R&Q Reins. Co. v. St. Paul Fire & Marine Ins. Co., No. 16-1473, 2017 U.S. Dist. LEXIS 72964 (E.D. Pa. May 12, 2017).
A Pennsylvania federal court denied a reinsurer's motion for judgment on the pleadings based on the failure of the cedent to plead the formation of a specific facultative certificate. In this case, the parties entered into a master facultative binding authority agreement that allowed the cedent to reinsure its commercial umbrella policies with a facultative reinsurer on an automatic basis. The master agreement provided that each cession would attach and become effective concurrently with the cedent's policy, as long as the policy was reported within 90 days of its effective date. The cedent would inform the reinsurer of the covered policy by sending a cession statement with pertinent policy information.
The motion involved one pair of policy and facultative certificate. The reinsurer argued that the cedent did not plead the existence of the cession statement connecting the two and, therefore, judgment on the pleadings dismissing the claim for that facultative certificate was warranted.
In denying the motion, the court held that the complaint adequately pleaded the existence of the contractual relationship between the policy and the facultative certificate. The complaint asserted that the facultative certificate reinsured the liabilities under the policy and that the limits of the facultative certificate were identical to the limits of the example certificate attached to the complaint. The court held that the cedent was not required to attach the contracts to the complaint.
The court pointed out that the master agreement did not say that the cession would attach and become effective after the cedent submits a cession statement to the reinsurer. The existence of the cession statement for this policy and facultative certificate was a factual dispute regarding the breach, but not the existence, of the contract and should not be addressed on a motion for judgment on the pleadings. The court also noted that another policy and facultative certificate pair suffered from the same defect, but that the reinsurer chose to move for judgment on the pleadings only for the one pair. That fact also weighed in favor of denial according to the court.