Part III.B
Continental Cas. Co. v. Stronghold: Did the Court Correctly Apply New York Law?
Welcome to Part III.B of our multi-part reinsurance statute of limitations feature. (Links to previous installments are listed at the end of this post.)
If you’ve been following this series, then you already know that under New York law, the six-year statute of limitations begins to run on a reinsurance claim once it is settled and the cedent has the right to demand payment. This is the general rule that applies to other contracts of indemnity, including insurance contracts, but it is subject to an exception: when an insurance or reinsurance contract expressly conditions the reinsurer’s duty to perform its obligations on the presentation of a claim, the statute of limitations generally does not begin to run any earlier than the date the cedent presents the claim.
In Part III.A we summarized the facts and holding of the United States Court of Appeals for the Second Circuit’s decision in Continental Cas. Co. v. Stronghold Ins. Co., 77 F.3d 16 (2d Cir. 1996), which concluded that a garden-variety notice of loss provision in a reinsurance contact was an express condition to the extent that it required notice of paid loss, which the Court seemed to think was more important to reinsurers than prompt notice of the original insureds’ reported losses losses and their development over time. Stronghold essentially created an express condition out of whole cloth by placing a strained interpretation on a timely notice provision identical in all material respects to one that New York’s highest court, in North River Ins. Co. v. Unigard Sec. Ins. Co., 79 N.Y.2d 576 (1992) (“Unigard I”), had held was not an express condition. And it relied on that interpretation to justify delaying the accrual of the statute of limitations on claims that were settled more than six-years before the Cedent commenced its action against the Reinsurers.
This Part III.B explains why we believe Stronghold misconstrued the notice provision, misapprehended its purpose and misapplied New York law on express conditions. Continue Reading »
