
USCA1 Opinion

	




          J      u      n      e   2      2      ,   1      9      9      5                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-2338                  COMPAGNIE DE REASSURANCE D'ILE DE FRANCE, ET AL.,                               Plaintiffs, Appellants,                                          v.                     NEW ENGLAND REINSURANCE CORPORATION, ET AL.,                                Defendants, Appellees.                                 ____________________        No. 93-2339                  COMPAGNIE DE REASSURANCE D'ILE DE FRANCE, ET AL.,                                Plaintiffs, Appellees,                                          v.                     NEW ENGLAND REINSURANCE CORPORATION, ET AL.,                               Defendants, Appellants.                                 ____________________                                     ERRATA SHEET            The opinion of this court issued on June  19, 1995, is amended  as        follows:            p.48, l.4:  Change "note 24" to "note 20".            p.49, l.15:  Change "note 23" to "note 21".            p.87, l.18:  Change "occurred" to "did not occur".            p.91, l.4:     Change "the  plaintiff appeal"  to "the  plaintiffs            appeal".            p.91, n.34, 3rd line from bottom:  Change "n.18" to "n.16".                             UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-2338                  COMPAGNIE DE REASSURANCE D'ILE DE FRANCE, ET AL.,                               Plaintiffs, Appellants,                                          v.                     NEW ENGLAND REINSURANCE CORPORATION, ET AL.,                                Defendants, Appellees.                                 ____________________        No. 93-2339                  COMPAGNIE DE REASSURANCE D'ILE DE FRANCE, ET AL.,                                Plaintiffs, Appellees,                                          v.                     NEW ENGLAND REINSURANCE CORPORATION, ET AL.,                               Defendants, Appellants.                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Edward F. Harrington, U.S. District Judge]                                               ____________________                                 ____________________                                        Before                                Torruella, Chief Judge,                                           ___________                           Campbell, Senior Circuit Judge,                                     ____________________                             and Carter, District Judge.*                                         ______________            Robert S.  Frank,  Jr. with  whom  Cynthia  T. MacLean,  David  A.            ______________________             ___________________   _________        Attisani, Choate,  Hall &  Stewart, David  S. Mortensen  and Tedeschi,        ________  ________________________  ___________________      _________        Grasso & Mortensen were on brief for defendants.        __________________            Allan  B. Taylor,  with  whom  William Shields,  Kenneth W.  Ritt,            ________________               _______________   ________________        Matthew E. Winter, Mary Theresa Kaloupek and Day, Berry  & Howard were        _________________  _____________________     ____________________        on brief for plaintiffs.                                 ____________________                                 ____________________                                    ____________________        *Of the District of Maine, sitting by designation.                      CAMPBELL, Senior Circuit Judge.   This is an appeal                                ____________________            from  a final  judgment of  the district  court in  an action            brought  by  a  number  of  foreign  reinsurance  syndicates,            companies  and pools  against a domestic  reinsurance company            and related parties.  At  issue are reinsurance contracts (or            "treaties,"  as  they  are  known)  under  which  plaintiffs,            Compagnie De Reassurance  D'Ile de France, et al.,1 agreed to            reinsure portions  of risks selected, and  also reinsured, by            defendant New  England  Reinsurance Corp.  ("NERCO").   After            sustaining heavy losses under these Treaties, plaintiffs sued            defendants  NERCO,  First  State  Insurance  Company  ("First            State"), and Cameron and Colby Co., Inc. ("Cameron & Colby"),            alleging  that  they  had  been  induced  to  enter  into the            reinsurance treaties by fraud, and further claiming breach of            contract,  violations  of Mass.  Gen. L.  ch.  93A,    2, and            violations   of  the   Racketeer   Influenced   and   Corrupt            Organizations  Act   ("RICO"),   18  U.S.C.        1961-1968.            Defendants  counterclaimed, alleging  breach of  contract and            violations of Mass. Gen. L. ch. 93A,   2.  Following a 30-day                                            ____________________            1.  The  plaintiffs  are  listed  in  the   district  court's            opinion.  See Compagnie de Reassurance D'Ile de France v. New                      ___ ________________________________________    ___            England  Reinsurance Corp.,  825 F.  Supp. 370,  373 n.2  (D.            __________________________            Mass. 1993).   Plaintiffs Pohjola Insurance  Company Ltd. and            Pohjola  Insurance  Company (UK)  Limited  were dismissed  on            motion of  the defendants, with the consent of the plaintiffs            during the  trial, and the  parties entered a  Stipulation of            Dismissal dated  May 5,  1995, whereby plaintiff  De Centrale            Herzverzekering N.V. dismissed its appeal in No. 93-2338, and            the defendants dismissed their  appeal in No. 93-2339 against            De Centrale only, leaving 31 plaintiffs remaining.                                         -4-            bench trial, the district  court found for the  plaintiffs on            all but the RICO claims.  The court ordered rescission of the            challenged reinsurance Treaties and ordered defendants to pay            plaintiffs $38,118,940.07, representing  all sums  plaintiffs            had previously paid out on losses incurred under the Treaties            with credit for premiums  received, plus prejudgment interest            at 12 percent.  Defendants estimate that the net cost to them            of the court's decision, adding together the court's judgment            and  the sums plaintiffs have been excused from paying out as            reinsurers of various losses, is approximately $106 million.                      Defendants have  appealed  from the  judgments  for            plaintiffs on the fraud,  contract and Mass. Gen. L.  ch. 93A            claims.   Plaintiffs  have cross-appealed  from the  district            court's dismissal of their  RICO claim.  For the  reasons set            forth  below, we  sustain the  district court's  findings and            rulings on  certain matters; reverse others  as being clearly            erroneous  or legally  incorrect;  and identify  still others            that require  the district court to make findings and rulings            now  absent.   We,  therefore,  vacate  the district  court's            judgments  and  remand  for  further  proceedings  consistent            herewith.  Our specific  dispositions are summarized on pages            98-100 of this opinion.            I.        Background                      Background                      The following is an  overview.  More specific facts            will  be related as needed  in our discussion  of the various                                         -5-            issues.                      The defendants are all subsidiaries of the Hartford            Group  of  Insurance  Companies  ("the  Hartford").2    First            State, based in Boston, Massachusetts, was a primary insurer.            NERCO was  a Boston-based reinsurer.   Cameron &  Colby, also            based    in    Boston,   provided    management,   marketing,            underwriting,  and other  services  to both  First State  and            NERCO.   Neither First State  nor NERCO had  employees of its            own; their businesses were carried on by employees of Cameron            & Colby.  Graham  Watson, Inc.,3 not a party,  was created in            1979 as  an unincorporated  division of Cameron  & Colby;  it            became  the  latter's  wholly owned  subsidiary  in mid-1980.            Graham   Watson's  role   was   to   provide  marketing   and            underwriting   services   in  the   facultative4  reinsurance            venture that is the subject of this litigation.                                            ____________________            2.  The  relationship  between  these  defendants  and  their            corporate parents, the Hartford and  ITT, is described in the            district court's opinion, 825  F. Supp. at 373.   Neither the            Hartford nor ITT is a party to this case.            3.  This entity is  variously referred to  as "Graham-Watson"            and "Graham Watson" in the documents contained in the record.            Like  the district court, we will  use the unhyphenated form,            unless quoting directly a source using the hyphenated form.             4.  Facultative reinsurance is one of  the two major types of            reinsurance, the  other being  treaty reinsurance.   From the            Latin word for  "ability" or "power,"  "facultative," broadly            speaking,  connotes  the option  to  reinsure,  or not,  each            particular risk, as contrasted  with a binding arrangement to            reinsure all risks of a particular sort.  See infra.  A major                                                      ___ _____            issue in  this case is  whether the  reinsurance provided  by            defendants  was  "facultative,"  as  promised  in  the   SANS            Treaties.                                         -6-                      The  underlying casualty and property risks germane            to  this case were located in North America.  Individuals and            entities  wishing  to  insure  against  these  risks procured            policies of insurance from primary insurers.  The latter then            purchased  reinsurance  from  NERCO  in  order  to  indemnify            themselves in whole or in part against losses sustained under            the primary policies they had issued.                      Not  wanting to keep  all the exposure  that it had            assumed as a reinsurer, NERCO itself    often acting with and            through  Graham Watson     sought  reinsurance on  the London            insurance  market, resulting  in the arrangements  with which            this lawsuit is concerned.  Under these reinsuring agreements            -- the  so-called System and Non-System  ("SANS") Treaties --            many  syndicates  at Lloyd's  of  London  and other  overseas            reinsurance entities (some of whom are the plaintiffs in this            case) agreed to  provide continuing reinsurance to NERCO on a            portion of each risk it reinsured.   In industry terminology,            NERCO, having been "ceded" the risks by the primary insurers,            became    a    "retrocedent,"    the     plaintiffs    became            "retrocessionaires," and  the  agreements between  them  were            "retrocessional" treaties.   The plaintiff  retrocessionaires            agreed to indemnify NERCO  for a portion of any  losses NERCO            might sustain  in its  reinsurance of  primary insurers.   In            return,  NERCO  promised  to  acquire  ("produce"),  evaluate            ("underwrite"),  and price  ("rate") the  risks and  to share                                         -7-            with plaintiff retrocessionaires, subject to its retention of            certain commissions, a portion of the premium it received.                      A.  Signing the Treaties                          Signing the Treaties                      In 1979, NERCO retained a U.S. broker, G.L. Hodson,            to  assist it in arranging for this reinsurance on the London            market.   Towards this end, Graves Hewitt, the CEO of Cameron            & Colby, and  his associates drafted  and circulated in  late            1979 a  document  known as  the  Placing Information.    This            document  stated that  Cameron  & Colby  had established  the            Graham Watson division after studying facultative reinsurance            operations in North America  and after receiving the approval            and support of the Hartford and ITT.5  The  stated purpose of            the division was:                      1.   To participate in  the property  and                           casualty   facultative   reinsurance                           business    which    is    currently                           dominated by the direct writers.                      2.   To rationalise [sic] the facultative                           placements of both the  Hartford and                           the  First  State not  only  from an                           administration  [sic] point  of view                           but    also     to    provide    the                           retrocessionaires with a broad cross                           section  of facultative  reinsurance                           emanating from these two companies.            According  to  the  Placing Information,  Graham  Watson  was                                            ____________________            5.  Plaintiffs'   fraud   claims   rely    significantly   on            representations made  in the Placing  Information, especially            those pertaining to Graham Watson's intention to procure non-            brokered, "direct" business from "selected primary companies"            rather than brokers.  We attach  as an appendix a copy of the            Placing Information typically circulated to the plaintiffs.                                         -8-            charged  with  penetrating the  "non-brokered  .  . .  direct            professional  reinsurance   market,"  leaving  "[f]acultative            reinsurance emanating  from reinsurance intermediaries  . . .            [to] continue  to be written separately  through NERFAC," the            latter being an  existing in-house entity that  had, for some            time,  been  writing reinsurance  for  the  defendants.   The            Placing Information was circulated  to, among others, several            European  sub-brokers retained  by Hodson  to act  on NERCO's            behalf in seeking potential retrocessionaires.6                      In late 1979, Hewitt traveled to London accompanied            by  Thomas Hearn, a Hodson  employee.  Aided  by employees of            sub-broker Sedgwick  Payne, they approached Ralph Bailey, the            head underwriter  for plaintiff Terra Nova  Insurance Company            Limited, and described to  him the proposed reinsurance plan.            Sedgwick-Payne's  brokers  thereafter negotiated  with Bailey            the "slips" spelling  out the  terms of the  treaties.   With            Bailey agreeing to act as  "lead underwriter" for the  London            market companies,  the brokers  approached  Ron Kellet,  head            underwriter for  plaintiff B.P.D. Kellet &  Others, a Lloyd's            syndicate, with the  request that he act as  lead underwriter                                            ____________________            6.  These included Sedgwick Payne, North American Reinsurance            Brokers Ltd.; Anglo-Swiss  Reinsurance Brokers, Ltd.;  Carter            Brito E Cunha Ltd.; Fielding & Partners; and Jardine Thompson            Graham  Ltd.   None of  the sub-brokers  are parties  to this            suit.                                         -9-            on  behalf of all other Lloyd's syndicates.7  After the leads            had   stamped  and  initialed   the  slips,   indicating  the            proportion of the total  risk they were bound to  accept, the            slips   were  separately   presented  for  approval   to  the            underwriters  for  each  of  the plaintiffs,8  each  of  whom            indicated his or her acceptance of a  portion of the risks by                                            ____________________            7.  A  lead   underwriter   is  initially   responsible   for            negotiating the  terms of  reinsurance contracts such  as the            SANS Treaties.  The lead underwriter normally commits  his or            her firm or syndicate to a level of participation in a treaty            that  is somewhat  higher  than that  of other  participating            reinsurers, who  are referred  to as the  "following market."            Members  of the  following  market rely  on the  underwriting            skill  and judgment of the  lead as an  important factor when            deciding whether  and by  how much  to  commit themselves  on            reinsurance   obligations.      Thus,   having   a  reputable            underwriter  as  lead can  have a  significant effect  on the            ability  to fully place a retrocessional  treaty.  There were            actually  two lead underwriters in this case:  Bailey for the            London  market   companies  and   Kellett  for  the   Lloyd's            syndicates.   See Edinburgh Assur.  Co. v. R.L.  Burns Corp.,                          ___ _____________________    _________________            479  F.Supp.  138,  145  n.2 (C.D.  Cal.  1979)  ("The market            sometimes recognizes both a lead underwriter at Lloyd's and a            lead company underwriter."), aff'd in relevant part, 669 F.2d                                         ______________________            1259 (9th Cir. 1982).            8.  Not all  of the 31  plaintiffs participated  in all  four            years  of  the   SANS  Treaties.    (28  of   the  plaintiffs            participated in  the 1980  SANS Treaties; 29  participated in            1981; 27 participated in 1982;  and 15 participated in 1983.)            However, the process of stamping and initialling the slips to            indicate  acceptance of a portion of the risk was repeated in            each of the following  three years (1981-83) with respect  to            each individual plaintiff.  We  also note that the plaintiffs            were not the only retrocessionaires participating in the SANS            Treaties;  in   all,  approximately  100   separate  entities            accepted portions  of  these risks  over  the four  years  in            question.                                         -10-            initialing the slip.9                      These  slips constituted, in  abbreviated form, the            contracts   between  the   cedent   NERCO  and   the  various            retrocessionaires.10      Briefly   summarized,   the   slips            provided  that  the  subject   matter  of  the  Treaties  was            "Business classified by the Reassured [NERCO] as Property and            Casualty   Facultative   Assumed   business    produced   and            underwritten by the Graham Watson division of Cameron & Colby            Co.,  Inc."  They also  stated that the  Lead Underwriter had            authority to require exclusion of certain types of risks, and            to agree to the final wording  of the formal contract.  NERCO            was  to retain a minimum of  $250,000 of each risk ceded, and            as  respects system  business (i.e.,  risks written  by First            State and  other Hartford entities,  infra), was not  to cede                                                 _____            more than 50 percent of the original reinsurance limit of any            given risk to  the Treaties,  and was to  co-reinsure for  10            percent participation  on  each such  risk.   The slips  also            specified   the  commission   structure  and   various  other            conditions of the  Treaties.  The  slips did not  incorporate            the Placing Information as such.                      Each   underwriter   subsequently   signed   Treaty                                            ____________________            9.  For a  detailed discussion  of the business  practices of            the  London insurance  market, see  Edinburgh Assur.,  479 F.                                           ___  ________________            Supp. at 144-46.             10.  We  place in the appendix portions of one of the typical            slips utilized here.                                         -11-            Wordings,   formal  contracts  containing  a  more  elaborate            statement  of the parties'  agreements.  These  were based on            the slips, and  the parties agreed that, in the  event of any            inconsistency,  the slips  would control.   The first  set of            SANS Treaties ran for the eleven month period from February 1            through December 31, 1980.   Thereafter, those plaintiffs who            desired  to   continue  for  another  year   indicated  their            willingness to  join by initialling new  slips and ultimately            executing new Treaty Wordings  for 1981.  Successive Treaties            were entered  into  for  1982 and  for  1983.   Some  of  the            plaintiffs  entered into Treaties for each of the four years;            others were parties  to the  Treaties for only  one, two,  or            three   of  those   years.    The   Treaties  were   open  to            renegotiation each year, and  certain changes, e.g., relating            to commission structure and the like, were in fact made.                      For each Treaty year  there were actually two slips            prepared,  one for  property  business and  one for  casualty            business.   The business  covered by  each  slip was  further            divided  into  "system business"  and  "non-system business."            "System business"  denoted risks written by  member companies            of the Hartford, and included,  among others, First State and            the Hartford itself.  "Non-system business" referred to risks            written  by any  other primary  insurer.   As a  condition of            participation,   although  not   included   in  the   written            contracts, Bailey  insisted that  no  non-system business  be                                         -12-            ceded to the SANS Treaties for the first year.   He testified            in  his deposition  that this  was because  he felt  that the            system  business  was  "the  steadier,  better  part  of  the            portfolio."                      B.  Performance of the Treaties                          Performance of the Treaties                      Once the  Treaties were  fully placed for  the 1980            treaty  year,  NERCO  began  retroceding  to  the  plaintiffs            portions  of the  risks it  was reinsuring.   Central  to the            plaintiffs'  present complaint, and  to the  district court's            finding of liability,  are the source  and nature of  NERCO's            business  as ceded  to  them.   In the  first  year, over  95            percent  of  the  business  so  ceded  was  system  business.            However,  few, if  any,  of  the  risks reinsured  were  from            Hartford companies  other than First  State.  In  the ensuing            three years,  the proportion  of system business  declined in            favor  of non-system business to less than 50 percent.  There            was evidence  that defendants had hoped  that system business            would  grow and  that NERCO  and its  retrocessionaires would            obtain  more  reinsurance  business directly  from  the other            Hartford  companies, in  addition  to First  State, but  that            these hopes were not realized.                      The proportion of non-system business rose steadily            after  the first year, but  the non-system business  was of a            kind which plaintiffs contend,  and the district court found,            was  different   from  that   represented   in  the   Placing                                         -13-            Information.  The court  construed the Placing Information as            representing  "that Graham Watson  would produce 'non-system'            reinsurance   business   directly   from  primary   insurance            companies without the use of intermediaries."  In support  of            the court's construction, plaintiffs point to representations            in the Placing Information that Graham Watson did  not intend            to seek  reinsurance  "on  a wholesale  basis  from  all  and            sundry" but  rather to  develop a close  working relationship            "with  selected primary companies."   The Placing Information            stated  that non-brokered business "placed significantly with            the  direct  professional  reinsurance market"  characterized            over  80 percent  of United  States  facultative reinsurance.            The Placing  Information also  stated that Graham  Watson was            "charged   with  the   responsibility  of   penetrating  this            business."  Notwithstanding these announced intentions in the            Placing Information, most  of defendants' growing  non-system            business  after the end of  1980 was, in  fact, obtained from            intermediaries    to wit, brokers and Managing General Agents            ("MGAs").  MGAs serve as agents of primary insurance carriers            with authority  to underwrite  and place certain  business on            the insurers'  behalf.   Defendants received the  majority of            their non-system business, portions  of which were then ceded            to the  plaintiffs under  the SANS  Treaties, from  Baccala &            Shoop Insurance  Services, an  MGA representing a  variety of            primary insurance companies.   Baccala & Shoop worked closely                                         -14-            with the broker, G.L. Hodson; in fact, they were owned by the            same entity.                      1.  Semi-Automatic and Automatic Facilities                          Semi-Automatic and Automatic Facilities                      Another key issue  in the present  litigation stems            from  the fact that, during the annual periods covered by the            Treaties,  almost   all  of  the  non-system   business  that            defendants  produced, and  shared  with  the plaintiffs,  was            underwritten   using   what   are    called   "semi-automatic            facilities."   (A  "facility"  is an  agreement setting  out,            among other things,  the rules under  which a reinsurer  will            reinsure  risks ceded by the other party.)  Defendants insist            that semi-automatic facilities were perfectly consistent with            the  representations  in  the  slips and  Treaties  that  the            reinsurance  to be  ceded  to plaintiffs  would be  "business            classified by the Reassured  [NERCO] as Property and Casualty            Facultative   Assumed   business."     (Emphasis   supplied.)            ___________            Plaintiffs   sharply  dispute  this.     Calling  facultative            underwriting the  "fundamental  material  term  in  the  SANS            Treaties," the district court agreed with plaintiffs that the            term "facultative" included only reinsurance that a reinsurer            underwrites  and negotiates  with  the primary  insurer on  a            risk-by-risk individual certificate basis in advance, i.e., a            certificate of reinsurance is issued  for each risk after the            reinsurer has first looked  into and approved reinsuring that            particular risk.                                         -15-                      Under  the  semi-automatic  method that  defendants            mostly used  in  underwriting non-system  risks,  defendants'            underwriters  did not evaluate risks one at a time in advance            of  the issuance  of a  policy of  reinsurance on  each risk.            Instead,    in    contracts   called    "Master   Facultative            Certificates" ("MFCs"), NERCO agreed  with an MGA, broker, or            primary   insurer  that   the  latter   entity  could   issue            reinsurance upon  risks of described types,  and upon certain            conditions and  with  certain limits,  prior  to  defendants'            underwriters' scrutiny and approval  of the risk.   After the                                                                _____            reinsurance  attached to  each  risk, however,  the agent  or            ceding company would send to Graham Watson a "risk bordereau"                a  document  identifying   and  providing  a  summary  of            information as to that, and any other, risks reinsured within            the  reporting period.  Graham Watson then had a brief period            after receipt of  the bordereau, for example 72 hours, within            which to cancel the reinsurance on a particular risk if it so            desired, cancellation  to  take  effect  within  a  specified            period, say, 14 days.                      Defendants  contend,  and  presented   evidence  at            trial,   that  the   semi-automatic   facility  is   commonly            classified  in the  industry today as  a form  of facultative            reinsurance.     They  concede  that,  in   an  earlier  era,            "facultative"  was   a  term  applied   only  to  reinsurance            individually  underwritten on a risk-by-risk basis in advance                                         -16-            of binding.  But  while accepting that the  reinsurer's right            to  reject  individual risks  remains  a  general feature  of            facultative reinsurance, defendants contend that this feature            is  adequately   preserved  in   the   more  economical   and            streamlined semi-automatic facility.11                      Defendants  also  used,  in   a  few  instances,  a            variation known as  an "automatic facility."  Under this type            of  facility,  rather  than  having the  right  to  cancel an            individual risk,  the reinsurer has  the right to  cancel the            entire facility on very short notice.  Even without the right            to cancel a  particular risk, defendants argue that  this was            "facultative,"  since  the  reinsured would,  as  a practical            matter,  agree to  cancel individual  risks rather  than face            cancellation of the entire facility.  Moreover, the reinsured            retained  the freedom  to cede  or not  to cede  a particular            risk,  which   is  not   the  case  in   treaty  reinsurance.            Automatics comprised  only a small portion  of the non-system            business,  most  of   which  was  underwritten   using  semi-                                            ____________________            11.  Because of  the cedent's right of  cancellation, and the            reinsured's right  not to cede, defendants  and their experts            contend  that  the  semi-automatic  facility  is  a  form  of            facultative   reinsurance,  and  is  not  forbidden  "treaty"            reinsurance.     The  SANS  Treaties   contained  an  express            exclusion  for  "assumed  treaty"   business.    In  "treaty"            reinsurance, the reinsurance arises solely as the consequence            of the terms of  a prior general contract,  with no right  on            the reinsurer's part  to reject a particular  risk that meets            the  terms  of the  contract, and  without  any right  on the            reinsured's part to decline to cede a particular risk, always            assuming that the risk  in question conforms to the  terms of            the prior contract.                                           -17-            automatics.                      2.  The First State Business                          The First State Business                      With regard  to system business  (which was  almost            exclusively with  First State), the defendants did  not use a            risk  bordereau,  nor  did  they ever  enter  into  a  formal            contractual  arrangement  spelling   out  First  State's  and            NERCO's relationship in respect to the latter's reinsuring of            risks later  assigned  under the  SANS Treaties.   There  was            evidence, however, indicating how matters worked in practice.            In  practice,  First  State's  underwriters  had  the   power            initially  to commit NERCO and the SANS Treaty signatories to            the reinsuring of individual risks primarily insured by First            State.   The reinsurance was evidenced by a layoff sheet that            First State  prepared; each  layoff sheet identified  a First            State  risk that  NERCO  and the  Treaty signatories  were to            reinsure, and  provided a brief summary  of information about            that risk.  A  packet containing many of these  layoff sheets            was periodically  provided by  First State to  Graham Watson,            whose underwriter could  study the risks  and would have  the            right to cancel the reinsurance at will.                      Defendants   contend   that    this   method    was            "facultative" because each risk was individually evaluated in            due  course  by a  Graham  Watson  underwriter based  on  the            information provided on the layoff sheets    and by follow-up            phone  and face-to-face  inquiries, as  well as  by  means of                                         -18-            microfiches   which   reproduced    First   State's    entire            underwriting file for a risk, and were available upon request                and it was understood that the reinsurance was subject to            cancellation at will by  Graham Watson.  They point  out that            because  First  State's  and Graham  Watson's  employees were            under  the same roof and  answerable to the  same bosses, the            latter's  underwriters could informally influence First State            not  to cede  business the  latter did  not wish,  as further            evidence  of their facultative  control.  Notwithstanding the            absence of a written  understanding between Graham Watson and            First  State, the  district  court found,  after hearing  the            evidence,  that,  "Graham   Watson  underwrote  all  "'system            business' .  . .  by the 'automatic'  and/or 'semi-automatic'            method  of  underwriting."    Since  practically  all  system            business  was with  First  State, this  finding grouped  that            underwriting with the  explicit semi-automatic and  automatic            facilities used in non-system business.                      3.  Further Performance                          Further Performance                      At trial,  plaintiffs made  much of the  absence of            proof  of  particular  occasions  when  defendants  had  ever            actually  rejected a  risk listed  in a  bordereau or  layoff            sheet.    Plaintiffs  also  sharply  questioned  whether  the            information   in  the  bordereaux   and  layoff   sheets  was            sufficient to allow for adequate underwriting (evaluation) of            individual  risks.  Defendants responded by emphasizing that,                                         -19-            whether  or  not  used, the  right  to  reject  at all  times            existed, and  by pointing  to evidence that  its underwriters            adequately reviewed the risks and had other means    personal            inquiries,  telephone calls, inspection of First State files,            and so on     to make inquiry in doubtful cases.  Defendants'            evidence also indicated that Graham Watson conducted periodic            audits of the  underwriting practices of  MGAs and others  in            order to  assess  compliance with  the terms  of the  various            facilities.    The  district  court found  no  evidence  that            defendants  had  rejected any  risks  and  found that  Graham            Watson's underwriting of individual risks was inadequate.                      In  any  case,  while defendants  wrote  some small            percentage of  reinsurance under  the SANS Treaties  that was            facultative in the traditional  sense of advance risk-by-risk            underwriting, most of the reinsurance produced under the SANS            Treaties was  underwritten either  under some variety  of the            semi-automatic facility or, in the case of First State system            business, under  the informal in-house  procedures previously            described.  And, as  mentioned above, over the four  years of            the SANS Treaties, one MGA, Baccala & Shoop, furnished almost            all  of the  non-system business  to defendants.   Non-system            business was  found by the court  to constitute approximately            one-half of the treaty business during the four year period.                      The agreement with Ralph Bailey to avoid non-system            business for the  first year was not to the  liking of Graham                                         -20-            Watson, whose employees  felt that non-system business  would            be a steadier source of income for the Treaties.  Bailey also            made  known his dislike of  MGAs and his  reluctance to allow            MGA  business to  be  ceded to  the  SANS Treaties.    Bailey            testified  that, because  MGAs  did not  themselves bear  any            risk,   they  did   not  underwrite   as  carefully   as  did            underwriters on  the payrolls  of the primary  companies, and            hence the  business  produced through  them  was of  a  lower            quality.12    Again, this  was not  to  the liking  of Graham            Watson;  one internal  memorandum,  dated December  11, 1980,            stated that "Ralph Bailey has an aversion to MGAs and he will            have to be  approached rather delicately because  a good deal            of  the business going into this facility will be on business            which is designed  to provide a real flow of  business from a            single  source."  This memorandum also  noted that Tom Hearn,            of Hodson, would  travel to  London on December  15, 1980  to            attempt to  overcome this  aversion.  Responding  to repeated            requests from Graham Watson  employees, Bailey agreed at some            time  during  the first  year  to  begin allowing  non-system                                            ____________________            12.  Conflicting points  of view were expressed  by insurance            experts  at trial  about  the relative  effectiveness of  MGA            underwriting, as filtered through  semi-automatic facilities,            and   risk-by-risk  underwriting   on   a   "direct"   basis.            Defendants offered evidence  that the losses sustained  under            the  SANS  Treaties were  less  than  those suffered  by  the            reinsurance  industry  as a  whole  during  the same  period.            Plaintiffs  did  not  attempt  to disprove  this  but  rather            insisted  that  the defendants  never  provided  the type  of            reinsurance business they had promised.                                         -21-            business to be  ceded to  the Treaties.   While he  expressly            agreed  to the  cession of  certain  MGA business  during the            first year (from  an MGA known as the London  Agency), he did            so only with great  reluctance.  However, he did  not request            or  insert  an exclusion  for MGA  business  in the  slips or            Treaty Wordings for subsequent years, as he could  have done.            No such express exclusion was ever inserted.                      4.  Renewal of the Treaties                          Renewal of the Treaties                      The SANS Treaties were continuous contracts subject            to  cancellation  "upon  120  days prior  written  notice  at            December 31,  1980 or  any subsequent December  31st."   This            allowed  any desired adjustments to  be made in  the terms of            the Treaties  on a  yearly basis.   In practice,  all of  the            retrocessionaires   cancelled   during  the   120-day  period            preceding December 31, 1980 and then initialled new slips for            the next calendar year.   In order to induce  renewal, Graham            Watson, again  through Hodson and  the European  sub-brokers,            disseminated a  document referred to as  the 1981 Anniversary            Information.    In addition  to listing  losses in  excess of            $50,000 reported through September  30, 1980, and providing a            summary  of  the business  ceded  thus  far, the  Anniversary            Information included the following statements:                      To   date,   the  preponderance   of  the                      business  has  been  assumed  from  First                      State Insurance Company  and written on a                      pro  rata  basis.    Non-System  business                      represents a  relatively small proportion                      of the total and what has been written is                                         -22-                      limited to Casualty business on an excess                      of loss basis  emanating from Baccala and                      Shoop Insurance Services.                      Because of the competitive climate in the                      United  States, Non-System  business will                      develop   more  slowly   than  originally                      anticipated.    It  continues to  be  the                      posture  of  Graham-Watson  not  to  seek                      business  on a wholesale basis but rather                      to  develop  close  working  relationship                      [sic] with selected primary sources.                      On  March 23, 1981, a meeting was held in Boston to            discuss the performance of the SANS Treaties.  In  attendance            were Ralph Bailey and several  employees of Hodson and Graham            Watson.  One major topic of conversation was the inclusion of            MGA business.   Bailey  asked the Graham  Watson underwriters            for  their opinion of  Baccala & Shoop,  and was told  by Bob            Wright, the  property underwriter,  that Wright knew  most of            Baccala & Shoop's home office people and was comfortable with            them.  Later in  the meeting, however, Bailey stated  that he            would not consider any new MGA business for the facility.  He            did  not, however,  make  this a  contractual requirement  by            inserting  an exclusion for MGA  business in the  slip at the            next renewal.                      At the close of the second year, a 1982 Anniversary            Information was disseminated, which  again provided a list of            losses and a  summary of  the business.   This document  also            included  figures  as  to  overall  loss  experience  through            September 30,  1981, which  disclosed that the  SANS Treaties            were  losing  money.   Indeed, the  loss  ratio for  the 1980                                         -23-            Treaties  was an  alarming  248.65 percent.13   In  addition,            the  1982  Anniversary  Information  included  the  following            statements:                      The  rating  basis of  these  treaties is                      being  amended  with   effect  from   1st                      January 1982 to  more accurately  reflect                      the  basis  used by  Graham-Watson.   All                      business other than that assumed from the                      First  State which is  a "system" company                      is being written on  a net rated basis in                      that Graham-Watson is quoting their price                      and if a ceding commission is required by                      the  original company, this is then added                      to the premium required  by Graham-Watson                      . . . .                      The  current sources of business is [sic]                      as follows :-                      FIRST STATE INS. CO.                      TWIN CITY per  Baccala      and     Shoop                                     Insurance Services                      ST. PAUL FIRE & MARINE                      NORTHBROOK                      CRUM & FORSTER                      CNA                      ROYAL INS. CO.                      CHUBB AND SON                      AETNA CASUALTY & SURETY            Plaintiffs point  out defendants'  failure to  mention, other            than in  the case of  Twin City, that  certain of  the listed            primaryinsurersactedthroughBaccala &Shooporotherintermediary.                      It appears  that no formal  anniversary information            was  prepared for 1983, the  last year of  the SANS Treaties,            although  letters   were   sent  to   the   retrocessionaires                                            ____________________            13.  Loss  ratio  is  the  ratio of  net  earned  premium  to            incurred  losses.    A  loss  ratio under  100%  indicates  a            profitable treaty;  a loss ratio greater  than 100% indicates            that more money is being paid to satisfy claims than is being            made in the form of premiums.                                         -24-            containing a list of  losses, a summary of the  business, and            notification of various  changes that had been made  over the            past year, none  of which  are material here.   However,  the            retrocessionaires   were  told   that   the   treaties   were            "continuing for 1983 basically as before."                      Following  the placing  of the  SANS Treaties,  the            plaintiffs at first accepted their shares of the premiums and            paid their shares of  corresponding losses incurred by NERCO.            The  losses were  considerable, as  they were  throughout the            insurance industry at this  time.  Beginning as early  as the            fourth quarter  of 1982,  however, certain of  the plaintiffs            ceased  paying losses.14   There  was evidence  that some  of            the plaintiffs (in addition to Terra Nova, through Bailey, as            related  above) began to inquire  as early as  1982 about the            use  of MGAs  to  obtain business  (rather  than through  the            formation of direct relationships with primary insurers), and            about the underwriting methods used by the defendants.                      C.  The Present Lawsuit                            The Present Lawsuit                      In 1985,  some of  the plaintiffs retained  counsel                                            ____________________            14.  The  district court  made no  findings as  to  when each            individual plaintiff first refused to make payments on losses            incurred.   The plaintiffs  introduced evidence  which showed            the  last quarter in which  each plaintiff made  a payment to            the Defendants.   The  earliest was Kansa  Reinsurance, which            made  its last  payment in  the fourth  quarter of  1982; the            latest were nine plaintiffs including Uni  Storebrand, Sampo,            and the  seven companies  bound through  Aurora Underwriters,            all  of whom made their last payments some time in the fourth            quarter of 1986.                                         -25-            and  sought to  conduct a  preliminary inspection  of NERCO's            books pursuant to a provision in the Treaty Wordings allowing            a  right  of inspection  "at  all  reasonable times  for  the            purpose  of obtaining information concerning this contract or            the  subject matter  thereof."   NERCO  allowed  a seven  day            preliminary inspection  in the fall  of 1985,  but a  dispute            then  arose between  the  parties  concerning the  conditions            under which any further inspection was to be conducted.                      Evidently  dissatisfied with  the  results of  this            inspection, and  concerned about  the growing loss  ratios of            the SANS  Treaties, a  group of sixteen  plaintiffs (of  whom            seven are  no longer  parties) commenced this  action against            NERCO  on January  6, 1987.   They  alleged  that they  had a            contractual  right  under  the treaties  to  inspect  NERCO's            records, and  that although  they had previously  conducted a            seven  day inspection, a  further, more exhaustive evaluation            was  needed.    They  sought   an  order  compelling  a   new            inspection.   On February  13, 1987,  the  parties entered  a            voluntary stipulation allowing,  and establishing  procedures            for, a further inspection to be conducted by  Roy T. Ward and            four  of his employees.   On February 27,  1987, the district            court entered  an order  allowing the inspection  to continue            pursuant to that stipulation.                      Meanwhile,  in   late  1986  a   second  group   of            reinsurers that had  continued to pay  losses to NERCO  while                                         -26-            the  parties  discussed the  possibility  of  a commutation15            retained a reinsurance inspection firm, Palange & Associates,            to inspect  NERCO's books  and records.   The  inspection was            conducted in Boston in 1987.  Again, disputes arose as to the            scope  and  methods of  this  inspection;  however, no  court            action  was  required  to  resolve these  disputes,  and  Mr.            Palange completed his inspection in the spring of 1988.                      Following these inspections, on July  12, 1988, the            original  plaintiffs,  now joined  by  the  remainder of  the            present plaintiffs, moved to amend their  complaint.  The new            complaint omitted the substantive allegations of the original            complaint,  and deleted  the  plaintiffs'  request  that  the            treaties be enforced.   Instead, the plaintiffs asserted that            the  treaties  had  been  induced  by  fraud  and  should  be            rescinded.  They also asserted claims for breach of contract,            violation of Mass.  Gen. L. ch. 93A,    2, and  the Racketeer            Influenced and Corrupt Organizations Act ("RICO"), 18  U.S.C.               1961-1968.  Denying these allegations, defendants asserted            the statute  of limitations  as a defense  and counterclaimed            for recovery  under the  challenged treaties, and  for treble            damages, costs  and attorneys  fees under  Mass. Gen.  L. ch.            93A,   2.                                            ____________________            15.  A commutation  is a method of  terminating a reinsurer's            obligation  to pay  future claims  in return  for a  lump sum            payment.    It does  not  necessarily  involve  any claim  or            admission of wrongdoing by the reinsured.                                         -27-                      Prior  to  trial the  defendants moved  for summary            judgment on the statute of limitations issue, as well as on a            variety of  other grounds not  important here.   The district            court held a hearing on the matter on January 15, 1992.  In a            written  order  dated  January  16, 1992,  the  court  denied            summary judgment  on the statute of  limitations ground, with            no explanation.                      A  jury-waived trial began  on April 5,  1993.  The            statute of  limitations was raised  again during trial.   The            court  delayed ruling until it could "find out what the facts            were."  On the  twenty-second day of trial, the  judge stated            simply that "[i]t seems that there is no problem with Statute            of Limitations."   However,  the court appeared  to entertain            the issue again  two days later, accepting  a deposition into            evidence  after  defendants argued  it  was  relevant to  the            statute of limitations.                      The  trial  concluded  on  May 19,  1993,  and  the            district court  entered a  memorandum and  order  on June  7,            1993.  See 825 F. Supp. 370 (D.  Mass. 1993).  