United States District Court, D. Connecticut
ODYSSEY REINSURANCE COMPANY f/k/a ODYSSEY AMERICA REINSURANCE CORPORATION, Plaintiff,
CAL-REGENT INSURANCE SERVICES CORPORATION, Defendant
Odyssey Reinsurance Company, formerly known as Odyssey
America Reinsurance Corporation, Plaintiff: James J. Reardon,
Jr., LEAD ATTORNEY, Reardon Scanlon Vodola Barnes LLP, West
Cal-Regent Insurance Services Corporation, Defendant:
Clifford E. Nichols, III, Day Pitney LLP-Stmfd, Stamford, CT;
Daniel Joseph Raccuia, Day Pitney LLP-HTFD, Hartford, CT;
Thomas O. Farrish, Day Pitney LLP-Htfd-CT, Hartford, CT.
Cal-Regent Insurance Services Corporation, Counter Claimant:
Thomas O. Farrish, Day Pitney LLP-Htfd-CT, Hartford, CT.
Odyssey Reinsurance Company, Counter Defendant: James J.
Reardon, Jr., LEAD ATTORNEY, Reardon Scanlon Vodola Barnes
LLP, West Hartford, CT.
ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
A. BOLDEN, UNITED STATES DISTRICT JUDGE.
diversity action arises out of a series of reinsurance
agreements to which Plaintiff Odyssey Reinsurance Company
(" Odyssey" ), Defendant Cal-Regent Insurance
Services Corporation (" Cal-Regent" ), and State
National Insurance Company, Inc. (" State National"
) were party. Odyssey alleges that Cal-Regent failed to remit
commission adjustment payments to Odyssey, and now seeks
summary judgment on its breach of contract and declaratory
judgment claims. Cal-Regent maintains that summary judgment
because (i) Odyssey has not proved its own performance, (ii)
Odyssey incorrectly calculates a commission adjustment, and
(iii) Cal-Regent has not had a full and fair opportunity to
conduct discovery into an alleged possible breach by Odyssey.
the potential breach raised by Cal-Regent may raise a genuine
dispute of material fact, Odyssey's motion for summary
judgment is DENIED WITHOUT PREJUDICE TO RENEWAL. On the
limited grounds discussed in this Ruling, the Court will
allow Cal-Regent an opportunity to amend its pleading to
allege this potential breach properly. Odyssey then will have
an opportunity to renew its motion for summary judgment at
the appropriate time.
is a Connecticut corporation engaged in the business of
reinsurance. (Pl.'s L. R. 56(a)(1) Stmt.
[hereinafter " Pl.'s Stmt." ] ¶ 2, ECF No.
69; Def.'s L. R. 56(a)(2) Stmt. [hereinafter "
Def.'s Stmt." ] ¶ 2, ECF No. 72.) Cal-Regent is
a California corporation that underwrote commercial
automobile and garage liability insurance on behalf of State
National, an insurance company that is not a party to this
action. (Pl.'s Stmt. ¶ 7; Def.'s Stmt. ¶ 7;
Nagby Aff. ¶ ¶ 6-7, ECF No. 73.) State National
purchased reinsurance from Odyssey to reinsure a percentage
of the risks that Cal-Regent underwrote on State
National's behalf. (Pl.'s Stmt. ¶ 7; Def.'s
Stmt. ¶ 7.)
The Reinsurance Agreements
Cal-Regent, and State National first entered into the
above-described arrangement under a Garage Liability Quota
Share Reinsurance Agreement effective April 1, 2002 (the
" 2002 Agreement" ). (Def.'s Mem. Opp. Summ. J.
[hereinafter " Def.'s Opp." ] Ex. 2 at 2, ECF
No. 71-2.) The parties terminated the 2002 Agreement
effective April 1, 2004, and on that day entered into a
second reinsurance agreement that was substantively the same
as the 2002 Agreement (the " 2004 Agreement" ). (
Id. at 23; Def.'s Opp. Ex. 3 [hereinafter "
2004 Agmt." ] at 2, ECF No. 71-3.) Similarly, the
parties terminated the 2004 Agreement effective April 1,
2006, and on that day entered into a third reinsurance
agreement that was substantively the same as the 2002 and
2004 Agreements (the " 2006 Agreement" ). (2004
Agmt. at 25; Def.'s Opp. Ex. 4 [hereinafter " 2006
Agmt." ] at 2, ECF No. 71-4.) Finally, the parties
terminated the 2006 Agreement effective April 1, 2007, and on
that day entered into a fourth reinsurance agreement that was
substantively the same as the 2002, 2004, and 2006 Agreements
(the " 2007 Agreement" ). (Nagby Aff. ¶ 16;
Def.'s Opp. Ex. 5 at 2, ECF No. 71-5.) The 2007 Agreement
terminated effective July 13, 2009. (Def.'s Opp. Ex. 5 at
26.) Each of the four reinsurance agreements (collectively,
the " Reinsurance Agreements" ) contained the
following provisions that are relevant to this dispute.
