Utica Mut. Ins. Co. v. Abeille Gen. Ins. Co., No. CA2013-002320 (N.Y. Sup. Ct., Oneida Cty., Aug. 15, 2016).

A New York state motion court, following New York Court of Appeals precedent, granted the motion of a pool of reinsurers to dismiss the cedent’s complaint insofar as it sought expenses in addition to the limits of the facultative certificates. This case is part of a longrunning effort by the cedent to recover reinsurance proceeds on the settlement of asbestos losses arising out of Gould Pumps.

After settlement of Gould Pumps coverage litigation, the cedent sought recovery under facultative certificates issued by the ECRA reinsurance pool. Part of what the cedent sought was reimbursement for expenses in excess of the certificate limits.

In ruling for the reinsurers, the court noted that only the language of the certificates was presented for review. The court rejected the reinsurers’ argument that the cedent should be estopped from seeking expenses based on a prior ruling in another case in federal court involving the same certificates. The court found that the decision in the other case may not be final and that collateral estoppel cannot preclude consideration of a question of law.

But relying on Excess Ins. Co. Ltd. v. Factory Mut. Ins. Co., 3 N.Y.3d 577 (2004), the court ruled in favor of the moving reinsurers. The court noted that evidence of custom and practice, no matter how extensive and persuasive, cannot be used unless the contract is ambiguous. Here, the court held that the facultative certificates were not ambiguous and extrinsic evidence could not be used.

Even though the language in the certificates in this case was different from the language in Excess, the court said that there appeared to be no meaningful distinction. Accordingly, bound by Excess, the court granted the motion finding that the certificate limits were a cap on both liability and expense.