The court held                   ___            that  the defendants had induced the plaintiffs to enter into            the treaties  by means of fraudulent  misrepresentations, had            breached their contracts with  plaintiffs, and had engaged in            unfair and  deceptive trade  practices in violation  of Mass.            Gen. L.  ch. 93A.   The RICO count  was rejected.   The court                                         -28-            made  no  mention  of  defendants'   statute  of  limitations            defenses.16                      By  way  of  relief,  the  district  court  ordered            rescission   of  the  challenged  reinsurance  contracts  and            ordered defendants to repay to plaintiffs all sums plaintiffs            had  previously  paid  out  on losses  incurred  under  those            contracts with  credit for  premiums paid to  the plaintiffs,            plus  prejudgment  interest  at  12 percent.    Judgment  was            entered for the plaintiffs in June 30, 1993  in the amount of            $37,501,701.12   plus   postjudgment   interest  and   costs.            Following  several  motions to  amend  this  judgment, a  new            judgment was entered on  September 21, 1993 in the  amount of            $38,118,940.07,  which   listed  the   amount  due   to  each                                            ____________________            16.  The district  court also made no  specific resolution in            its  judgment  of  defendants'  counterclaims.    It  can  be            implied, however,  as defendants  state in their  brief, that            the court  dismissed the  counterclaims "sub silentio."   The                                                     ____________            counterclaims sought  to  hold plaintiffs  liable  for  their            unperformed reinsurance obligations imposed by  the treaties.            While it would  have been  better practice for  the court  to            have denied  the counterclaims expressly, its intent to do so            is apparent from its rescision of the treaties as having been            induced  by  defendants' fraud  and  breached  by defendants'            actions.  We have held, in parallel circumstances,  that such            elliptical judgments will be  deemed to adjudicate all claims            for Rule 54(b) purposes notwithstanding their failure to deal            specifically with  the counterclaims in question.   Joseph E.                                                                _________            Bennett Co. v. Trio Indus., Inc., 306 F.2d 546, 548 (1st Cir.            ___________    _________________            1962); see Fed. R. Civ.  P. 54(b); 28 U.S.C.   1291.   By the                   ___            same token, we hold  that defendants, having acted reasonably            by focussing their appeal on the district court's findings of            liability, did not  forfeit the  right to  seek relief  under            their  counterclaims  by  not expressly  appealing  from  the            district    court's    unspecified    dismissal   of    those            counterclaims.                                         -29-            individual plaintiff, as  opposed to the  lump sum stated  in            the  first judgment.   The defendants' filed  their notice of            appeal  from  the fraud,  contract,  and  ch. 93A  claims  on            October  19,  1993; the  plaintiffs'  filed  their notice  of            appeal from  the adverse  RICO finding  on November  2, 1993.            Motions relating  to the plaintiffs' requests  for attorney's            fees and costs are still pending in the district court.                      D.  The District Court's Findings                          The District Court's Findings                      In its  memorandum and order  of June 7,  1993, the            district  court  found  that  the defendants  made,  and  the            plaintiffs  relied upon,  "four material  representations" to            secure the  plaintiffs' participation  in the SANS  Treaties.            These were:                      1.   That Graham Watson would produce and                      underwrite    property    and    casualty                      facultative     reinsurance.         This                      ___________                      representation mean[t] that Graham Watson                      would   underwrite   reinsurance  on   an                      individual,   risk-by-risk,   certificate                      __________                      basis.                      2.   That  Graham  Watson  would  produce                      such reinsurance directly from system and                                       ________                      non-system original  insurers without the                      use   of   any   intermediaries.     This                      representation mean[t] that Graham Watson                      would  be a direct  writer of reinsurance                      from   the    original   insurer,   which                      reinsurance   cessions   would   not   be                      brokered.                      3.   That  the Hartford  Companies, along                      with  First State,  would be  the "system                      business"   original   insurers.     This                      representation mean[t]  that the Hartford                      Insurance  Group would  be the  source of                      "system   business."       The   Hartford                      Insurance Group  is made  up  of the  so-                      called   Hartford  Companies   and  First                               ___________________        _____                                         -30-                      State,   an   excess  and   surplus  line                      _____                      carrier.                      4.   That   Graham   Watson  would   seek                      facultative  reinsurance  business   from                      selected  primary companies,  rather than                                _______                      on    a    wholesale    basis.       This                      representation mean[t] that Graham Watson                      would  assume  reinsurance from  selected                      insurance   companies,  not   reinsurance                      companies  or  Managing  General  Agents,                      that  is,   from  risk-bearing  insurance                      entities.            825  F. Supp. at 376-77 (emphasis in original).  The district            court  found that  although  business had  been assumed  from            several  of the  Hartford Companies,  including First  State,            Hartford  Specialty Company,  Nutmeg  Insurance Company,  and            Twin City Insurance  Company, all of  this business with  the            exception of the First State business had  been classified as            non-system business.   The court  listed, as sources  of non-            system business, a number of primary insurance companies, but            also  a number  of brokers  and MGAs,  and found  that "[t]he            majority of  'non-system business' emanated from  Baccala and            Shoop,  a Managing  General Agent,  through the  intermediary            G.L.  Hodson."   Id.   After a  further discussion  of Graham                             ___            Watson's underwriting practices, the court stated:                           Upon a review  of the evidence,  the                      Court  finds that  Graham Watson  did not                      facultatively   underwrite,    that   is,                      underwrite   on    an   individual   risk                      certificate basis as represented,  any of                      the "system business"  nor virtually  any                      of  the   "non-system  business";  Graham                      Watson  underwrote all  "system business"                      and  virtually all  "non-system business"                      by   the    "automatic"   and/or   "semi-                      automatic" method of underwriting.                                         -31-                           The Court also  finds, on the  basis                      of the evidence, that  most of the  "non-                      system   business"  emanated   from  MGAs                      through  the  use  of intermediaries  and                      from  intermediaries themselves,  and was                      not  produced  from primary  risk-bearing                      insurance  entities  directly.   Although                      the plaintiff reinsurers were  aware that                      Baccala and Shoop, an  MGA, had ceded  to                      the  SANS   Treaties  approximately  five                      percent of the  total business during the                      first   year,   1980,  they   were  never                      apprised that, during  the ensuing  three                      years, Baccala  and Shoop would  cede the                      majority  of  "non-system  business"  and                      that other MGAs and  intermediaries would                      cede,  in  conjunction  with Baccala  and                      Shoop, most of the  "non-system business"                      to  the  SANS   Treaties.     "Non-system                      business" constituted, over the course of                      the SANS Treaties, approximately one-half                      of   the  total  business  ceded  to  the                      Treaties.            825 F. Supp. at 379 (emphasis in original).                      With respect  to the plaintiffs' fraud  claims, the            district court stated that the plaintiffs understood that the            term  "facultative," as used in  the SANS Treaties, was being            used  in   its  "standard  and   traditional  sense,  namely,            underwriting on a risk-by-risk  certificate basis."  It found            that NERCO was aware of this understanding on the plaintiffs'            part, "and was well aware that it, itself, was secretly using            the  term in  a special  sense without  ever disclosing  such            special  meaning"  to  the  plaintiffs,  and  that  this  was            therefore a knowing  misrepresentation.  As to  the breach of            contract claims, the district court found that NERCO  did not            keep, and never  intended to keep, its contractual promise to                                         -32-            underwrite  risks obtained  directly  from  selected  primary            sources on an individual risk-by-risk certificate basis.            II.       Preliminary Matters                      Preliminary Matters                      A.  Standard of Appellate Review                          Standard of Appellate Review                      When  reviewing the  findings of  a  district court            sitting  without  a  jury,  "'the  court  of  appeals  cannot            undertake  to decide  factual  issues afresh.'"   Jackson  v.                                                              _______            Harvard  Univ., 900 F.2d  464, 466  (1st Cir.  1990) (quoting            ______________            Reliance  Steel Prod. Co. v. National Fire Ins. Co., 880 F.2d            _________________________    ______________________            575, 576 (1st Cir. 1989)), cert. denied, 498 U.S. 848 (1990).                                       ____________            We  may set  aside findings  of fact  by the  district court,            whether  based  on  oral  or documentary  evidence,  only  if            "clearly erroneous," and with  due regard "to the opportunity            of the trial court to judge of the credibility of witnesses."            Fed. R. Civ. P. 52(a).  A finding is clearly  erroneous when,            "'although  there is  evidence to  support it,  the reviewing            court  on the entire evidence  is left with  the definite and            firm  conviction that  a mistake  has been committed.'"   See                                                                      ___            Anderson v. City of  Bessemer City, 470 U.S. 564,  573 (1985)            ________    ______________________            (quoting  United States v. United States Gypsum Co., 333 U.S.                      _____________    ________________________            364, 395 (1948)),  reh'g denied, 333 U.S.  869); accord Brown                               ____________                  ______ _____            Daltas & Assoc., Inc. v. General Accident Ins. Co. of Am., 48            _____________________    ________________________________            F.3d 30, 36 (1st Cir. 1995).                      Review  of  legal  rulings  is,  however,  de novo.                                                                 _______            "[I]f  the trial  court bases  its findings  upon  a mistaken                                         -33-            impression  of applicable  legal  principles,  the  reviewing            court  is  not  bound  by the  clearly  erroneous  standard."            Inwood Lab., Inc. v. Ives Lab.,  Inc., 456 U.S. 844, 855 n.15            _________________    ________________            (1982)  (citing United  States v. Singer  Mfg. Co.,  374 U.S.                            ______________    ________________            174,  194 n.9  (1963));  accord Cumpiano  v. Banco  Santander                                     ______ ________     ________________            Puerto Rico, 902  F.2d 148, 153 (1st  Cir. 1990).  "[T]o  the            ___________            extent  that findings  of  fact can  be  shown to  have  been            predicated upon, or induced  by, errors of law, they  will be            accorded diminished  respect on  appeal."  Dedham  Water Co.,                                                       __________________            Inc.  v. Cumberland Farms Dairy, Inc., 972 F.2d 453, 457 (1st            ____     ____________________________            Cir. 1992) (citing RCI Northeast Servs. Div. v. Boston Edison                               _________________________    _____________            Co., 822 F.2d 199, 203 (1st Cir. 1987)).            ___                      Application of these  principles is complicated  in            the  present  case  by  the district  court's  disregard,  in            several key  areas, of Rule 52(a)'s  further injunction that,            "[i]n all actions tried upon the facts without a jury . . . ,            the court shall find the facts specially and state separately            its  conclusions of  law thereon."   Fed.  R. Civ.  P. 52(a).            Rule 52(a) imposes  on the district  court "an obligation  to            ensure  that its  ratio decidendi  is  set forth  with enough                              _______________            clarity to enable  a reviewing court reliably  to perform its            function."   Touch v. Master Unit Die Products, Inc., 43 F.3d                         _____    ______________________________            754, 759  (1st Cir. 1995).   The court  made no  findings and            rulings whatsoever  on the important  statute of  limitations            issues  discussed  infra,  nor,   in  general,  did  it  make                               _____                                         -34-            subsidiary  findings  resolving disputed  evidence.   Thus in            finding that  defendants  had committed  fraud  in  promising            "facultative" reinsurance, the court stated that all  parties            understood  that  term   to  mean  risk-by-risk,   individual            certificate underwriting,  but made no attempt to distinguish            or explain  the great body  of evidence indicating  a broader            meaning.    Its finding  that  all plaintiffs  relied  on the            Placing Information is similarly  bereft of explanation as to            how this could be, given the absence of  proof of reliance in            a number of instances.                      These  omissions  have required  us  to remand  for            certain  additional findings.   Where  possible,  however, we            have  disposed of key issues or, if that was impossible, have            set out  a guiding legal standard for use on remand.  In sum,            we have endeavored to dispose of as much of the appeals as we            properly can at this juncture.                      B.  Choice of Law                          Choice of Law                      We dispose first of certain contentions raised with            regard to  legal standards.  Plaintiffs challenge defendants'            assertion that the SANS Treaties contain an express choice of            law provision providing for  the application of Massachusetts            law  to plaintiffs' common law fraud and contract claims.  In            fact, Article XVIII of the SANS Treaties merely provides that            if  a dispute  is  litigated, plaintiffs  will submit  to the            jurisdiction of  any court  of competent jurisdiction  in the                                         -35-            United States, and "all matters hereunder shall be determined            in accordance  with the law and practice of such court."  But            while  plaintiffs' point is well taken, they go on to concede            that "[i]n this case,  Massachusetts choice of law principles            dictate the application of  Massachusetts substantive law  to            plaintiffs' common law claims."  Given the parties'  (and the            lower  court's)  general  acceptance  of  Massachusetts  law,            albeit  on  different  theories,  and  in  the absence  of  a            preferable choice, we shall apply Massachusetts law except as            otherwise  noted.  See Bird  v. Centennial Ins.  Co., 11 F.3d                               ___ ____     ____________________            228,  231  n.5 (1st  Cir.  1993)  (accepting parties'  agreed            choice of law where there was a "reasonable relation" between            the litigation and the forum whose law had been selected).                      C.  The Burden Required to Prove Fraud                          The Burden Required to Prove Fraud                      The defendants argue  strenuously, and the district            court  stated, that  the  plaintiffs were  required to  prove            fraud  by "clear  and convincing  evidence."   The plaintiffs            respond  that under  applicable Massachusetts law  fraud need            not be shown by anything more than the ordinary preponderance            of  the  evidence  standard  applicable  to  civil  cases  in            general.   Review  of  Massachusetts law  indicates that  the            plaintiffs are right.17                                            ____________________            17.  Defendants  also  argue  that,  because  the  plaintiffs            adopted "clear  and  convincing evidence"  as the  applicable            burden of proof  in the  district court, and  did not  object            when defense counsel  stated their burden in those  terms, it            is  now too  late for  them to  contest the burden  of proof.                                         -36-                      In Callahan v. Westinghouse Broadcasting Co., Inc.,                         ________    ___________________________________            372 Mass. 582, 363 N.E.2d 240 (Mass. 1977), the Massachusetts            Supreme  Judicial Court  ("SJC") commented  on the  burden of            proof  applicable  to a  libel  action governed  by  Gertz v.                                                                 _____            Robert  Welch, Inc., 418 U.S.  323 (1974) and  New York Times            ___________________                            ______________            Co. v. Sullivan, 376  U.S. 254 (1964).  Recognizing  that the            ___    ________            Supreme  Court required  "clear  and convincing  proof" in  a            libel case, the SJC nonetheless noted that,                      the  words  "clear and  convincing proof"                      had  not  been  discussed  in  our  cases                      [other than in the libel context] because                      the phrase had  not been used theretofore                      in this Commonwealth.  Indeed, because of                      the vagueness of an intermediate standard                      of proof, we have  not looked with  favor                      on the use of such a standard.            Callahan, 372 Mass.  at 583, 363 N.E.2d at 241.   We have not            ________            found  any  Massachusetts  case  stating that  a  "clear  and            convincing"  standard should be applied in a common law fraud            case,  nor have  we found  any indication  that the  SJC has,            since Callahan,  looked with  greater favor on  introducing a                  ________            "clear and convincing" standard of  proof to cases where none            otherwise  exists.     See   Paul  J.  Liacos,   Handbook  of                                   ___                       ____________            Massachusetts Evidence 38-39 (5th ed. 1981) (stating that the            ______________________            burden  of  proof  in  Massachusetts  civil  cases is  "by  a                                            ____________________            However,  while  parties  may  stipulate to  the  facts  (and            perhaps even  to the  law, in different  circumstances), they            may not, by agreement or by some principal of acquiescence or            waiver,  compel  courts  to  follow a  clear  and  convincing            standard that is contrary to the governing law.                                         -37-            preponderance of the evidence"  and listing those few issues,            not  including fraud,  where a  higher standard  is required,            including  proof of a gift  causa mortis, contents  of a lost            will, irregularity  of official proceedings, and  malice in a            defamation action);  see also 9 John  Henry Wigmore, Evidence                                 ________                        ________            in  Trials at Common Law   2498 (Chadbourn rev. 1981) (noting            ________________________            that "clear  and convincing" standard is  commonly applied in            cases  of fraud, but failing to cite, in a comprehensive list            of   authorities,  any   Massachusetts  case   applying  this            standard).   We conclude, therefore,  that Massachusetts  has            not adopted  a "clear  and convincing" standard  in cases  of            fraud.                      D.  The Duty Owed to the Reinsurers                          The Duty Owed to the Reinsurers                      The plaintiffs argue, and the district court found,            that  the defendants were under  a duty to  the plaintiffs of            utmost good faith ("uberrimae  fidei").  The defendants refer                                ________________            to the same standard.  We agree  that a reinsurer like NERCO,            having  obtained by  treaty the  power to  impose significant            risks  and liabilities upon plaintiff retrocessionaires, owed            to  them  the utmost  good faith  in  its dealings  under the            treaties.  See generally Unigard Sec. Ins. Co., Inc. v. North                       _____________ ___________________________    _____            River Ins. Co., 4 F.3d 1049 (2d Cir. 1993).            ______________                      This means  that,  as the  district court  properly            recognized, defendants  owed plaintiffs a  duty "to  exercise            good faith and to disclose all  material facts."  In the non-                                         -38-            marine  context, however, a claim of fraud may not be founded            on innocent  misrepresentation  and concealment.   Thus,  the               ________            district court properly required the plaintiff to prove that                      the defendant made a false representation                      of a material fact with  knowledge of its                      falsity  for the purpose  of inducing the                      plaintiff  to act  thereon, and  that the                      plaintiff relied  upon the representation                      as true and acted upon it to his damage.            Kennedy v. Josephthal  & Co.,  Inc., 814 F.2d  798, 805  (1st            _______    ________________________            Cir.  1987) (quoting Danca v. Taunton Sav. Bank, 385 Mass. 1,                                 _____    _________________            8, 429 N.E.2d 1129, 1133 (1982) (citations omitted)).                      The standard for fraudulent concealment is similar:                      Except  with  respect  to  marine  risks,                      concealment exists and avoids  the policy                      where the insured has knowledge of a fact                      material  to the risk which honesty, good                      faith, and  fair dealing require  that he                      should  communicate  to  the insurer  but                      which  he  designedly  and  intentionally                      withholds.            9  George J. Couch, Cyclopedia  of Insurance Law    38:2 (2nd                                ____________________________            ed. 1985) (Couch).  Massachusetts' adherence to the same rule            is indicated in Century Indem. Co. v. Jameson, 333 Mass. 503,                            __________________    _______            504-05, 131 N.E.2d 767, 769 (Mass. 1956); see also Unigard, 4                                                      ________ _______            F.3d  at   1069  (holding  that  simple   negligence  in  not            disclosing a material  fact does not constitute  bad faith so            as to avoid a policy of reinsurance).            III.      The Fraud Claims                      The Fraud Claims                      We  turn  now  to  the  substantive  issues,   and,            initially, to the  fraud claim  which is pivotal  to all  the                                         -39-            district  court's  findings.    The district  court  saw  two            fundamental  issues in the case, both of them relevant to its            finding  of  fraud.    One was  "whether  Graham  Watson  did            underwrite  facultative reinsurance"  on the system  and non-                        ___________            system  business.    The  other was  "whether  Graham  Watson            produced   'non-system   business'  by   establishing  direct            relationships    with   primary,    risk-bearing,   insurance            companies."                      A.  "Facultative" Underwriting                          "Facultative" Underwriting                      Plaintiffs  argued, and  the district  court found,            that "the parties to the contract" (including, it would seem,            defendants themselves) "understood the  meaning of that  term            ["facultative"]   in  its  standard  and  traditional  sense,            namely, underwriting on a risk-by-risk certificate basis, the            classic  meaning  of  the  term."    825  F.  Supp.  at  382.            According   to  the  court,   "NERCO  knew"  that  plaintiffs            understood "'facultative'  in  its standard  and  traditional            sense of risk-by-risk  certificate underwriting and  was well            aware  that  it, itself,  was secretly  using  the term  in a            special sense without ever disclosing such special meaning to            the Plaintiff  reinsurers."   Thus, the court  concluded, the            defendants'  representation  that   the  business  would   be            underwritten  on a risk-by-risk  individual certificate basis            was "knowingly false when made."  Id.                                              ___                      1.  No Express Misrepresentation                          No Express Misrepresentation                                         -40-                      We hold that  these findings are clearly  erroneous            insofar  as  they  attribute  to defendants  an  implicit  or            express representation that they would engage exclusively  in            classic  risk-by-risk,  individual certificate  underwriting.            The  record is without evidence from which a court could find            that   defendants   represented   to  plaintiffs   that   the            facultative business  underwritten by Graham Watson  would be            limited to individual certificate, risk-by-risk underwriting.                      To be  sure, as the court found, there was evidence            that the overseas sub-brokers engaged to represent defendants            by their broker, G.L. Hodson, understood "facultative" in the            classic  risk-by-risk individual  certificate  sense.   Nigel            Huntington-Whitely,  the employee principally assigned to the            SANS  Treaty placements by  defendants' sub-broker, Sedgwick-            Payne,  testified  to  having  this understanding.    But  he            indicated that  it "may  have just  been an assumption,"  and            could not identify the source of his understanding beyond his            sense of what the term "facultative" might mean.  It was  not            established that the sub-brokers were told this by defendants            nor that prior to the initial (1980) Treaties the sub-brokers            communicated this view to  plaintiffs or to defendants during            negotiations.                      To  fill this gap,  plaintiffs point to Huntington-            Whitely's letter of June 24, 1981 (well over a year after the            Treaties  were entered  into), wherein  he states  in passing                                         -41-            that "Graham Watson is underwriting  each risk individually."            However, this statement clearly did not induce the plaintiffs            to  enter into  the 1980  and 1981  SANS Treaties,  given its            timing.   Moreover,  it is  arguable that  the semi-automatic            facilities, because they allowed Graham Watson's underwriters            to reject  individual risks, were  a form of  individual risk            underwriting and thus not  necessarily inconsistent with this            statement.                      Plaintiffs  also  point  to  the  1982  Anniversary            Information,  which  states  that,  on  non-system  business,            "Graham Watson  is  quoting  their  price  and  if  a  ceding            commission is required by the  original company, this is then            added to the premium required by Graham Watson."   Plaintiffs            argue  that  this  specifically  describes   individual  risk            negotiation.  However,  it could  just as easily  be read  to            refer to  Graham Watson  quoting a  price during the  initial            negotiations  leading to  the  formation of  a semi-automatic            facility.  Thus,  it is  not an explicit  promise to  perform            individual risk-by-risk certificate underwriting.   Moreover,            this  representation,  like  the  statement   in  Huntington-            Whitely's letter, was made  in 1981, and thus could  not have            fraudulently  induced  the plaintiffs  to participate  in the            1980 and 1981 SANS Treaties.                      Defendants'   chief   executive,   Graves   Hewitt,            testified  at  the  trial to  having  told  one  of the  lead                                         -42-            underwriters, Bailey, in 1979, about his dissatisfaction with            the method of using  a separate certificate as to  each risk,            and his intention,  in connection with the  SANS Treaties, to            use a single controlling facility for multiple risks, as  was            later  done by means of the semi-automatic MFCs.  Because the            district  court found  -- contrary  to Hewitt's  testimony --            that  defendants had not disclosed  their intent to use semi-            automatics,  we  must  assume  that it  did  not  credit that            testimony,  although nowhere  in its  findings did  the court            mention  and reject the testimony.   We do  not, in any case,            rely upon Hewitt's testimony  in determining that the court's            fraud  findings  premised  on  the  term  "facultative"  were            erroneous.                      Bailey  himself did  not attend  the trial  but was            deposed and  his deposition was read.   He did not describe a            meeting with Hewitt in  1979 nor any specific representations            having  been  made  to him  prior  to  the  execution of  the            Treaties  on the  character of the  facultative underwriting.            He testified  generally to "understanding" that Graham Watson            would assess and underwrite each risk separately, but did not            refer to any conversation or  occasion where any defendant so            promised.   Asked if he would  have considered semi-automatic            binding  authorities to be  facultative underwriting, he said            that "is not what I had intended and not what I had been told            from my own  recollection."  This was the closest  he came to                                         -43-            suggesting that he was  told by someone (defendants, brokers,            or  others?) that facultative meant what the judge found.  We            think  this  vague testimony,  which  makes  no reference  to            specific sources,  falls short  of supporting a  finding that            defendants  expressly  promised  to  engage  in  risk-by-risk            __________            underwriting only or knew that plaintiffs misunderstood their            intentions in this regard.                      2.    The Intended  Meaning  of  the Term                            The Intended  Meaning  of  the Term                      "Facultative"                      "Facultative"                      We similarly  hold  clearly erroneous  the  finding            that   defendants   "knew"    that   plaintiffs    understood            "facultative"  to  be  limited  to  risk-by-risk  certificate            underwriting.    There  is   no  evidence  of  statements  or            correspondence  by  plaintiffs  or their  representatives  to            defendants,  prior to  execution of  the slips  and treaties,            informing  defendants  that  the  plaintiffs  understood  the            meaning of facultative to be so limited.                       Of course, if the court properly could have found,            on the basis of the evidence, that the term "facultative" was            unambiguous, referring only  to individual certificate, risk-            by-risk underwriting,  then defendants would  be charged with            knowledge of that ordinary meaning.  However, as the evidence            clearly showed, that term, both standing alone and as used in            the   Placing  Information,   slips,  and   Treaty  Wordings,            encompasses  a variety  of  underwriting  methods, about  the            propriety of  which the  parties and their  experts disagree.                                         -44-            Whether or not  a term as  used by parties  to a contract  is            ambiguous is  a question  of law subject  to plenary  review.            ITT Corp. v.  LTX Corp., 926 F.2d 1258, 1261  (1st Cir. 1991)            _________     _________            (citations omitted);  see also  In  re Navigation  Technology                                  ________  _____________________________            Corp.,  880 F.2d  1491,  1495 (1st  Cir. 1989)  ("Contractual            _____            language  is  considered   ambiguous  where  the  contracting            parties  reasonably differ  as to  its meaning.").   However,            where a term is ambiguous, its meaning presents a question of            fact, see Commercial Union Ins. Co. v. Boston Edison Co., 412                  ___ _________________________    _________________            Mass.  545,  557,  591  N.E.2d  165,  172  (1992)  (citations            omitted),  a finding on which may only be reversed if clearly            erroneous. Fed. R. Civ. P. 52(a).                      As noted, the district court found that the parties            understood  the  meaning of  the  term  "facultative" in  its            "standard and traditional  sense, namely,  underwriting on  a            risk-by-risk  certificate basis."   If  by this  finding, and            others  like it, the district  court meant that  the term was            legally unambiguous,  being limited  in meaning to  only that            one type of underwriting,  it was wrong as  a matter of  law.            Expert  testimony  and  treatises  presented  by  both  sides            support  the  view that  the term,  as  used in  the industry            today,  has  been   broadened  beyond   its  classic   roots,            notwithstanding  plaintiffs'  insistence  that   the  classic            method is alone the proper one.                      Most likely  the court  did not  mean the term  was                                         -45-            unambiguous  as a matter of law, but rather concluded, on the            basis  of  all the  evidence, that,  as  used in  the present            circumstances,  it  should  be  given  the  limited   meaning            ascribed.18  Yet  the district court  offered no reasons  why            it gave  the term the  limited reading  it did.   Nor did  it            explain why it believed  defendants "knew" that plaintiffs so            restricted the term.   On the latter point,  it may have been            influenced  by testimony  from defendants'  principal, Graves            Hewitt,  who  said he  had as  good  an understanding  of the            London  insurance market as any American.  The judge may have            felt that,  possessing such  insight, Hewitt "knew"  that, as            some  English  witnesses  testified, "facultative"  would  be            understood to mean  risk-by-risk certificate underwriting  in            that market.   But absent evidence that  Hewitt actually knew            and  believed this,  such  a leap  would be  pure speculation            given Hewitt's own contrary testimony.                        Moreover,   English   treatises   introduced   into            evidence   by   plaintiffs  indicate   that,  notwithstanding            plaintiffs'  witnesses, the  reinsurance industry  in England                                            ____________________            18.  "When the  written agreement, as applied  to the subject            matter, is in  any respect uncertain or equivocal in meaning,            all the circumstances of the parties leading to its execution            may  be  shown for  the purpose  of  elucidating, but  not of            contradicting or changing its terms."  Affiliated FM Ins. Co.                                                   ______________________            v. Constitution  Reins. Corp., 416 Mass. 839, 842, 626 N.E.2d               __________________________            878, 880 (1994) (quoting Keating v. Stadium Management Corp.,                                     _______    ________________________            24  Mass. App. Ct. 246,  249, 508 N.E.2d  121 (1987) (quoting            Robert Indus.,  Inc. v. Spence,  362 Mass.  751, 753-54,  291            ____________________    ______            N.E.2d 407 (1973)), review denied, 400 Mass. 1104, 511 N.E.2d                                _____________            620 (1987).                                         -46-            recognizes types of  facultative reinsurance  other than  the            risk-by-risk  certificate variety.   A leading English writer            on  reinsurance,  Golding,  describes  in  his  authoritative            treatise   (introduced  by   plaintiffs)  various   types  of            facultative   reinsurance   other   than   the   risk-by-risk            certificate variety.   One variation Golding describes is the            so-called "cover in course of post."  He states:                                It  will be clear  that much of                      the  labour  involved in  the facultative                      method  is  connected  with  getting  the                      necessary  initials  on  the  slips.   In                      modern  practice  this  can   be  largely                      avoided  by the  system  of  what may  be                      called giving cover "in course of post" -                      - though the term nowadays extends to the                      use of telex communications as much as to                      the mail.    The reinsured  will  arrange                      facilities with a  number of  reinsurers,                      whereby  it may  issue  request notes  by                      post, for one or more  lines of a risk to                      be  reinsured,  as may  be  agreed.   The                      reinsurers will then hold covered each up                      to  the amount  of its  agreed  share and                      remains so bound, unless and until it has                      signified its declinature  "in course  of                      post".    As a  rule  a  limit is  fixed,                      within which this must be notified say 48                      hours  after  receipt,  though  sometimes                      this  is  extended up  to  as  much as  a                      fortnight to allow for possible delays in                      transmission.  If  no declinature is made                      within the period, the reinsurer is bound                      in  the ordinary  way.   The  system does                      save a  great deal  of work, and  is much                      favored by reinsureds  accordingly.   Yet                                                            ___                      it   may  be  emphasized  that  it  still                      _________________________________________                      remains facultative  reinsurance, for the                      _________________________________________                      reinsurer  is in no  way deprived  of its                      _________________________________________                      power  to  decline, even  though  it must                      _________________________________________                      accept responsibility in the meantime.                      ______________________________________            C.E. Golding, Golding: The Law and Practice of Reinsurance 42                          ____________________________________________                                         -47-            (K.V. Louw ed., 5th  ed. 1987) (emphasis supplied);  see also                                                                 ________            R.L. Carter, Reinsurance 234-35 (2nd ed. 1983) (detailing use                         ___________            of bordereau to report risks bound under the "cover in course            of post" method, which he also classifies as facultative).19                                            ____________________            19.  Golding also states:                      The  subject  of facultative  reinsurance                      w[ould]  not  be  complete  without  some                      reference  to  the  form  of  reinsurance                      called  a   "facultative  obligatory"  or                      "open cover," which is generally regarded                      as belonging to  the facultative  section                      of the business and  is often so  treated                      in the books of a reinsurer.                                An open cover is  a reinsurance                      arrangement under which the reinsured may                      at  its option  cede a  share of  certain                      defined risks, which share  the reinsurer                      is bound obligatorily to accept.  Such an                      arrangement thus partakes  partly of  the                      nature of a  facultative reinsurance  and                      partly of a treaty.   To the reinsured it                      is   facultative  because   cessions  are                      optional at its discretion.  . . . To the                      reinsurer the open  cover is more  in the                      nature of a treaty.  The obligation is an                      obligatory one and it  applies not to  an                      individual case  but  to all  cases of  a                      given class that may be ceded.  No matter                      how the  open cover may be  regarded in a                      reinsurer's  books, it  is clear  that it                      has  none  of  the  characteristics  of a                      facultative reinsurance and in particular                      it  lacks  the  fundamental feature,  the                      power,   inherent    in   a   facultative                      reinsurer,  to decline  a risk  if though                      fit.            Golding,  supra,  at  46-47.    The  open  cover,  as Golding                      _____            describes  it,  seems  somewhat  similar   to  the  automatic            facility,  except that  under the  open cover,  the reinsurer            lacks  the ability to cancel the contract on short notice, as            it may under the  automatic.  As the somewhat  anomalous open            cover is  "generally regarded"  as facultative, so  much more            might  the  automatic  facility  be  so  regarded,  since  it                                         -48-                      But  even ignoring  these indications  that English            custom and  practice  have gone  beyond  classic  facultative            methodology, it is the American,  not the English, usage that            seems  to  us key.   The  underwriters  in London  and Europe            contracted  in the  slips with  defendant NERCO,  an American            company, for reinsurance "classified by the Reassured [NERCO]                                      ___________________________            as   Property   and  Casualty Facultative   Assumed  Business                                          ___________            produced and  underwritten by  the Graham Watson  division of            Cameron  &   Colby,  Inc."    (Emphasis   supplied.)20    The                                            ____________________            explicitly includes a right to reject  risks by rejecting the            entire facility.  Automatics were, in any event, a minor part            of  defendants'  business,  semi-automatics  having  been the            predominant mode.            20.  At footnote 7 of its opinion, the court stated that this            language                      was  understood  by  the  parties  to the                      contract  as  providing   NERCO  with   a                      limited  discretion  in  classifying  the                      types of  reinsurance  and that  is  this                      Court's  interpretation  on the  basis of                      the evidence.            It is  unclear precisely what the  court had in mind  by this            statement.   There was  testimony that the  contract language            meant that NERCO had discretion to classify a particular risk            as  either a  property or  a casualty  risk; there  was other            testimony  that it  was  standard language  which gave  NERCO            discretion to  determine what business was  facultative.  The            plain  meaning of  the language  seems to  us to  allow NERCO            reasonable, though  not unlimited, discretion  to decide what            types of reinsurance fit  within the stated classification --            namely,  as  "Property   and  Casualty  Facultative   Assumed            business  .  . .  ."   Determining  whether the  business was            "facultative"  as  well  as  whether  it  was  "property"  or            "casualty" would all  be included.   See Commercial Union,  7                                                 ___ ________________            F.3d  at 1052 (citing Jiminez v.  Peninsular & Oriental Steam                                  _______     ___________________________            Navigation Co., 974  F.2d 221, 223 (1st Cir.  1992); Feinberg            ______________                                       ________            v. Insurance  Co. of  N. Am.,  260 F.2d  523,  527 (1st  Cir.               _________________________                                         -49-            facultative reinsurance NERCO  was to classify covered  risks            in  the  American,  not  the  English,  market.    NERCO  was            expressly delegated the right to "classify" the  reinsurance.            See supra  note 20.  In exercising  that right, NERCO was, of            ___ _____            course,  held  to  a standard  of  reasonable classification.            Salem Glass Co. v. Joseph Rugo, Inc., 343 Mass. 103, 106, 176            _______________    _________________            N.E.2d 30, 32-33  (1961) (where a  contract leaves a  certain            discretion or power in  the hands of one party, that party is            under  a  duty to  exercise  that  power reasonably);  accord                                                                   ______            Johnson v. Educational  Testing Serv., 754  F.2d 20, 26  (1st            _______    __________________________            Cir. 1985), cert. denied, 472 U.S. 1029 (1985).  Nonetheless,                        ____________            being  an   American  company  operating  here,  NERCO  would            obviously be  expected to  classify its business  pursuant to            American,  not English,  terminology.   Hence, to  the extent            there is  any difference  between the prevailing  English and            American  views  of  what  kind of  underwriting  the  market            regards as "facultative," the parties would have intended the            American interpretation to  control, absent evidence  of some            contrary intent.  Cf.  Hazard's Adm'r. v. New  England Marine                              ___  _______________    ___________________            Ins. Co., 33 U.S. 557, 564 (1834) ("Underwriters are presumed            ________            to know the  usages and customs of all of  the places from or            to which they make insurances.").                                            ____________________            1958)) ("In  construing a  contract, we must  give reasonable            effect  to all  terms  whenever possible.");  id. at  1052-53                                                          ___            (citing Liberty Mut. Ins. Co. v. Gibbs, 773 F.2d 15,  17 (1st                    _____________________    _____            Cir. 1985)  (where unambiguous, contract terms  must be given            their plain meaning).                                         -50-                      To  be sure,  plaintiffs'  experts  gave  testimony            tending  to show that the American market understood the term            "facultative  reinsurance"  to mean  risk-by-risk certificate            underwriting.  One  might argue that  the district judge  was            entitled to believe plaintiffs' experts over defendants' (who            testified  to the  opposite  understanding),21  and to  infer            that  the ordinary  meaning  of the  term "facultative"  was,            therefore,  the traditional  one of  risk-by-risk certificate            underwriting.                      But  the  evidence  that  the  term  "facultative,"            within  the  American market,  embraces  more  than just  the            individual risk  certificate method  is simply too  extensive            for the  court to have rejected.  Normally, of course, we are            bound by the district court's choice among competing experts.            But  it is hard to gainsay experts such as defendants' expert            James  Inzerillo, see  supra note  21, when  even plaintiffs'                              ___  _____            experts did not categorically deny the widespread use, within                                            ____________________            21.  Defendants'   experts   testified   that   "facultative"            included reinsurance underwritten  by the semi-automatic  and            related  methods.    One  of defendants'  experts  was  James            Inzerillo,   the   former   president   of   Munich  American            Reinsurance Co., the United States branch of Munich Insurance            Co., the  largest reinsurer in  the world. He  testified that            individual risk underwriting was "by no means"  the only form            of  facultative reinsurance, and that MFCs and semi-automatic            and  automatic  facilities  were  all  forms  of  facultative            reinsurance.  Moreover, he testified that the largest direct-            writing professional reinsurers in  the country all used such            facilities  in   their  facultative  operations.     None  of            plaintiffs/  experts categorically denied  the widespread use            of such facilities in facultative operations.                                         -51-            the  facultative  operations   of  American  reinsurers,   of            facilities  like the semi-automatics  and automatics  here in            issue.   Plaintiffs' experts did  not, in fact,  testify that            the ordinary meaning of the term in the American  reinsurance            industry  was limited to  individual certificate risk-by-risk            underwriting.   Rather they intimated that  this was what, in            their own opinion,  the term properly  meant or should  mean.            Yet, the question  is not  the abstract use  of language  but            whether NERCO    having discretion under the slips and Treaty            Wordings    could reasonably classify the semi-automatic  and            other  methods it used in its own operations as "facultative"            and whether it committed fraud when it did so.                      The best  approach to answering this  question lies            in the  realities of  industry practice.   Cf.  Affiliated FM                                                       ___  _____________            Ins., 416 Mass  at 845, 626  N.E.2d at 881 ("Where,  as here,            ____            the contract  language is ambiguous, evidence  of trade usage            is admissible  to determine the meaning  of the agreement.").            Plaintiffs' expert, Phelan,  conceded that American companies            commonly  used  facilities   similar  to  defendants'   semi-            automatics   and   automatics   within    their   facultative            departments.  He regarded this  as anomalous, and pointed out            practical considerations which  had led to that  development.            But while disapproving, he admitted  to the widespread use of            facilities  of  this  type  within  the  industry  under  the                                         -52-            facultative designation.22                      American  treatise  writers,  moreover,   like  the            English  writers  from whom  we  have  quoted, acknowledge  a            substantial,  even predominant,  modern trend towards  use of            facultative facilities similar to the semi-automatics here in            question.23    We  think  it is  substantially  beyond  cavil                                            ____________________            22.  Phelan testified, on cross-examination:                      Q:    Now you  said  in  response to  Mr.                      Ritt's  question,  if  I  understood  you                      correctly,    that    the    professional                      reinsurers  in  this  country   in  their                      facultative  departments  commonly  write                      semiautomatic  and  automatic  facilities                      and  call  them  facultative; isn't  that                      right?                      A:  Yes.                      Q:    And  you   have  testified,  if   I                      understand it, that there is nothing, per                      se,  wrong  with  doing  so;  isn't  that                      right?                      A:  That is correct.            23.  For instance, Langler, writing in America in the 1950's,            describes  an arrangement very much like the MFCs used by the            defendants, which he places squarely in the facultative camp.            He says,                                   Such facultative business as is now being                      done  by  Reinsurance  Companies  in  the                      main,  is   transacted  under  Agreements                      somewhat  similar to  the enclosed.   The                      offices   ceding   the  business   either                      prepare   binders   and/or   certificates                      supplied by the Reinsurer or, if equipped                      to  do so,  will furnish  reports of  the                      business  on an itemized bordereau, . . .                      . It is, however, the invariable right of                      the Reinsurer (or should  be) to ask  for                      the  cancellation,  within  5 days  after                      receipt  of advices,  of  any cession  or                      cessions submitted under the terms of the                      agreement,  otherwise the  reinsurance is                                         -53-                                            ____________________                      considered binding  on both parties.   It                      should  be  noted that  this cancellation                      privilege  is  worthless unless  itemized                      reports are received,  from which it will                      be  possible to  review the  cessions and                      extract  one  or  more  for  cancellation                      notice, if desired.            Willian  J.  Langler,  The  Business  of  Reinsurance  103-04                                   ______________________________            (1954).  Langler includes a sample contract for use with this            method, which contains the following clause:                                   Cancellation  Privilege.   The  Reinsurer                      _______________________                      binds itself to accept reinsurances ceded                      to  it  hereunder with  the understanding                      however that it may cancel any cession or                      cessions within five  days after  receipt                      of  advices  . .  .  upon  notice to  the                      Ceding Company.            Id.  at 106.  This  clause is not  dissimilar to cancellation            ___            clauses  found in the MFCs  used by the  defendants to assume            business.                      The district court quoted  from 2 Klaus Gerathewohl            et  al.,   Reinsurance  Principles  and   Practice  1   (John                       _______________________________________            Christofer La Bonte trans., 1980) in support of its view that            semi-automatic  and automatic facilities are not a legitimate            form of facultative reinsurance.   Gerathewohl does state, as            a general proposition,  that facultative reinsurance  "always            covers  a single  risk."   However, he  states, in  a section            entitled   "The   management   of   facultative   reinsurance            business,"  that "[i]n  order  to keep  the direct  insurer's            management  and  administration  operations  for  facultative            reinsurance  business  at  a  minimum,  it  is  essential  to            rationalize  -  ie  [sic]  standardize    -  all  operational            ___________            processes  as far  as  the individual  nature of  facultative            reinsurance  will allow."  Id. at 12 (emphasis added).  Among                                       ___            the   methods  used   "particularly  by   large  professional            reinsurance  companies  that  specialize in  the  facultative            business," id. at 13, is the following:                       ___                      Application   of    General   Terms   and                      Conditions  of   Facultative  Reinsurance                      containing general principles  applicable                      to all cessions  made.  Such streamlining                      and   standardization    of   facultative                      reinsurance    agreements    avoids   the                                         -54-            that, in  recent times,   the term  "facultative reinsurance"            includes methods,  in  addition to  traditional  risk-by-risk            certificate  underwriting, similar  in  concept to  the semi-            automatics.                      Given this body of evidence,  including plaintiffs'            expert's  concession  as to  the  classification,  we see  no            adequate basis,  from the term "facultative"  itself, for the            judge  to  infer   that  defendants  necessarily  knew   that            plaintiffs  would or should  interpret "facultative," as used            in  the slips and Treaty Wordings, as limited solely to risk-            by-risk certificate  underwriting.   While the latter  is the            original and classic method, see  Unigard, 4 F.3d at 1053-54,                                         ___  _______            other  "streamlined" forms  are  clearly  now being  utilized            within the  industry under the rubric  of "facultative," both            here  and abroad, including types in  which the reinsurer can            be bound on individual risks by the reinsured acting pursuant            to  the  terms of  a general  authorizing  contract.   Such a                                            ____________________                      necessity  to  negotiate  the  terms  and                      conditions  on  each individual  case and                      also  excludes  possible  cases of  doubt                      owing   to   the   absence   of   express                      stipulations.            Id.  at 14-15.  Thus, Gerathewohl cannot stand as support for            ___            a definition  of facultative  underwriting that  excludes all            but   individual   risk-by-risk   negotiation.      Moreover,            Gerathewohl  is  a  German   author,  writing  for  a  German            reinsurance company.  His views, while probably authoritative            in that context, cannot be taken  as authoritative over those            of writers  more intimate with  the common  practices of  the            American reinsurance market.                                         -55-            contract requires  the reinsured  to report the  placement of            the  reinsurance to the reinsurer via a bordereau; and it may            give the reinsurer the right,  within a specified time frame,            to  reject   any  particular  risk  thereafter       but  not            necessarily  ab initio.   The  semi-automatics in  issue here                         _________            were designed  along these lines.   Facilities employing this            method were developed  to offset the paperwork and high costs            associated with classic  certificate facultative  reinsurance            individually   negotiated  in   advance  on   a  risk-by-risk            basis.24     The  hallmark  of   facultative  reinsurance                evaluation   of  each  risk  separately  by  the  reinsurer's            underwriter    is  sought to be preserved  by maintaining the            right  to  cancel  after the  fact.    Although  a window  of            exposure  is  created during  which  the  reinsurer is  bound            without his consent on what the latter may later decide is an            unacceptable risk,  the potential for damage  is minimized by            the  relative  shortness  of  the exposure  and  by  contract            conditions which  prevent  the  reinsured  from  binding  the            reinsurer to  predescribed types of risks  the reinsurer does                                            ____________________            24.  The  First  State  reinsurance, as  the  district  court            found, fell within the automatic and/or semi-automatic method            of  underwriting.    See supra  section  I.B.2.    The record                                 ___ _____            supports that  finding, in the  sense that the  practices and            understanding between  First  State and  Graham  Watson  were            generally  analogous  to  those under  the  formalized  MFCs,            although  the close  employment  settings may  have indicated            greater de facto underwriting control.                    ________                                         -56-            not wish to cover.25                      We  conclude that there  is insufficient support in            the record for the court's  key fraud finding that defendants            knowingly   misrepresented  to  plaintiffs  that  they  would            receive  one type  of reinsurance  (the  classic risk-by-risk            certificate form  of facultative), while intending  all along            to provide another type  (semi-automatic and automatic).  The            evidence  does,  indeed,  support  the court's  finding  that            defendants intended to supply reinsurance underwritten by the            semi-automatic  and (to  a  minor degree)  automatic  methods            (although  not   to  the   complete   exclusion  of   classic            facultative, a small amount of which was also produced).  But            the record  does not support the finding  that the defendants            knew that the plaintiffs expected to receive only the classic            risk-by-risk certificate form of facultative reinsurance, nor            does  it support  the  finding that  defendants made  knowing            misrepresentations with respect to the term "facultative".                      3.  No Concealment                          No Concealment                                            ____________________            25.  The   district   court    found   that    semi-automatic            underwriting   differed   from   the   classic   risk-by-risk            facultative method  in that  "the 'right to  cancel' and  the            'right to reject' are effective only at the time the right is                                                 ___________            exercised by  the reinsurance underwriter and  well after the                                                                _____            reinsured  risks had attached  to the SANS  Treaties."  These            rights were  not effective ab initio.  But this appears to be                                       _________            a  price the  industry  has  been  willing  to  pay  for  the            streamlined operation,  as Golding notes, see Golding, supra,                                                      ___          _____            at  42 ("Yet  it  may be  emphasized  that it  still  remains            facultative  reinsurance,  for the  reinsurer  is  in no  way            deprived  of its power to decline, even though it must accept                                               __________________________            responsibility in the meantime.")            ______________________________                                         -57-                      Before leaving this  subject, we shall consider  an            alternate  theory  of   fraud  based  on  use  of   the  term            "facultative," a  theory which, arguably, might  enable us to            uphold the district court's result.                        Defendants  doubtless  knew  that  the  streamlined            forms of  facultative underwriting  they intended  to provide            under  the SANS Treaties were not the same as the traditional            form of facultative underwriting.   Graves Hewitt's testimony            indicated as much.  He testified that most of the facultative            business   in  his   company's   NERFAC  division   had  been            underwritten  in the  classic individual  certificate manner.            He  wanted  Graham Watson  to  switch  to the  semi-automatic            method  in  order to  get rid  of  the paperwork  and expense            associated  with  the  classic  method.26   The  record  also            bears  the inference (assuming, as we  infer, supra, that the                                                          _____            court discredited  Hewitt's  testimony that  he  so  informed            Bailey in  1979)  that defendants  not  only did  not  inform            plaintiffs     or their own sub-brokers    of their intention                                            ____________________            26.  Hewitt testified that when he approached Bailey in 1979,            he did so intending to short circuit the  classic facultative            arrangements which NERFAC was using because "we had mountains            of paper to  file . . . .  I  made it clear to  Ralph we were            not interested in doing business that way."  The court, as it            was entitled to, apparently rejected Hewitt's testimony.  (If            accepted, it  would have  seriously undermined any  theory of            intentional  misrepresentation.)    The  testimony  at  least            indicates  that  Hewitt was  well  aware  that the  MFCs  and            accompanying  modes  of underwriting  were  in  some sense  a            departure  from past  practice. There  was evidence  of their            occasional  use by NERFAC in  the past, but  most of NERFAC's            underwriting was by the traditional facultative method.                                         -58-            to streamline their  underwriting, but kept this  information            to  themselves.    Does  it  follow  from  this  that,  while            negotiating the  SANS Treaties, defendants  designedly failed            to volunteer  to plaintiffs  facts  material to  the risk                i.e.,  their  intention  to  use  this  type  of  facultative                                                    ____            underwriting     "which honesty, good faith  and fair dealing            require[d] that [they] should communicate to the insurer"?  9            Couch   38:2.                      Although argued by plaintiffs, the above theory was            not  adopted by the district court.  Instead, the court found            that   defendants  had   misled  plaintiffs  by   making  the            "knowingly    false"    representation   that    "reinsurance            underwriting   would   be    individual   risk    certificate            underwriting."   While there  is insufficient  record support            for such an express misrepresentation, it can be  argued that            defendants, being under  the duty to exercise the utmost good            faith, Unigard, 4 F.3d at 1066, were required to disclose, as                   _______            a fact  material to the  risk, their proposed  utilization of            streamlined facultative underwriting procedures  going beyond            the traditional method.                      Couch states:                      In effecting a  contract of  reinsurance,                      it is incumbent upon the original insurer                      to communicate to the reinsurer all facts                      of  which  it  has  knowledge  which  are                      material to the risk, and where it states                      as  a fact something  untrue, with intent                      to deceive,  or where  it  states a  fact                      positively as true  without knowing it to                                         -59-                      be true, and which tends  to mislead, the                      policy is avoided where such statement or                      fact materially affects  the risk;  also,                      any  undue   concealment  or  intentional                      withholding  of  facts  material  to  the                      risk,  which ought in  good conscience to                      be communicated by the  original insurer,                      avoids  the  contract, without  regard to                      whether the knowledge or information with                      respect to material facts was acquired by                      the   original   insurer  previously   or                      subsequently  to  the   writing  of   the                      original contract.            19 Couch   80:77.  While the above speaks of the relationship            between  original insurer  and reinsurer,  we think  the same            general   principles  apply   between   a   retrocedant   and            retrocessionares in a reinsurance treaty.  The question boils            down to whether a  failure to disclose plans to  deviate from            traditional risk-by-risk underwriting,  should be  considered            "undue  concealment  or  intentional  withholding   of  facts            material  to the risk, which  ought in good  conscience to be            communicated. . . ."   Id.  We answer in the negative for two                                   ___            reasons.                      First,  in  determining   what  information  is  so            material as to require disclosure by  the insured sua sponte,                                                              __________            courts recognize that the insured need not disclose "what the            insurer  already knows or ought  to know."   9 Couch   38:15.            It is  said that  "[a]  minute disclosure  of every  material            circumstance is  not required."   Puritan  Ins. Co.  v. Eagle                                              _________________     _____            S.S. Co., S.A., 779 F.2d 866, 871 (2d Cir. 1985).            ______________                      Ordinarily the insured is not required to                      make  more than  a  general statement  of                                         -60-                      facts, and is not expected to go into the                      details about which the insurer manifests                      no interest and makes no inquiry . . . .            9  Couch   38:58.  There is a "wide distinction . . . between            [the  insured's  duties in]  those  cases where  there  is no            inquiry  and  those where  questions  are  propounded by  the            insurer."  Id.                       ___                      Here there  is no indication that  plaintiffs asked            defendants during the negotiation  of the first SANS Treaties            to  describe  what  types  of  facultative underwriting  they            proposed  to  engage  in.    To the  contrary,  the  executed            contracts   expressly   allowed   defendants   a   reasonable            discretion in  this regard.   And as we  have just  held, the            type  of underwriting  methods they  utilized, while  not the            classic form of facultative reinsurance, fell within industry            parameters.                      The  parties here  were of  equal power  and highly            knowledgeable.  The slips and Treaty Wordings were negotiated            by  and  between  sophisticated   reinsurance  professionals.            Without first being asked  by the other party, one  would not            expect defendants to volunteer a plethora of details on their            proposed  underwriting practices.   Matters  would have  been            different had defendants  affirmatively misrepresented  their            intended underwriting practices or given  incomplete, evasive            or incorrect  answers to questions asked.  We see no basis to            infer "undue  concealment" from  their  failure to  volunteer                                         -61-            further    information    about   facultative    underwriting            characteristics where, for all  that appears, the subject was            not broached.                      The  slips,  as said,  were  worded so  as  to vest            discretion in NERCO as  to the business it would  classify as            "facultative," indicating a willingness  to leave this choice            to  NERCO.  As previously discussed, NERCO's choice had to be            reasonable  and exercised in  good faith.   Salem  Glass, 343                                                        ____________            Mass. at 106, 176 N.E.2d  at 32-33; Johnson, 754 F.2d at  26.                                                _______            But, within those  limits, the decision  was left in  NERCO's            hands.    To say  that  NERCO  had  a  duty to  volunteer  to            plaintiffs, unasked, the nature  of its proposed  facultative            underwriting facilities and, in  effect, secure their advance            approval, goes  beyond the parties'  bargain as written.   If            plaintiffs  had wished  to limit  defendants to  a particular            facultative  method,  that   requirement  should  have   been            inserted in  the contract.  It  was not.  The  duty of utmost            good  faith should  not enable  a party, whose  bargain later            turns  sour,  to  expand the  terms  of  an original,  fairly            bargained  contract.27     Given   the  equal   strength  and                                            ____________________            27.  To argue  that the plaintiffs'  underwriters were lulled            into not asking because they did not  understand the American            meaning of  "facultative"  is  surely  to  underestimate  the            acuity of the London  underwriters who write insurance around            the world.   As  already mentioned, English  authorities like            Golding, supra,  indicate that,  even in the  British market,                     _____            streamlined  methods  of  facultative underwriting  are  well            known.   But assuming different  considerations in reinsuring            risks in other  parts of the world, underwriters are expected                                         -62-            sophistication of the parties, and the fact that underwriting            considerations  now in  dispute were  such obvious  topics of            inquiry  had  plaintiffs wanted  to  know  more, we  are  not            convinced that  the  record  establishes  that  the  intended            methods  of proposed  facultative underwriting  were material            items of the type  defendants were required, without inquiry,            to disclose.                      However, even if the materiality of the information            were  such that  defendants should  have volunteered  it, the            record  lacks evidence  from which  to find  that defendants,            recognizing its materiality, withheld it  deliberately rather            than through  oversight.  Claims in  fraud against non-marine            reinsurers  cannot  rest  on  a  showing  of  mere  negligent            concealment.  Unigard, 4  F.3d at 1069.    The semi-automatic                          _______            and like  methods employed  were, as above  indicated, within            accepted  parameters of  facultative classification,  and the            contract left their use to defendants' discretion.   Plans to            use  such  facilities  were  not  so  abnormal  as  to  imply            fraudulent intent from the mere fact  of non-disclosure.  