptcy Appellate Panel’s judgment affirming in part, and reversing in part, a prior decision of the bankruptcy court regarding the reinsurance contract at issue. The Eighth Circuit determined that appellant/debtor Acceptance Insurance Company ("AIC") was a part to the reinsurance contract, however, the language in the reinsurance provision of the contract was ambiguous and susceptible to two alternate interpretations. Accordingly, extrinsic evidence was both appropriate and necessary to interpret the language of the provision and to ascertain the intent of the parties. Citing evidence before the bankruptcy trial court, the Court affirmed the bankruptcy panel's decision that the parties intended the reinsurance provision to provide reinsurance coverage. The Eighth Circuit also found that appellee Granite Re was entitled to the full $15 million premium payment, and AIC was not discharged of its duty to pay the premium by the frustration of fundamental purpose defense. In Re Acceptance Ins. Co. Inc., No. 08-1933 (8th Cir. May 18, 2009).