J-A02013-17

                                  2017 PA Super 328



CENTURY INDEMNITY COMPANY, AS                     IN THE SUPERIOR COURT OF
SUCCESSOR TO CCI INSURANCE                              PENNSYLVANIA
COMPANY, AS SUCCESSOR TO
INSURANCE COMPANY OF NORTH
AMERICA AND PACIFIC EMPLOYERS
INSURANCE COMPANY

                            Appellee

                       v.

ONEBEACON INSURANCE COMPANY
F/K/A CGU INSURANCE COMPANY F/K/A
GENERAL ACCIDENT INSURANCE
COMPANY OF AMERICA

                            Appellant                   No. 1280 EDA 2016


                Appeal from the Judgment Entered April 26, 2016
              In the Court of Common Pleas of Philadelphia County
               Civil Division at No(s): July Term, 2012 No. 002928


BEFORE: OTT, J., RANSOM, J., and FITZGERALD, J.*

OPINION BY OTT, J.:                                   FILED OCTOBER 17, 2017

        OneBeacon Insurance Company F/K/A CGU Insurance Company F/K/A

General Accident Insurance Company of America (hereinafter “OneBeacon”),

appeals from the judgment entered on April 26, 2016,1 in the Philadelphia
____________________________________________


*   Former Justice specially assigned to the Superior Court.

1We note that OneBeacon filed its notice of appeal from the March 15, 2016,
order denying its post-trial motions. See Notice of Appeal, 4/14/2016.
However, “an appeal properly lies from the entry of judgment, not from the
denial of post-trial motions.” Gold v. Rosen, 135 A.3d 1039, 1040 n.1 (Pa.
Super. 2016). In the present case, judgment was subsequently entered on
(Footnote Continued Next Page)
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County Court of Common Pleas in this action seeking reinsurance2 coverage

for defense expenses.            Following a non-jury trial, the court entered

judgment against OneBeacon and in favor of Century Indemnity Company,

as successor to CCI Insurance Company, as successor to Insurance

Company of North America (hereinafter “Century”), in the amount of

$4,772,520.44, plus prejudgment interest, and in favor of Pacific Employers

Insurance Company (hereinafter “PEIC”), in the amount of $2,426,478.42,

plus prejudgment interest.3 On appeal, OneBeacon challenges the ruling of

the trial court that the reinsurance facultative certificates4 at issue provided
(Footnote Continued) _______________________

the verdict on April 26, 2016. Therefore, we will consider this appeal as
properly filed after the entry of judgment. See id. See also Pa.R.A.P.
905(a)(5). Further, we direct the Prothonotary to correct the caption
accordingly.

2   Reinsurance is defined as:

        the ceding by one insurance company to another of all or a
        portion of its risks for a stipulated portion of the premium, in
        which the liability of the reinsurer is solely to the reinsured,
        which is the ceding company, and in which contract the ceding
        company retains all contact with the original insured, and
        handles all matters prior to and subsequent to loss[.]

Reid v. Ruffin, 469 A.2d 1030, 1033 (Pa. 1983) (citation and emphasis
omitted). In other words, it is insurance coverage for insurance companies.

3  We note Century and PEIC are proceeding jointly in this appeal,
represented by the same attorneys. Therefore, we will refer to them
collectively as “Century/PEIC.”

4  “Facultative reinsurance reinsures one particular risk,” as opposed to
“treaty reinsurance [which] reinsures a program, for example, a collection of
homeowners’ risks underwritten by a ceding company.” Koken v. Legion
(Footnote Continued Next Page)


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coverage for defense expenses in excess of the liability cap, and that

Century/PEIC were entitled to interest on certain proofs of loss issued prior

to early 2013. For the reasons below, we affirm.

      The relevant facts and procedural history underlying this appeal are as

follows.     In 1983, Century’s predecessor issued an Excess Blanket

Catastrophe Liability Policy to a subsidiary of Formosa Plastics Corporation

that provided $25,000,000.00 in umbrella liability for covered losses. During

the same period, PEIC issued a similar policy to Gould Pumps, Inc. 5 Both of

the underlying policies included a “second obligation to provide coverage for

defense costs.”      Trial Court’s Findings of Fact and Conclusions of Law,

2/23/2016, at 2. Thereafter, Century’s predecessor and PEIC both obtained

facultative certificates from OneBeacon’s predecessor to reinsure a certain

layer of the underlying Formosa and Gould policies.      Both the underlying

policies and the facultative certificates were renewed the following year;

Century’s certificate was renewed via an endorsement, and PEIC was issued

a new certificate.