Any            argument  that  plans  to   use  semi-automatics  had  to  be            disclosed because that method  of underwriting was especially            risky is belied by  the absence of evidence linking  the SANS                                            ____________________            to  seek information  as to  the terms  and practices  in the            insured's  market  if  they  are interested.    Cf.  Hazard's                                                            ___  ________            Adm'r., 33  U.S. at 564  ("Underwriters are presumed  to know            ______            the usages  and customs of all of the places from or to which            they make insurances.").                                         -63-            Treaty losses with the  method of underwriting used.   To the            contrary,  defendants presented evidence  which, if believed,            could indicate that  the losses under the  Treaties were less            than  the  industry  averages  for  the  period.28    It   is            undisputed, as the judge stated, that the market in which the            losses  occurred  was  "disastrous" generally.    Substantial            contrary  evidence   was  not   introduced,  nor   was  there            substantial evidence of large Treaty  losses from risks of  a            type that would likely not have been reinsured under the more            deliberate  classic  facultative  procedures.    We  find the            record inadequate  to support  a finding that  in failing  to            disclose  their  plans  to  use  semi-automatic  and  related            underwriting  methods, defendants were acting with fraudulent            intent.                      We  thus  reject,   as  an  alternative  means   of            affirming   the  court's  "facultative"  fraud  finding,  the            fraudulent withholding  theory above discussed.   We conclude            that  the  court clearly  erred to  the  extent it  based its            finding  of  fraud  on  defendants' promise  to  produce  and            underwrite "facultative" reinsurance.29                                            ____________________            28.  Cf.  Unigard, 4  F.3d at  1054 (noting  that "in  recent                 ___  _______            years, the  reinsurance market  has witnessed an  increase in            participants  and  a decline  in  profitability  due to  huge            environmental losses")            29.  For reasons set out in our discussion of the plaintiffs'            contract  claims,  infra,  we  reject  the  district  court's                               _____            determination of fraud  insofar as based on its  finding that            defendants did  not, in  fact, "produce" or  "underwrite" the                                         -64-                      B.  Risks Obtained Directly from Primary Insurers                          Risks Obtained Directly from Primary Insurers                      The district court's fraud determination rests also            on  findings  of  misrepresentations  in  the  1979   Placing            Information  concerning  Graham  Watson's  intent  to  obtain            reinsurance  directly from selected  primary insurers without            intermediaries.   The court found that  (1) NERCO represented            that it  would "produce  'non-system business'  from primary,            risk-bearing, insurance  companies  directly"; (2)  that  "in            fact,  it  produced  most  of such  business  from  [Managing            General    Agents]    through    intermediaries   and    from            intermediaries  themselves,  and  yet  never  disclosed these            material  matters  to  the  Plaintiff reinsurers  as  it  was            required  to do"; (3) that plaintiffs had put their trust and            confidence in, and entered into the SANS Treaties in reliance            upon,  the foregoing  representations  (as well  as upon  the            supposed  representation  of   individual  risk   certificate            underwriting,   rejected  above);   (4)  that   the  inducing            representations  to produce  and underwrite  reinsurance from            selected  primary sources,  and by  a direct  approach rather            than through intermediaries, "were knowingly false" and "were            not  kept  by  NERCO  nor  did  NERCO  intend  to  keep  such            promises."                      Two  complementary  theories   emerge  from   these                                            ____________________            reinsurance, but rather improperly delegated those duties  to            others.                                         -65-            findings.   First,  that defendants  never intended,  when in            1979  they  wrote  and  circulated  the  Placing  Information            containing  the challenged  representations,  to live  up  to            them.   Second,  that when  later, during  the course  of the            Treaties,   it  became  apparent   that  "direct"  non-system            business was unavailable, and defendants decided to seek non-            system business through intermediaries, they did not disclose            "these material matters, as [they were] required to do."                      1.  Fraud in the Inducement                          Fraud in the Inducement                      The   first  theory   amounts   to  fraud   in  the            inducement.   While the misrepresentations were of intentions            as  to a  course  of action  in  the future,  the  deliberate            misstatement of present intentions can constitute fraud.                      Present intention as to a future act is a                      fact.  It is  susceptible of proof.  When                      such intention  does not exist, .  . . it                      is a misrepresentation of a material fact                      . . . .   The  statement of  fact  as  to                      present intention of the defendant, being                      susceptible of actual knowledge and being                      a fact alleged to have been false, may be                      made  the  foundation  of an  action  for                      deceit.            Feldman  v. Witmark,  254  Mass. 480,  481-82,  150 N.E.  329            _______     _______            (1926),  quoted in Barret Assoc.,  Inc. v. Aronson, 346 Mass.                     _________ ____________________    _______            150,  190 N.E.2d  867, 868  (1963).   It is true  the Placing            Information  was   never  incorporated  into   the  contracts            (consisting  of   the  slips  and  Treaty   Wordings).    But            defendants  prepared and  circulated the  Placing Information            specifically  to  induce   persons  and  entities  like   the                                         -66-            plaintiffs  to  enter into  the  Treaties.   Knowingly  false            material  statements  therein  inducing  reliance   would  be            actionable fraud.30                      Defendants respond that  the representation in  the            Placing  Information  of an  intention  to  "develop a  close            working  relationship with  selected  primary companies"  and            related  statements  were   accurate  reflections  of   their            intentions  when made.   In  support of  this, they  point to            evidence  of their  efforts after  the Treaties  were entered            into  to   develop  a  working   relationship  with   primary            companies.  They  also argue that at all times  they did have            an ongoing  direct relationship with First  State.  Utilizing            brokers and  MGAs to provide NERCO  with reinsurance business            was said to  have occurred  only after it  was apparent  that            these earlier, sincere efforts had failed.                      But the court was entitled to find otherwise, as it            did.  Anderson, 470 U.S. at 573-74 (if evidence is subject to                  ________            more than one reasonable interpretation, it cannot be clearly            erroneous).    Before  the Placing  Information  was written,            there was  evidence that NERCO commonly  used intermediaries.            Statements by  defendants' witnesses at trial  and in certain            of defendants'  planning documents  issued prior to  the SANS            Treaties suggest an  intention to  continue to do  so in  the                                            ____________________            30.  Defendants challenge  the district court's  finding that            all  plaintiffs  relied  on  these  misrepresentations.    We            discuss reliance in the following section.                                         -67-            Graham Watson operation.   And defendants' efforts, after the            Treaties were in place, to secure non-brokered business could            be found to be  predictably ineffectual, further suggesting a            lack of intention to secure the direct business described  in            the   Placing   Information.      The   Placing   Information            representations,  it  might  be inferred,  more  reflected  a            calculated  effort to  entice  plaintiffs to  enter into  the            Treaties than honestly  to project defendants' real  business            plans.  While susceptible of another construction, the record            adequately  supports the court's finding that representations            in  the  Placing Information  as  to  Graham Watson's  direct            writing intentions were knowingly misstated.                      Defendants argue  that even  though NERCO  may have            used   intermediaries,  it  nonetheless   complied  with  its            representation  that  it   would  develop  a  close   working            relationship  with primary companies.   Defendants  point out            that the reinsurance it wrote with the  aid of intermediaries            came,  for  the  most  part,  from  highly  regarded  primary            insurance companies.  They also argue that the intermediaries            enabled them  to develop  relationships with  these companies            that might, in time,  become "direct."  But the  court, as it            did,  was  entitled  to   read  the  Placing  Information  as            inconsistent  with the securing  of business  through brokers            and MGAs.   The Placing  Information says, for  example, that            "[f]aculative   reinsurance    emanating   from   reinsurance                                         -68-            intermediaries will continue to be written separately through            NERFAC."   While defendants seek to place a different meaning            on this, the  court was entitled to read this  as saying that            business through  intermediaries  would  not  be  handled  by            Graham Watson.   And  there were other  statements supporting            the same impression.                      The court was entitled  to conclude that there were            significant  differences  between  a   "direct"  relationship            between  NERCO   and   selected  primary   insurers   and   a            relationship by  brokers and  MGAs.  These  differences could            affect the quality of the business, at least in some people's            minds, and might  have caused some plaintiffs,  had they been            aware  of  defendants'  actual  plans,  to  reevaluate  their            decision to participate in the SANS Treaties.  In the case of            business  obtained  through  MGAs,  for   instance,  the  MGA            underwrote the risk  for the primary  insurer (as opposed  to            the  underwriting  being  performed  by  the  primary insurer            itself);   communications,   premiums,   and  reporting   and            accounting documents were routed through the broker.  The MGA            was not  at risk should an actual loss arise.  Bailey, a lead            underwriter, strenuously objected to business underwritten by            intermediaries, regarding it as of lesser quality.  The court            was entitled to believe that the non-system business provided            through Baccala and Shoop and others was materially different            from the  business represented  in  the Placing  Information.                                         -69-            We,  therefore,  affirm  the  district court's  finding  that            material and  knowing  misrepresentations were  made  in  the            Placing Information in 1979.                      2.  Concealment                          Concealment                      The court  also found  that NERCO "never  disclosed            these material matters to the Plaintiff reinsurers as  it was            required to do."   This appears to  be a finding that,  while            the  Treaties were in  effect, NERCO violated  its good faith            duty  to  disclose  to   plaintiffs  matters  coming  to  its            attention material to  the risk     most notably its  growing            use   of  intermediaries  for  non-system  business  and  its            abandonment of the  plans set out in  the Placing Information            to establish direct relationships with primary insurers.  See                                                                      ___            Unigard,  4 F.3d  at  1069.   This  trend, however,  was  not            _______            totally unannounced  by defendants.  In  the 1981 Anniversary            Information,   defendants   revealed   that,   although   the            preponderance  of that  year's  business was  system business            from First  State, a "relatively small proportion of the non-            system business had been  written on an excess of  loss basis            emanating  from Baccala  and Shoop  Insurance Services."   At            this  time,   Bailey was  already well  aware that  NERCO was            receiving the Baccala and Shoop business.  He objected to it,            but  finally went along for that  year.  Because Bailey was a            lead  underwriter,  this  conceivably  (although  we  do  not            decide)  put all  the plaintiffs  for whom  he was  acting on                                         -70-            notice that more  such business could  be anticipated in  the            following year,  yet  neither he  nor  anyone else  took  the            simple  precaution of  inserting  a prohibition  against this            type  of business in the renewal slips for 1981 and following            years.                      The district  court dismissed the  1981 Anniversary            Information disclosure in the following finding:                      Although  the  Plaintiff reinsurers  were                      aware that Baccala and Shoop, an MGA, had                      ceded to the SANS  Treaties approximately                      five percent of the total business during                      the  first  year, 1980,  they  were never                      apprised that, during  the ensuing  three                      years,  Baccala and Shoop  would cede the                      majority  of  "non-system  business"  and                      that other MGAs and  intermediaries would                      cede,  in  conjunction  with Baccala  and                      Shoop, most of the  "non-system business"                      to the SANS Treaties.            This  finding  does  not  explain, however,  why  Bailey  and            others,  once on notice that business was being accepted that            was contrary  to representations in the  Placing Information,            did  not  continue  to  protest  and  try  to  head  off  the            acceptance  of further  such business.   Moreover,  the court            made  no reference  to  other evidence  that  certain of  the            plaintiffs may  have learned a considerable  amount about the            nature and source of defendant's business during  the life of            the  SANS  Treaties.     Such  evidence  is  relevant,  under            discovery principles, to the various statutes of limitations,            including the three year  fraud statute, infra.  It  may also                                                     _____            be substantively relevant to plaintiffs' fraud claims and the                                         -71-            recovery rights  of individual plaintiffs.   Although we have            sustained  the  district  court's  finding   that  defendants            deliberately  misstated  their  business  plans  in  1979, if            certain plaintiffs renewed their annual participations in the            SANS Treaties even after  becoming aware that defendants were            using intermediaries and lacked "direct" business, this could            affect their right  to recover in fraud for subsequent Treaty            business, and might conceivably cast doubt as  to their right            to  recover at all, on some theory of acquiescence or waiver.            These matters require  the making of  further findings as  to            what  information  became  known   to  whom,  and  when,  and            determination  of  the legal  effect  of  any such  knowledge            and/or notice.                      Therefore, although we affirm the  district court's            finding  that  knowing misrepresentations  were  made  in the            Placing Information, we direct that reconsideration  be given            on  remand  to  the  legal significance  of  the  information            revealed in  the 1981 Anniversary Information,  and any other            information the court finds  was subsequently received by the            plaintiffs, or  some of  them, as it  relates to  plaintiffs'            rights  to abandon  their reinsurance  obligations under  the            SANS Treaties,  and recover damages for  losses already paid.            In considering  such matters, the district  court should take            into account, among other  things, defendants' duty of utmost            good faith, the  identity of those plaintiffs affected by the                                         -72-            particular  information,  the legal  effect on  plaintiffs of            information possessed  by Bailey because of  his special role            as  a lead underwriter, and  the fact that  the Treaties were            renewable annually.   The district court  did not discuss  or            make findings on these matters.  So as to leave a clear field            on   remand,  we   vacate   (without,  however,   necessarily            disapproving)  and  leave  for   further  evaluation  by  the            district  court,  the  court's  finding   that  NERCO  "never            disclosed these material matters to the plaintiff reinsurers,            as it was required  to do."  However, we  affirm the district            court's   finding   that   the   defendants'   made  material            misrepresentations in the Placing Information regarding plans            to obtain business directly from primary insurers and related            matters.                      On  remand it will also be  necessary for the court            to consider exactly  which of the SANS Treaties were infected            by the  misrepresentations made in  the Placing  Information.            This question may be  affected not only by which  information            came to what plaintiffs during the term of the SANS Treaties,            but  also by  the fact  that the  business produced  by First            State was  obtained directly, without the  involvement of any            intermediary.    No part  of  that  business, therefore,  was            seemingly affected by these misrepresentations although we do            not  foreclose the issue.  In  addition, because the district            court  made  no subsidiary  findings  concerning the  various                                         -73-            arrangements  under  which Graham  Watson  assumed non-system            business,    we cannot  tell  whether  all  of that  business            involved the use of brokers and/or intermediaries, or whether            some  portion  of  it  was  obtained  directly  from  primary            insurers.   On remand,  the district  court should  take into            account  all  such  issues  in determining      assuming  the            statutes of limitations and other matters do not stand in the            way of recovery    what relief to provide.                      C.  Reliance                          Reliance                      The district court properly listed reliance as  one            of the  elements of  a common law  fraud under  Massachusetts            law.  825 F. Supp. at 380 (stating that plaintiffs must prove            that they "relied upon that representation as true and  acted            upon it to their detriment").   The court then found that the            representation that defendants would obtain business directly            from  primary insurers was "made  by NERCO with the intention            of inducing the Plaintiff reinsurers  to enter into the  SANS            Treaties, and,  in reliance on  said . .  . representation[],                            ______________            the Plaintiff reinsurers did enter into  the SANS Treaties to            their detriment."   825 F. Supp. at 383  (emphasis supplied).            The court  made no  subsidiary findings which  would indicate            what  evidence  it credited  in finding  that  all of  the 32            plaintiffs31 relied.                                             ____________________            31.  Thirty-two  being the  number  of plaintiffs  before the            district court at the time it rendered judgment.                                         -74-                      Defendants  challenge  this  finding, pointing  out            that a majority of the plaintiffs failed to present any proof            whatsoever that  they had  individually read and  relied upon            the Placing  Information.  Underwriters for only  some of the            plaintiffs testified that they had relied upon the challenged            statements.  Plaintiffs conceded in closing argument that for            many of the individual plaintiffs there was no specific proof            of reliance.                      Reliance  is  an element  of  common  law fraud  in            Massachusetts,  as the  district  court stated.   Danca,  385                                                              _____            Mass. at  8, 429 N.E.2d at  1133 (citations omitted).   It is            "general insurance law" that reliance  is an element of fraud            in the  insurance context.    E.g., Foremost  Guar. Corp.  v.                                          ____  _____________________            Meritor  Sav.  Bank,  910  F.2d 118,  123  (4th  Cir.  1990).            ___________________            Plaintiffs nonetheless argued below  and on appeal that proof            of  reliance was not needed,  citing Shapiro v. American Home                                                 _______    _____________            Assur. Co., 584 F.  Supp. 1245 (D. Mass. 1984).   In Shapiro,            __________                                           _______            the district  court said that "[t]he  weight of Massachusetts            authority does not consider  'reliance' as a separate element            which an  insurer  must  prove  in  order  to  invalidate  an            insurance  policy."  Id. at 1250.  But Shapiro, and the cases                                 ___               _______            cited therein, see Pahigian  v. Manufacturers' Life Ins. Co.,                               ________     ____________________________            349   Mass.  78,   206   N.E.2d  660   (1965);  Davidson   v.                                                            ________            Massachusetts Casualty Ins. Co., 325 Mass. 115, 89 N.E.2d 201            _______________________________            (1949); Bouley v.  Continental Casualty Co., 454 F.2d 85 (1st                    ______     ________________________                                         -75-            Cir.   1972)  (applying   Connecticut  law),   are  factually            distinguishable  from  the present  case.    Shapiro and  its                                                         _______            predecessors  dealt with  misrepresentations  made on  a form            application for a policy  of insurance, which application was            then  attached  to and  became  a  part of  the  policy.   In            Shapiro,  the application stated on its  face that "any claim            _______            or  action arising [from an  incorrect answer to the previous            question in  the application] is excluded  from this proposed            coverage."  Shapiro, 584 F. Supp. at 1247.   The Shapiro line                        _______                              _______            of  cases  relate to  what have  been called  "warranties" in            insurance law.  See  9 Couch,   36:1 ("Generally  speaking, a                            ___            warranty in the law of insurance is a statement, stipulation,            or  condition which forms a part of the contract, whereby the                          __________________________________            insured  contracts  as to  the  existence  of certain  facts,            circumstances, or  conditions, the literal truth  as to which            is  essential to  the validity  of the  contract.") (emphasis            supplied).   Warranties are typically  enforced regardless of            reliance.  In the  present case, the Placing Information  was            not a warranty.  It was neither incorporated in, nor attached            to, the contracts eventually  executed, nor did the contracts            themselves  contain  any  promise that  Graham  Watson  would            obtain  business  directly from  primary insurers.   Shapiro,                                                                 _______            Pahigian, and  Davidson were, in addition,  all cases decided            ________       ________            under Mass. Gen.  L. ch.  175,   186,  a consumer  protection            statute not at  issue here, and arguably inapplicable to this                                         -76-            situation.  Cf.  Liberty Mut.,  773 F.2d at  18 (refusing  to                        ___  ____________            apply Mass. Gen.  L. ch.  175,   112,  a consumer  protection            statute,  in  the  reinsurance  context, and  noting  that  a            contract  of reinsurance  is more  "a contract  of indemnity"            than  a policy of insurance).  