Commissions and Adjustments
XI provided that Cal-Regent would receive a provisional
commission on all premiums that it underwrote on State
National's behalf, and that Odyssey was responsible for
paying its share of Cal-Regent's provisional commission
directly to Cal-Regent. (2004 Agmt. ¶ 11.2.)
Cal-Regent's provisional commission was adjusted for each
" Underwriting Year" depending on the ratio of
losses incurred to
premiums earned (" loss ratio" ) for the business
underwritten by Cal-Regent. ( Id. ¶ 11.4.)
" Underwriting Year" was defined:
" Underwriting Year" as used herein shall mean
those Policies with inception, renewal or anniversary date
during each 12-month period commencing with each April 1 and
all premium attributable to, and all loss arising out of such
Policies from such inception, renewal or anniversary date
until expiration, cancellation, or next anniversary,
whichever occurs first, will be ascribed to the Underwriting
( Id. ¶ 11.4(h).)
commission increased if the loss ratio for a given year fell
below certain designated percentages, and decreased if the
loss ratio exceeded certain designated percentages. ( See
id. ¶ 11.4(a).) Cal-Regent's commission was
adjusted even further if the loss ratio for a given year fell
outside the range of designated percentages. ( See
id. ¶ 11.4(b).) In that case, the difference in
percentage points between the loss ratio and the highest or
lowest (whatever the case may be) designated percentage was
multiplied by premiums earned for the period, and the product
was carried forward to the " next adjustment
period" as a debit or credit (whatever the case may be)
to " losses incurred" (" carry forward"
). ( Id. ) " Losses incurred" was defined
As respects second and each Underwriting Year hereunder, plus
(minus) the debit (credit) from the preceding Underwriting
Year . . . .
( Id. ¶ 11.4(f)(iii).)
the timing of commission calculations and payments, each
[Cal-Regent] shall calculate and report the adjusted
commission on ceded premiums within 60 days after 36
months after the inception of the first
Underwriting Year, and within 60 days after the end of each
12-month period thereafter until all losses subject hereto
have been fully settled. If the adjusted commission on ceded
premiums earned is less than commissions previously allowed
on premiums earned for the Agreement, [Cal-Regent] shall
remit the difference to [Odyssey] and [State National] with
( Id. ¶ 11.4(c).)
III provided for termination on a " run-off basis."
( Id. ¶ 3.7.) Specifically, each agreement
provided that when it terminated for any reason, reinsurance
continued to apply to business in force at the time of
termination, ( id. ¶ 3.3), and that the parties
were not " relieved of or released from any obligation
created by or under this Agreement in relation to payment,
expenses, reports, accounting or handling, which relate to
outstanding insurance business under this Agreement existing
on the date of termination," ( id. ¶ 3.4).
Each agreement contained the following provision:
This Agreement provides for termination on a run-off basis.
The relevant provisions of this Agreement shall apply to the
business being run off. It is expressly agreed that the
terms, conditions and obligations of the Preamble; Sections
3.3, 3.4, 3.6 and 3.7; Articles IV - XIX; Sections 20.2,
20.3, 20.5, 20.7,
20.8; and Articles XXI and XXII shall survive termination of
( Id. ¶ 3.7.)
5.3 addressed loss settlement and provided in relevant part:
[State National] hereby empowers [Odyssey], and [Odyssey]
may, in its discretion, and under its supervision appoint
[Cal-Regent], to accept notice of and investigate any claim
arising under any of the Policies, to pay, adjust, settle,
resist or compromise any such claim, unless [State National]
specifically directs to the contrary with respect to any
individual claim. In the latter event, [Odyssey] and/or
[Cal-Regent] shall follow the instructions of [State
National] as respects such claim. All such loss settlements,