      Each of the certificates at issue consists of a double-sided, pre-printed

form and contains the identical, relevant, policy language. The front of the


(Footnote Continued) _______________________

Ins. Co., 831 A.2d 1196, 1210 (Pa. Commw. 2003), aff'd, 878 A.2d 51 (Pa.
2005).

5See Trial Court’s Findings of Fact and Conclusions of Law, 2/23/2016, at
¶¶ 3-11.



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certificate names the reinsured, i.e. Century’s predecessor or PEIC, and

thereafter states:      “In consideration of the payment of the premium and

subject to the general conditions set forth on the reverse side hereof,

the reinsurer does hereby reinsure” the underlying policy.         Complaint,

7/23/2012, Exhibit A, Certificate 4513 (hereinafter “Certificate”) (emphasis

added).6     After providing information regarding the underlying policy, the

certificate includes four sections under the heading, “Details of Reinsurance

Afforded.”     Id.    Section I, II, and III list the type of insurance, the

underlying policy limits, and the ceding company’s retention.        See id.

Section IV is entitled “Reinsurance Accepted” and provides the reinsurance

policy limit for the certificate.7 Id.

       The back of each certificate lists nine general conditions, three of

which are relevant to this appeal:

       1. The [Reinsured] Company [Insurance Company of North
       America] warrants to retain for its own account, subject to
       Treaty Reinsurance, the amount of liability specified in Section
       III, and the liability of the Reinsurer [OneBeacon]
       specified in Section IV shall follow that of the Company
       and expect as otherwise specifically provided herein, shall
____________________________________________


6 The facultative certificates issued to PEIC are attached to the complaint at
Exhibits B and C. Since, as noted above, the relevant certificate language is
identical, we will refer only to the certificate issued to Century.

7 The Century certificate issued in 1983 included a “Reinsurance Accepted”
amount of $3,000,000.00, and the 1984 endorsement provided for the same
coverage. See Complaint, 7/23/2012, Exhibit A. The PEIC certificates
included a “Reinsurance Accepted” amount of $2,000,000.00 for 1983, and
$3,000,000.00 for 1984. See Complaint, 7/23/2012, Exhibit B, C.



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       be subject in all respects to all the terms and conditions of
       the Company’s policy.         The Company shall furnish the
       Reinsurer with a copy of its policy and all endorsements thereto
       which in any manner affect this certificate, and shall make
       available for inspection and place at the disposal of the
       Reinsurer at reasonable times any of its records relating
       to this reinsurance or claims in connection therewith.

                                    ****
       3. All claims involving this reinsurance, when settled by
       the Company, shall be binding on the Reinsurer, who shall
       be bound to pay its proportion of such settlements, and in
       addition thereto, in the ratio that the Reinsurer’s loss payment
       bears to the Company’s gross loss payment, its proportion of
       expenses, other than Company salaries and office expenses,
       incurred by the Company in the investigation and settlement of
       such claims or suits and, with the prior consent of the Reinsurer
       to trial court proceedings, its proportion of court costs and
       interest on any judgment or award.[8]

       4. Payment of its proportion of loss and expense paid by the
       Company will be made by the Reinusurer to the Company
       promptly following receipt of proof of loss.

Id. at 2 (emphasis supplied).

       Both Century and PEIC paid significant amounts in losses to their

underlying insureds for asbestos-related claims pursuant to the 1983 and

____________________________________________


8 General Conditions (1) and (3) are typically referred to as “following form”
or “follow the fortunes” clauses in reinsurance contracts.

       The doctrine of “follow the fortunes” has been defined as
       meaning that “the reinsurer will follow the fortunes or be placed
       in the position of the [insurer].” Basically, the doctrine burdens
       the reinsurer with those risks which the direct insurer bears
       under the direct insurer’s policy covering the original insured.

Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co., 903 F.2d
910 (2nd Cir. 1990) (citations omitted).




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1984 underlying policies.          When OneBeacon failed to promptly pay

Century/PEIC under the facultative certificates, the companies jointly filed a

breach of contract and declaratory judgment action against OneBeacon on

July 23, 2012. While the action was pending, OneBeacon paid Century/PEIC

the limits listed in the “Reinsurance Accepted” section of the facultative

certificates, but refused to pay any amount above that limit for defense

expenses.