Finally, in Shapiro, the court                                                       _______            found  that even if reliance were a required element of proof            under   186,  such reliance  would be found  on the  evidence            before  the court.   Shapiro,  584 F.  Supp. at  1249.   This                                 _______            obviously cannot be said here of those plaintiffs who did not            present individual evidence of reliance, infra.   Plaintiffs'                                                     _____            counsel  conceded in  closing  argument that  what he  called            subjective reliance by the underwriter who wrote the risk was            not  proven here in many  instances.  We,  therefore, find no            basis  in  Shapiro  for  making  an  exception  here  to  the                       _______            Massachusetts requirement  that a plaintiff  seeking recovery            in fraud must prove reliance on the misrepresentations made.                      As  direct  evidence  of  reliance   is  admittedly            lacking as  to many  plaintiffs, the question  arises whether            there may be circumstantial  evidence of reliance to  fill in            the gap.  We cannot find such evidence.  The plaintiffs were,            for the  most part, unrelated entities  from several European            nations.  They  were approached  by no fewer  than five  sub-            brokers.  Defendants, it is true, concede in their brief that            the SANS  "placing materials  were distributed by  the London            sub-brokers to prospective  retrocessionaires, including  the                                         -77-            plaintiffs, in London and  Central Europe."  But  delivery of            the placing materials to a plaintiff is not the same as proof            that the  recipient looked at and  relied upon them.   Nor is            the fact  that certain other plaintiffs read  and relied upon            the placing  materials evidence  that all plaintiffs  did so.            Several of  the plaintiffs were  unable to produce  copies of            the  Placing Information from their  own files, and many were            unable  to present the testimony of anyone who could say that            the Placing  Information was seen  and relied upon  in making            the decision to enter into the SANS Treaties.  There was also            evidence that, at  least as  to some of  the plaintiffs,  the            sub-broker soliciting  participation and the  underwriter who            made the  decision to participate were  corporate affiliates,            thus raising the possibility of some motive for participation            unrelated to the defendants' inducing statements.                      In  light  of  these  facts,  the district  court's            finding  that  all  plaintiffs  had  relied  upon  the  false            statements  in  the   Placing  Information  is   legally  and            factually insupportable and must be vacated.   We remand with            directions for the  district court to determine which  of the            plaintiffs  have  proven  reliance  in  conformity  with  the            requirements of  Massachusetts law,  and to deny  recovery in            fraud to any plaintiff who has not met this burden.            IV.       Contract Claims                      Contract Claims                      We turn to the plaintiffs' contract claims.                                         -78-                      (1) The slips called for the cession of "[b]usiness            classified  by the  Reassured [NERCO]  as  . .  . Facultative            Assumed  business produced  and  underwritten by  the  Graham            Watson division of  Cameron & Colby  Co., Inc."   As we  have            held, the character of the business ceded could reasonably be            classified  as facultative  business.   We find  insufficient            record  support   for  the   court's  finding   that,  "NERCO            contracted under  the SANS Treaties that  Graham Watson would            examine each individual risk submission by the ceding company            on  a risk-by-risk basis and, if the  risk be accepted, . . .            would  then issue  an  individual certificate  to the  ceding            company."   We accordingly reject, as  clearly erroneous, the            court's finding of breach of contract based upon the supposed            non-facultative  character of  the reinsurance  retroceded to            plaintiffs.                      (2) The district court further found that                      NERCO   also  breached   its  contractual                      obligation   to   produce  property   and                      casualty  facultative  assumed  business,                      for under the  "automatic" and/or  "semi-                      automatic"  method  of  underwriting  the                      reinsurance business is actually produced                      by the ceding source companies and not by                      the original reinsurer.            We  hold this  finding to  be clearly  erroneous.   While the            primary insured  or its agent  may indeed have  the authority            under the automatic or semi-automatic methods to initiate the            issuance of the  reinsurance, this can only be  done pursuant            to the reinsurer's authorization in  the MFC or other advance                                         -79-            arrangement.    The  reinsurance  was clearly  "produced"  by            defendants  by negotiating and  setting up the  MFCs or other            arrangements under which the business was assumed.                      (3)  The  district  court  also  found  that  NERCO            breached its  contractual  representation that  the  business            would be "underwritten" by Graham Watson.  The district court            found  a  contractual  breach because,  under  the  automatic            and/or  semi-automatic  methods   employed,  "Graham   Watson            delegated  its  reinsurance  underwriting  authority  to  the            source  company  to  automatically  cede risks  to  the  SANS            Treaties."   The  district court  was undoubtedly  right that            under  the   semi-automatic  and  like  methods,  the  ceding            company, or  the MGA  representing  it, was  given the  right            initially to assign  the risks  to NERCO, and  through it  to            plaintiffs,  before review  by Graham  Watson's underwriters.            However,  this was done  under facilities  previously entered            into with  Graham Watson, containing  underwriting terms  and            requirements satisfactory to the latter.  And, in the case of            most  of the business, Graham  Watson had the  right within a            stated  time to reject any risk upon receipt of the bordereau            or  lay-off sheet disclosing it, if the risk did not meet its            underwriting approval.   Graham Watson  was underwriting  the            business,  albeit using  the streamlined  facultative methods            discussed earlier in  the opinion.   As we  have held,  these            methods  fall within  the industry's purview  of "facultative                                         -80-            underwriting."  Our decision on that point dictates rejection            of  the   district   court's  above   finding,  which   rests            essentially  on   the  erroneous  view  that   the  types  of            facilities   defendants  were  using  were  illegitimate  and            unacceptable underwriting vehicles.  We hold, therefore, that            this finding, too, was clearly erroneous.                      Having  said  this,  we   remain  troubled  by  the            evidence, and the  court's findings,  of possible  systematic            inadequacies  in the quality  of the  underwriting performed.                                 _______            Conceivably,  underwriting could  be  so deficient  as to  be            tantamount to a breach of the duty to underwrite.  Plaintiffs            insisted, with support from their experts, that Graham Watson            was less  than diligent in its underwriting  efforts once the            risks were reported  to it by means of the  layoff sheets and            bordereau.   There was evidence  of delay  and of  inadequate            underwriting data.   There was also some evidence that Graham            Watson's underwriters may never  have rejected a single risk.                                      _____            The district court found that Graham Watson did not have "the            quantity or quality of information it needed to facultatively            underwrite the  risks  ceded to  the  SANS Treaties."    This            finding was,  to be  sure, based  on the  court's incorrectly            narrow  definition  of facultative  reinsurance,  and  was in            support of  its finding  that Graham  Watson did  not perform            facultative underwriting.   Whether, under  this court's very            different  view of  the propriety of  defendant's streamlined                                         -81-            facilities,  Graham Watson's "underwriting" could possibly be            found  to  have   been  so  inadequate  as  to   violate  its            contractual duty to "underwrite"  is a question we are  in no            position  to answer.   We  leave this  issue to  the district            court, on  remand, with  instructions to also  decide whether            other considerations     such as  the bar of  the statute  of            limitations    leave it viable.                      (4) The district  court found that NERCO  "violated            its contractual  obligation  to 'co-reinsure  for 10  percent            participation on  all 'System Business'  ceded hereunder,' as            required by  Warranty No.  2 in  the Slip."   Warranty  No. 2            reads as follows:                      2)  Reassured [NERCO] co-reinsure for 10%                      participation  on  all "System  Business"                      ceded hereunder.            The plaintiffs  argue that this  term was  inserted into  the            Slips at Bailey's  insistence because he wanted NERCO to keep            a  significant risk in  the business, thus  providing it with            "an increased incentive to exercise care and prudence in risk            selection."  They then argue that in fact, NERCO did not keep            a  10   percent  retention,  but  instead   obtained  outside            reinsurance of  that 10 percent  which reduced the  amount of            risk it  kept for itself to  a "minuscule" amount.   In other            words,  they  read  the  Warranty to  require  a  10  percent            unreinsured retention.   The  district court appears  to have            ___________            also  read  the warranty  in this  manner;  this is  the only                                         -82-            reasonable reading of the court's statement,  as there was no            evidence  that NERCO  did not  initially  retain at  least 10            percent of each risk it ceded.                      The  defendants  respond  that  Bailey's  testimony            shows  that the  intent of  the Warranty  was not  that NERCO            could not obtain any reinsurance of its retention, but rather            that NERCO should have  exposure to losses that was  equal to            or  greater than Bailey's  firm's exposure.   They  point out            that the evidence shows that, in fact, "NERCO's actual losses            on  the portion of the  SANS risk portfolio  that it retained            (unreinsured) was $105,000,000      an amount virtually equal            to  all of  the losses  of all  of the  plaintiffs combined."                                       ___            (Emphasis in original.)                      We  believe  the court  was  entitled  to view  the            evidence on  this point as  it did.   There is no  doubt that            NERCO  did reinsure  some  portion of  its retention;  Hewitt            admitted as much, and the plaintiffs introduced into evidence            some of the reinsurance  contracts used by NERCO to  reinsure            the retention.  There  was also evidence on both sides of the            question  whether  the parties  intended  Warranty  No. 2  to            require NERCO to keep an  unreinsured retention.  While there            are   no   contemporaneous   documents   using   the   phrase            "unreinsured  retention" or words  of similar import, several            witnesses,  including  Nigel   Huntington-Whitely,  who   was            pivotally  involved  in   the  negotiation  of   this  point,                                         -83-            testified  that  an   unreinsured  retention  was  what   was            intended.                      The  issue of  what  the parties  intended by  this            language is an  issue of  fact, which we  must uphold  absent            clear error.   See Commercial  Union, 412 Mass.  at 557,  591                           ___ _________________            N.E.2d at  172.  We,  therefore, affirm the  district court's            finding of  breach of  contract on  this ground, subject,  of            course, to any relevant findings the district  court may make            on remand concerning the effect of the statute of limitations            and other material issues remaining open, infra.                                                      _____            V.        The Statute of Limitations                      The Statute of Limitations                      The  defendants  argue   that  "virtually"  all  of            plaintiffs' claims should have  been barred by the applicable            statute  of limitations  defenses raised  below.   As already            noted,  we  have not  been  able to  find  in the  record any            explanation by  the district  judge of  his reasoning or  his            view  of  the  law  and   the  facts  on  these   potentially            dispositive  issues.   The  possible effects  of the  various            statutes  of limitations  on the  different claims  cannot be            reviewed without  findings and  rulings based on  the record.            We, therefore, express no opinion at this time but direct the            district court, upon  remand, to consider  the impact of  the            applicable statutes of limitations on the various claims, and            make appropriate findings and rulings.                      The  parties  agree that  the  date  from which  to                                         -84-            measure the statutes  of limitations is  July 12, 1988,  when            the  plaintiffs first raised their claims of fraud and breach            of contract,32 by adding these claims to their Second Amended            Complaint.   The applicable statute of  limitations for fraud            is three  years, Mass.  Gen. L. ch.  260,   2A;  Tagliente v.                                                             _________            Himmer, 949 F.2d  1, 4 (1st  Cir. 1991);  that for breach  of            ______            contract is  six  years, Mass.  Gen.  L. Ann.  ch.  260,    2            (1992).   The plaintiffs argue that each of these statutes is            subject to the discovery rule, meaning that a cause of action            did  not accrue  until the  plaintiffs learned  or reasonably            should  have learned of  the factual basis  for their claims.            White  v. Peabody Const. Co.,  Inc., 386 Mass.  121, 129, 434            _____     _________________________            N.E.2d  1015, 1020  (1982); see  also Cambridge  Plating Co.,                                        _________ _______________________            Inc.  v.  Napco, Inc.,  991 F.2d  21,  26-28 (1st  Cir. 1993)            ____      ___________            (discussing  Massachusetts  discovery  rule); Tagliente,  949                                                          _________            F.2d at 4  (same).   If plaintiffs' claims  accrued prior  to            July 12, 1982 (contract) or July 12, 1985 (fraud), and unless            the discovery rule applies so as to delay the accrual of  the            alleged  causes  of action  beyond  these  dates, then  those            claims would have been barred.                      There  are various  facts which,  if proven  to the                                            ____________________            32.  As  we say  below, the  district court erred  in finding            liability under Mass. Gen. L. ch.  93A.  Therefore, we do not            discuss the  statute of  limitations relevant to  that claim.            Nor, do we discuss the statute of limitations relevant to the            RICO  claim because  we affirm  the district  court's finding            that RICO does not apply to the facts of this case.                                         -85-            satisfaction  of the factfinder, might necessitate evaluation            of  whether any  or all  of  plaintiffs' fraud,  and possibly            other,  claims were  time  barred.   There  is, for  example,            uncontroverted  evidence that  the  lead  underwriter,  Ralph            Bailey, had  personal knowledge prior to  1981 of defendants'            use  of  the MGA  Baccala  &  Shoop.   Another  matter  to be            examined   is  the   disclosure  in   the  1981   Anniversary            Information, distributed  to the plaintiffs in  late 1980, of            the fact that business had been assumed from Baccala & Shoop.            There are also in the record other indications of information            being  conveyed to one  or more plaintiffs  at various times,            which need evaluation to determine whether the running of the            limitations periods  was triggered at those  moments and with            what effect.   For  example, some  of the  plaintiffs stopped            paying claims made by NERCO as early as the fourth quarter of            1982.  The plaintiffs were obligated to make such payments by            their  own reciprocal duty  of utmost good  faith, unless, of            course, they had knowledge of a bona fide defense to payment,                                            _________            such as the defendants'  fraud.  See Contractors  Realty Co.,                                             ___ ________________________            Inc.  v. Insurance Co.  of N.  Am., 469  F. Supp.  1287, 1294            ____     _________________________            (S.D.N.Y. 1979) (noting  the "reciprocal duty on  the part of            the insurer to deal  fairly, to give the assured  fair notice            of his obligations, and  to furnish openhandedly the benefits            of  a  policy").    Also  there  were  letters and  testimony            suggesting  that certain people connected with plaintiffs had                                         -86-            knowledge as to various matters early in the 1980's.33                      We  direct the  district court  to evaluate  all of            these  items, and any others  it deems relevant,  and to make            such findings  and rulings as it believes  appropriate in the            circumstances.    We  leave  entirely to  it,  in  the  first            instance,  the determination of whether and  how to apply the            Massachusetts discovery  rule or  other relevant rule  of law            and how to calculate,  on this record, the proper  running of            the applicable statutes of limitations.            VI.       The Chapter 93A Claims                      The Chapter 93A Claims                      In  a footnote,  the district court  found, without            more, that "the  conduct of NERCO constitutes  a violation of            Chapter  93A,  Section   2  of  the   General  Laws  of   the            Commonwealth of  Massachusetts."   825 F.  Supp. at  383 n.9.            Mass.  Gen. L. ch. 93A,   2 declares unlawful "unfair methods            of  competition and unfair or  deceptive acts or practices in            the conduct of  any trade or  commerce."   Mass. Gen. L.  ch.            93A,   11 provides for the  bringing of a civil action by the            victim  of such  practices.   An action  may not  be brought,            however,  "unless the  actions and  transactions constituting                                            ____________________            33.  For  example, Eric  Verhes  of Compagnie  de Reassurance            D'Ile de France  apparently knew  of the use  of Baccala  and            Shoop  by  mid-1982; and  plaintiff  Imperio  Re exchanged  a            series of  letters with NERCO via the sub-broker Carter Brito            E Cunha Ltd.  in late 1984 discussing the use  of Baccala and            Shoop,  and commented in one dated December 21, 1984 that the            fact that business was "underwritten by Baccala and Shoop . .            . would appear to be a further point contravening the wording            of the Contract."                                         -87-            the alleged unfair  method of  competition or  the unfair  or            deceptive   act   or   practice   occurred    primarily   and            substantially within the commonwealth."  Id.                                                     ___                      The defendants  argued below  as they do  on appeal            that the acts and practices said to constitute a violation of               2 did  not  occur primarily  and substantially  within the            commonwealth,  as  required by     11.   The  district court,            however,  made  no  finding  on this  important  point.   The            closest the  court came to finding where the critical conduct            occurred  was a statement, in  the course of  a colloquy with            counsel, that it  was "implicit . . . activities  had to have            been found in Massachusetts."  The court went on  to say that            while  "there were  activities  within the  state that  would            constitute  a violation of  93A, as I  found . .  . there are            more important activities, more crucial  activities that took            place overseas."  We are thus left without a specific finding            and with considerable confusion  as to what the court  had in            mind.  Given the absence of guidance -- indeed, with guidance            that points in  opposite directions --  we must determine  as            best  we can whether  the   11  locus requirement  was met on            this record.                      In insisting  that the  acts and practices  said to            constitute  a   violation   did  not   occur  primarily   and            substantially within the  commonwealth, the defendants assert            as follows:   The  Placing Information  was prepared by  G.L.                                         -88-            Hodson in  New York.   It was  then transmitted  to the  sub-            brokers in  London, and communicated by  the sub-brokers from            London  to the  plaintiffs  at their  places  of business  in            London and continental Europe.  The plaintiffs, to the extent            they  relied on  any  misrepresentations, did  so in  Europe,            signed the slips and Treaty Wordings in Europe,  and suffered            any  financial  injury in  Europe.    As  the  judge  himself            indicated, "notwithstanding that there were activities within            this  state,  at  least  and  maybe  the  most  crucial  were            overseas."  The latter  reason caused the court to  refuse to            award double or treble  damages, a discretionary matter under               11.  Defendants argue that  this shows a misreading of the            statute, because if the district court found that the crucial            actions creating liability had  occurred overseas, they could            not   have   occurred    primarily   and   substantially   in            Massachusetts, hence he should have found no liability at all            under  ch.  93A.     Defendants  insist  that  if  misleading            statements  are made  in Massachusetts  but are  received and            relied  upon  outside  the  commonwealth,  there  can  be  no            liability under ch. 93A.                      The  plaintiffs  reply   that  the  district  court            implicitly  found that  the defendants  failed to  meet their            statutory burden of proving that their fraudulent conduct did            not occur  primarily and substantially  in the  commonwealth.            Plaintiffs  disagree that  the only  relevant conduct  is the                                         -89-            placing of the Treaties overseas, and argue that the relevant            conduct includes (1) the location of the defendants and their            business, (2) the initial drafting of the placing information            in Boston, prior to its communication to G.L. Hodson, (3) the            fact  that  all  subsequent false  and  deceptive information            emanated  from Boston,  (4)  certain  later meetings  between            various plaintiffs and defendants, and between defendants and            their brokers, in Boston, (5) the place of performance of the            contracts (Boston), (6) the  day-to-day operation of the SANS            program in Boston, (7) the alleged obstruction of plaintiffs'            attempts  to inspect NERCO's books and records in Boston, and            (8) the reaping of the benefits of the fraud in Boston.  They            argue that Massachusetts case law does not provide a  bright-            line test for the "primarily and substantially" standard, but            rather requires a "pragmatic, functional analysis" which must            include  consideration not only  of where the communications,            reliance, and injury took  place, but also where the  bulk of            the more mundane activities did not occurr.                      A  finding   whether  the  defendant  has  met  its            statutory  burden   of  proving   that  its   activities  and            transactions   occurred   primarily   and  substantially   in            Massachusetts is a matter of law, subject to plenary  review.            Clinton Hosp.  Ass'n v.  Corson Group,  Inc., 907  F.2d 1260,            ____________________     ___________________            1264  (1st Cir. 1990).   In Bushkin Assoc.,  Inc. v. Raytheon                                        _____________________    ________            Co.,  393  Mass. 622,  473  N.E.2d  662  (1985)  the  Supreme            ___                                         -90-            Judicial Court determined,  on facts bearing much  similarity            to  the  transmission of  the  fraud  claims  here, that  the            violation did  not occur "primarily  and substantially within            the commonwealth."  Ch. 93A,   11.  The plaintiff, Bushkin, a            New  York  resident, based  his  ch.  93A claim  on  "alleged            representations made during a telephone call or calls in 1975            between a  Raytheon officer  in Massachusetts and  Bushkin in            New  York."  Id. at 638,  473 N.E.2d at 672.   As a result of                         ___            information Bushkin  disclosed  to Raytheon  over the  phone,            Raytheon  learned  that  Beech  Aircraft  Corporation  was  a            possible acquisition target.   Bushkin alleged  that Raytheon            had  promised to  pay  him a  fee  if it  were successful  in            acquiring Beech.   After telling  him that it  was no  longer            interested in  Beech, Raytheon  acquired it  with the  aid of            another consultant, and denied Bushkin any compensation.  Id.                                                                      ___            at 624-26, 473 N.E.2d at 664-65.                      In finding against Bushkin,  the SJC noted that the            telephone calls  were between  the two states,  the allegedly            deceptive statements  were made in Massachusetts but received            and acted on in New  York, and that any loss was  incurred in            New York.  Id.  Based on Bushkin, this court in Clinton Hosp.                       ___           _______                _____________            minimized the location of the dissembler at the time he makes            a  deceptive statement  for  purposes of  the "primarily  and            substantially" analysis.   "Rather," we  said, "the  critical            factor is the locus of the  recipient of the deception at the                                         -91-            time of the reliance."   Clinton Hosp., 907 F.2d  at 1265-66.                                     _____________            We likewise gave weight to the situs of the loss.  Id.                                                               ___                      Viewing  the  conduct  surrounding  the  fraudulent            misrepresentations in the  Placing Information points  to the            same result  as that  reached in Bushkin.   As in  that case,                                             _______            non-Massachusetts  residents are  here attempting  to recover            for the allegedly  unfair trade practices of a corporation in            Massachusetts, under a  statute designed  to protect  against            in-state frauds.  As in that case, the defendant's day-to-day            business activities were largely carried on in Massachusetts.            As in that case, we shall assume that the allegedly deceptive            acts or  practices    in particular,  the Placing Information               originated  in Massachusetts, but the  Placing Information            was  intended   to  be,  and  was,   circulated  abroad,  and            plaintiffs  received and acted upon  it there.   The situs of            the plaintiffs' losses was  also in Europe.  It  follows that            with  respect   to  plaintiffs'   claims  of  fraud   in  the            inducement,  the defendants  have met their  statutory burden            under   11 of  proving that their fraudulent conduct  did not            occur primarily and substantially  in Massachusetts.  On this            point, we reverse the district court's ruling that defendants            are liable under Mass. Gen. L. ch. 93A,   2.                      This does  not, however, end  the matter.   In this            opinion, we have sustained the district court's finding  of a            breach of contract stemming from defendants' violation of its                                         -92-            contractual obligation  to retain 10% of  all system business            ceded to  the SANS  Treaties.   We have also  left open,  for            further  consideration  on  remand,  a  contract  claim   for            possible failure to perform underwriting as promised.  And we            have  left open the possibility,  on remand, of  a finding of            fraudulent concealment  of the  use of intermediaries  and of            other conduct  deviating from representations in  the Placing            Information,  in  the years  following the  initial Treaties.            The  above activities,  or  some of  them, might  conceivably            support --  although we take  no position at  this time --  a            finding   of      2   violations   occurring  primarily   and            substantially  within Massachusetts.   Accordingly,  while we            hold that fraud in  the inducement based upon representations            in  the  Placing  Information  did not  occur  primarily  and            substantially within  Massachusetts, we  do not at  this time            foreclose  liability under  Mass. Gen.  L. ch.  93A  based on            different conduct of the type mentioned above.  We leave such            determination to the district court on remand.            VII.      The RICO Claims                      The RICO Claims                      In  the  same  footnote   in  which  it  found  the            defendants liable under ch. 93A, the district court found for            the  defendants  under the  Racketeer Influenced  and Corrupt            Organizations  Act ("RICO"), 18  U.S.C.    1961-1968, stating            that,                      Title  18,  United States  Code, Sections                      1961-1968 do not  apply to  the facts  of                                         -93-                      this   case  on   the  ground   that  the                      Plaintiffs have failed to  establish that                      they  suffered   an  "investment"  injury                      under Section 1962(a) or an "acquisition"                      injury under Section  1962(b) or that the                      three Defendants were separate persons as                      required under Section 1962(c).            825 F. Supp.  at 383 n.9.34   In No. 93-2338,  the plaintiffs            appeal from this ruling, arguing that the district  court was            wrong with respect to all three sections of RICO.                      In order  to  recover in  a  civil RICO  action,  a            plaintiff must  prove both that the defendant violated one of            the provisions of 18 U.S.C.   1962 and that the plaintiff was            injured  "in  his business  or  property  by  reason of"  the            defendant's  violation.   18  U.S.C.     1964(c).   Thus,  in            proving a right to recover for a RICO violation premised upon                                            ____________________            34.  No judgment  dismissing the  RICO claims was  entered by            the  district court; the only disposition  of those claims is            the above-quoted language in the  district court's Memorandum            and Order of June  7, 1993.  See Fed.  R. Civ. P. 58  ("Every                                         ___            judgment  shall be  set  forth on  a  separate document.    A            judgment is effective only when so set forth and when entered            as provided in Rule 79(a).").  We proceed, however, as though            the judgment  for the plaintiffs issued on September 21, 1993            pursuant  to  that  order  had  included  language  expressly            dismissing the RICO claims.   See Fiore v.  Washington County                                          ___ _____     _________________            Community Mental  Health Ctr., 960  F.2d 229,  236 n.10  (1st            _____________________________            Cir.   1992)  (en  banc)   (holding  that  separate  document            requirement is waived  by filing of timely notice of appeal).            "The  'separate  document'  rule  does  not  defeat appellate            jurisdiction where a timely appeal  is filed and the  parties            do  not suffer any prejudice  from the absence  of a separate            document  entering  judgment  on  claims  that  were  clearly            disposed of in an earlier order."  Southworth Mach. Co., Inc.                                               __________________________            v.  F/V  Corey  Pride,  994  F.2d  37,  39  (1st  Cir.  1993)                _________________            (citations omitted); see also supra, n.18 (discussing failure                                 ________ _____            of   district   court   to   expressly   dismiss  defendants'            counterclaims).                                         -94-               1962(a), the plaintiffs had to prove that they were harmed                                                                   ______            by reason of NERCO's use or investment of income derived from            a pattern  of racketeering activity in  some enterprise (here            alleged to be Graham Watson) engaged in interstate or foreign            commerce.  18 U.S.C.     1962(a), 1964(c).  This  they failed            to  do.  Even assuming  that they had  been defrauded through            the use of the mails or international wires, see 18 U.S.C.                                                            ___            1961(1)(B), that alone is  not enough to show that  they were            harmed  additionally  by NERCO's  use  or  investment of  the            proceeds of that fraud to establish or operate Graham Watson.            See,  e.g., Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153,            __________  ____________________    ___________            1188 (3d  Cir. 1993)  ("the plaintiff  must allege  an injury            resulting from the investment of racketeering income distinct            from  an injury  caused by  the predicate  acts themselves").            The plaintiffs  have simply  "repeat[ed] the crux  of [their]            allegations   in  regard  to   the  pattern  of  racketeering            activity."  Id.                        ___                      Under    1962(b), the  plaintiffs had to  show that            they  were  harmed  by   reason  of  NERCO's  acquisition  or            maintenance  of control of an enterprise through a pattern of            racketeering activity.  Again,  even assuming that plaintiffs            proved the  underlying RICO  violation, they failed  to prove            any  harm   beyond  that  resulting  from   the  fraud  which            constituted  the  predicate act.    See,  e.g., Danielsen  v.                                                __________  _________            Burnside-Ott Aviation  Training Ctr.,  Inc.,  941 F.2d  1220,            ___________________________________________                                         -95-            1231   (D.C.   Cir.  1991)   ("plaintiffs   must   allege  an            'acquisition' injury,  analogous  to the  'use or  investment            injury'  required under   1962(a) to show injury by reason of            a   1962(b)  violation").  The  plaintiffs claimed that  they            were harmed by their participation  in the SANS treaties, not            by the defendants' acquisition or control of Graham Watson.                      As  to  the    1962(c)  claim,  the district  court            stated  that  "the  three  Defendants   were  [not]  separate            persons."   In fact, however, NERCO, First State, and Cameron            & Colby were distinct corporate entities, with separate legal            identities.  The distinction  between those three entities is            not, however, decisive  for   1962(c) purposes.   The statute            requires that the person (i.e., the three defendants) engaged                              ______            in  racketeering be  distinct  from the  enterprise (in  this                                                     __________            case, Graham Watson, not a defendant) whose activities  he or            she  seeks  to  conduct  through racketeering.    See,  e.g.,                                                              __________            Miranda v. Ponce Federal  Bank, 948 F.2d 41, 44-45  (1st Cir.            _______    ___________________            1991) (citing  cases) ("the same entity cannot do double duty            as  both  the  RICO  defendant  and  the  RICO  enterprise").            Assuming the court meant to find that NERCO, First State, and            Cameron  & Colby were not distinct from Graham Watson, it was            clearly entitled,  on the evidence presented, to  make such a            finding.   Up  until mid-1980,  Graham Watson  was merely  an            unincorporated division of Cameron & Colby.  After that time,            although  it  became   a  separate  wholly-owned   subsidiary                                         -96-            corporation,  all  of its  employees were  in fact  Cameron &            Colby  employees, and  there is  no evidence  whatsoever that            Graham  Watson took  any actions  independent of  its parent.            Cf.  Brittingham v.  Mobil Corp., 943  F.2d 297,  302-303 (3d            ___  ___________     ___________            Cir. 1991)  (noting that    1962(c)  claims may  be dismissed            "when  the   enterprise  and  defendant,   although  facially            distinct,  are in reality no different from each other").  We            accordingly  affirm  the district  court's  dismissal  of the            plaintiffs' RICO claims.            VIII.     Damages                      Damages                      The   district   court   ruled   that   "[i]n   the            circumstances of this case, it  is not feasible to reasonably            calculate  damages  on  the  basis  of  the  'benefit  of the            bargain' method  of damages."   The court  accordingly (after            further  proceedings)  entered  judgment  in  the  amount  of            $38,118,940.07  (which  sum  included prejudgment  interest),            plus  postjudgment   interest  and  costs.     This  sum  was            calculated to  be the difference  between claims paid  by the            plaintiff reinsurers less the  premiums they received  during            the course of  the SANS  Treaties.  The  district court  also            announced  in its Memorandum and  Order of June  7, 1993 (but            not  in any  separate judgment),  that "the  only appropriate            remedy  is  to  rescind the  SANS  Treaties  as  a matter  of            equity."                      Defendants  complain  on  appeal   that  plaintiffs                                         -97-            should have been required  to prove, and could  only recover,            "benefit  of the  bargain"  damages.   Defendants argue  that            plaintiffs  in  fact suffered  no  damage  at all  as  "[t]he            results achieved under the SANS Treaties were poor, but  they            were   better   than   industry   average   results   . . . .            Plaintiffs'  experts,  who  utilized  individual  certificate            facultative  underwriting,  reluctantly  admitted  their  own            operations lost money and were closed down."   In defendants'            view,  the  losses  under  the  SANS  Treaties  were  due  to            "extremely  adverse market  conditions     low  premiums  and            unprecedented loss experiences."   As the judge commented, it            was "a disastrous  market."   Defendants go on  to point  out            that "[t]here was no evidence that brokerage-located business            resulted in larger losses than business obtained 'directly.'"                      The court, in  its opinion  excused the  plaintiffs            from establishing  damages  because, for  plaintiffs to  have            done so,                      it  would have  been necessary  to obtain                      the financial records of the major direct                      reinsurance     companies     . . . which                      financial  records  are confidential  and                      not accessible to third parties.                      We find no  legal error in the  court's decision to            furnish  relief  for fraud  based  on  cancelling plaintiffs'            reinsurance obligations under the  Treaties.  When an insurer            establishes that it was induced by fraud to issue policies of            insurance, cancellation of  the policy is a customary form of                                         -98-            relief.   See, e.g., Century Indem., 333 Mass. at 504-05, 131                      _________  ______________            N.E.2d  at 769.   To  the extent  that these  plaintiffs were            ceded shares in reinsurance  under Treaties they were induced            to  join,  and  continued   to  participate  in,  because  of            defendants' fraud, the district  court was authorized,  where            otherwise appropriate, to provide the remedy of retroactively            cancelling  the  applicable Treaties,  reimbursing plaintiffs            for  their   net  losses,  and  absolving   them  from  their            unfulfilled reinsurance obligations thereunder.                      In this opinion we  have reversed the fraud finding            based on the  "facultative" representations, but  have upheld            it  in respect  to reliance  on representations  in the  1979            Placing  Information  regarding  securing nontreaty  business            "directly"  rather  than  through  intermediaries.    Thus  a            cancellation remedy for fraud may still be appropriate  as to            reinsurance  retroceded to plaintiffs  which was  infected by            that  fraud.     However,   we  have  remanded   for  further            consideration  of   whether  the  statutes   of  limitations,            including that for fraud,  constitute a bar to the  claims of            any   or  all  plaintiffs.     We  have   also  remanded  for            consideration whether,  at least in some  cases, the original            fraud was dissipated, or its duration limited to a particular            year or years, by the receipt of knowledge of  the falsity of            the  earlier  representations  coupled  with  renewal  of the            Treaty  or other  conduct indicating acquiescence  or waiver.                                         -99-            We have further remanded for consideration of whether certain            of the plaintiffs are barred from relief for fraud because of            their failure to establish reliance.                      We accordingly  vacate all  relief  granted by  the            court and remand for further findings on what relief, if any,            is appropriate in light  of the other findings that  are made            upon remand.    If  there are  instances  where  recovery  is            appropriate for  breach of contract only,  rather than fraud,            the court should determine the proper measure of relief, and,            subject  to  our rulings  herein,  the  district court  shall            recalculate the proper award, if any  is due, on the basis of            its assessment of the law and facts.            IX.       Prejudgment Interest                      Prejudgment Interest                      The  defendants  argue  that  the  district court's            order  rescinding  the  SANS  Treaties was  a  restitutionary            award, not an  award of damages.  Thus, they say, the court's            assessment of prejudgment interest at the rate  of 12 percent            set  by  Mass.  Gen. L.  ch.  231,      6B,  6C, and  6H  was            erroneous, because the rate of interest set by those statutes            is applicable only to awards of damages, not to rescissionary            awards.   They  argue  that the  plaintiffs  made an  express            election  of remedies,  choosing rescission  and restitution,            and  thus foregoing  their  option to  pursue  the remedy  of            contract  damages  and  interest   on  those  damages.    The            defendants contend that prejudgment interest should have been                                        -100-            applied at the  rate of 6  percent set by  Mass. Gen. L.  ch.            107,   3.                      In light of the fact that we are vacating the award            and remanding  this case  to  the district  court, where  any            judgment eventually  awarded to either party  may bear little            resemblance  to the judgment we vacate  today, we decline the            defendants' invitation to  consider this point at length.  We            find  it  of  interest, however,  that     6C  has been  held            applicable to a recovery based on an action for money paid by            mistake, Commercial Union, 412 Mass. at 555-56, 591 N.E.2d at                     ________________            171-72, a recovery which  seemingly bears more resemblance to            restitution than to money damages.            X.        Conclusion                      Conclusion                      Appeal No. 93-2339                      __________________                      We  sustain  the   district  court's  findings  and            rulings on  certain matters;  reverse others either  as being            clearly erroneous  or legally incorrect;  and identify  still            others that require the  district court to make findings  and            rulings now absent.    We, therefore, vacate in  its entirety            the  judgment  awarding  a  total of  $38,118,940.07  to  the            plaintiffs and remand with directions that the district court            hold further proceedings and take such further actions as are            necessary to  comply with this  opinion.35  We  summarize our                                            ____________________            35.  As  a  matter of  consistency,  we  likewise vacate  the            court's  other directives  not  incorporated in  its judgment            purporting to afford relief, such as its equitable rescission                                        -101-            specific dispositions as follows:                      (1)  We  reverse  as  being  clearly erroneous  the            district court's  finding of fraud  premised upon defendants'            promise to cede "facultative" reinsurance.                      (2)  We   sustain  the  court's  finding  that  the            defendants made misrepresentations in the Placing Information            to the effect,  inter alia, that  they would obtain  business                            __________            directly from primary insurers.  However, the  claim of fraud            based on  this finding must be given further consideration on            remand  in   light  of   our  direction  to   reconsider  the            defendants' defense  based on the statute  of limitations; to            revisit  the  reliance  element  and  deny  recovery  to  any            plaintiff  unable  to satisfy  its  burden of  proof  on this            point; and to  reconsider the possible effects  of any notice            and knowledge  obtained by any  of the plaintiffs  during the            lives of the SANS Treaties and determine whether these defeat            or limit the duration of any plaintiffs' continuing rights of            recovery in fraud.                      (3)  We  reverse  the district  court's  finding of            breach of  contract based  upon the  supposed non-facultative            character of the retroceded reinsurance.  We also reverse the            district  court's finding  of breach  of contract  based upon            failure to "produce" the  retroceded reinsurance.  We reverse                                            ____________________            of the SANS  Treaties.   Such orders should  be revisited  on            remand and reissued, modified, or not as the court determines            in light of this opinion and its own findings and rulings.                                        -102-            the district court's breach of contract  finding based on the            promise that Graham Watson would "underwrite"  the retroceded            reinsurance, except we leave open  for the court to consider,            on  remand,  whether  the  underwriting might  have  been  so            entirely inadequate as to violate  that provision.  We affirm            the district court's finding of breach of contract based upon            the  violation of  Warranty No.  2 in  the slips,  subject to            further findings on the effect of the  statute of limitations            and any other bar to recovery.                      (4)  We  direct  the  court to  consider  and  make            specific  findings   and  rulings  as  to   the  statutes  of            limitations defenses and to  find the dates that each  of the            relevant statutes began to run as to each of the plaintiffs.                      (5) We  direct the court to  recalculate the proper            amount  of relief and prejudgment interest  to the extent its            other  determinations  on  remand  are  consistent  with  the            awarding of relief to any of the plaintiffs.  We have upheld,            as a  remedy, the cancellation of any reinsurance infected by            fraudulent representations  and leave to the  court on remand            the  determination of any  other theories of  relief that may            become appropriate.                      (6) We reverse the court's allowance of plaintiffs'            claims under Mass. Gen. L.  ch. 93A,   2 insofar as  they are            based on fraud in the inducement.  However, we remand for the            district  court's further  consideration  whether  any  other                                        -103-            conduct,  as  mentioned  in  this opinion,  might  support  a            finding of liability under that statute.                      Appeal No. 93-2338                      __________________                      We  affirm  the   district  court's  dismissal   of            plaintiffs' claims under the Racketeer Influenced and Corrupt            Organizations Act, 18 U.S.C.    1961-1968.                      So ordered.   Each side  to bear its  own costs  on                      ___________________________________________________            appeal.            _______                                        -104-