      The case proceeded through discovery.              On January 20, 2015,

OneBeacon filed a motion for summary judgment.               It argued that it had

already paid Century/PEIC “$11 million, a sum equal to the total dollar

amounts stated as the ‘Reinsurance Accepted’ in the facultative reinsurance

certificates at issue in this case[,]” and that under authoritative case law,

and the unambiguous language of the certificates at issue, it was not

obligated to pay defense expenses “in excess of the stated Reinsurance

Accepted       amount[.]”     OneBeacon’s     Motion   for   Summary    Judgment,

1/20/2015, at ¶¶ 1-2. OneBeacon further argued: (1) Century/PEIC were

collaterally    estopped    from   seeking   defense   costs   in   excess   of   the

Reinsurance Accepted limits as a result of “prior adverse decisions” rendered

against them, and (2) it owed no interest to Century/PEIC on the $11 million

previously submitted because it “had no duty to pay either [company] prior

to the respective dates of OneBeacon’s actual payments.” Id. at ¶¶ 3-4. On




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January 21, 2015, Century/PEIC filed a motion for partial summary

judgment on the issue of prejudgment interest.9

       The trial court entered two orders disposing of the motions on March

27, 2015: (1) denying OneBeacon’s motion for summary judgment, and (2)

granting Century/PEIC’s motion for partial summary judgment. See Orders,

3/27/2015. With regard to OneBeacon’s motion, the trial court determined:

(1) the certificates were ambiguous, and, consequently, Century/PEIC could

present extrinsic evidence at trial, and (2) Century/PEIC were not collaterally

estopped from asserting their claims based on prior decisions.       See Trial

Court Opinion, 3/27/2015 (OneBeacon’s Motion), at 5-8. The court granted

Century/PEIC’s motion for partial summary judgment, concluding OneBeacon

had a duty to pay Century/PEIC promptly following receipt of proof of loss.

See Trial Court Opinion, 3/27/2015 (Century/PEIC’s Motion), at 4-6.

Accordingly, the court found both Century and PEIC were entitled to

prejudgment interest, Century in the amount of $275,760.45 and PEIC in

the amount of $152,071.35. See id. at 6. Judgment was entered on these

amounts in favor of Century/PEIC and against OneBeacon on April 9, 2015.
____________________________________________


9 Century/PEIC had sought summary judgment on this issue twice before in
motions filed in July of 2012 and December of 2013. They withdrew the first
motion without prejudice in October of 2013. On April 10, 2014, the trial
court denied the second motion, concluding there were genuine issues of
material fact precluding the entry of summary judgment. See Order,
4/10/2014. When ruling on the third motion, the court found “[t]hose
questions no longer remain.”        See Trial Court Opinion, 3/27/2015
(Century/PEIC’s Motion), at 1 n.1.



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       On April 27, 2015, OneBeacon filed two motions, requesting the trial

court amend each of its March 27, 2015, orders to certify them for an

interlocutory appeal pursuant to 42 Pa.C.S. § 702(b). The trial court denied

OneBeacon’s motions to amend on May 21, 2015, and this Court

subsequently denied OneBeacon’s petition for review.          See Century

Indemnity Co. et al. v. OneBeacon Insurance Co. et. al., 95 EDM 2015,

Order, 7/29/2015. A three-day, non-jury trial commenced on January 11,

2016. On February 23, 2016, the trial court entered an order, accompanied

by findings of fact and conclusions of law, finding in favor of Century/PEIC,

and against OneBeacon. See Order, 2/23/2016.10 OneBeacon filed post-




____________________________________________


10 Specifically, the court found in favor of Century and against OneBeacon
“in the amount of $4,772,520.44 plus pre-judgment interest at the statutory
rate of 6% per annum in the amount of $431,497.17 (through January 11,
2016) and additional pre-judgment interest in the amount of $784.52 for
each day between January 12, 2016 and the date of this finding.” Order
2/23/2016, at 1. With regard to PEIC, the court entered a finding against
OneBeacon “in the amount of $2,426,478.42 plus pre-judgment interest at
the statutory rate of 6% per annum in the amount of $363,262.43 (through
January 11, 2016 and additional pre-judgment interest in the amount of
$398.87 for each date between January 12, 2016 and the date of this
finding.” Id. at 1-2.




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trial motions on March 3, 2016, which the trial court denied on March 15,

2016. This timely appeal followed.11, 12

       In its first issue, OneBeacon argues the trial court erred in denying its

motion for summary judgment and finding the facultative certificates at

issue were ambiguous as to whether the “Reinsurance Accepted” amount

capped OneBeacon’s liability for both losses and defense expenses.           See

OneBeacon’s Brief at 17-32.

       Our review of a trial court’s order denying a motion for summary

judgment is well-established:

       We view the record in the light most favorable to the non-
       moving party, and all doubts as to the existence of a genuine
       issue of material fact must be resolved against the moving party.
       Pennsylvania State University v. County of Centre, 532 Pa.
       142, 615 A.2d 303, 304 (1992). Only where there is no genuine
       issue as to any material fact and it is clear that the moving party
       is entitled to a judgment as a matter of law will summary
       judgment be entered. Skipworth v. Lead Industries Ass'n,
       Inc., 547 Pa. 224, 690 A.2d 169, 171 (1997). Our scope of
____________________________________________


11We note OneBeacon filed three notices of appeal: (1) from the April 9,
2015, entry of partial judgment (Docket No. 1282 EDA 2016); (2) from the
March 27, 2015, order denying its motion for summary judgment (Docket
No. 1281 EDA 2016); and (3) from the March 15, 2016, order denying its
post-trial motions (Docket No. 1280 EDA 2016). By order entered June 7,
2016, this Court, sua sponte, quashed the appeals at Docket Nos. 1281 EDA
2016 and 1282 EDA 2016, as duplicative.

12 The trial court did not direct OneBeacon to file a concise statement of
errors complained of on appeal pursuant to Pa.R.A.P. 1925(b). Although the
court filed an opinion pursuant to Pa.R.A.P. 1925(a) on May 9, 2016, it relied
on its prior opinions disposing of the parties’ motions for summary
judgment, as well as its February 23, 2016, findings of fact and conclusions
of law. See Trial Court Opinion, 5/9/2016, at 1-2.



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      review of a trial court’s order granting or denying summary
      judgment is plenary, O'Donoghue v. Laurel Savings Ass'n,
      556 Pa. 349, 728 A.2d 914, 916 (1999), and our standard of
      review is clear: the trial court’s order will be reversed only
      where it is established that the court committed an error of law
      or abused its discretion. Cochran v. GAF Corp., 542 Pa. 210,
      666 A.2d 245, 248 (1995).

Pappas v. Asbel, 768 A.2d 1089, 1095 (Pa. 2001), cert. denied sub nom,

United      States    Healthcare     Systems     of    Pennsylvania,   Inc.    v.

Pennsylvania Hosp. Ins. Com., et al., 536 U.S. 938 (2002).

      Here, OneBeacon’s argument focuses on an interpretation of the

parties’ contract, in this case, the facultative certificates.

             In interpreting the terms of a contract, the cardinal rule
      followed by courts is to ascertain the intent of the contracting
      parties. If the contractual terms are clear and unambiguous on
      their face, then such terms are deemed to be the best reflection
      of the intent of the parties. If, however, the contractual terms
      are ambiguous, then resort to extrinsic evidence to ascertain
      their meaning is proper. A contract’s terms are considered
      ambiguous “‘if they are subject to more than one reasonable
      interpretation when applied to a particular set of facts.’”

Com. ex rel. Kane v. UPMC, 129 A.3d 441, 463 (Pa. 2015) (internal

citations omitted).

       OneBeacon asserts the certificates at issue are unambiguous, and

specifically provide that “the dollar amount listed as the ‘Reinsurance

Accepted’     in Section IV on the front page constitutes the maximum

amount for which OneBeacon can be liable under the certificate, including

for all expenses that can be billed to the reinsurer.” OneBeacon’s Brief at

17-18 (emphasis added).       It insists the trial court’s contrary conclusion is

based upon the court’s misinterpretation of the certificate language, and its


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non-application of controlling caselaw, in particular the Second Circuit’s

seminal decision in Bellefonte Reinsurance Co. v. Aetna Casualty &

Surety Co., 903 F.2d 910 (2nd Cir. 1990).

        Because our research confirms the trial court’s conclusion that “this is

a case of first impression for Pennsylvania courts,”      13   we begin with an

examination of Bellefonte, which is the leading decision concerning whether

a reinsurer is obligated to pay defense expenses incurred in the underlying

litigation which exceed the “Reinsurance Accepted” limit stated on the

facultative certificate.14

        The Bellefonte case arose during litigation over the Dalkon Shield

intrauterine device.         See Bellefonte, supra, 903 F.2d at 911.        The

manufacturer of the device filed a declaratory judgment action against

Aetna, the underlying insurer, seeking a determination that Aetna was

required to pay defense costs even if those costs exceeded the liability limits

stated in the policies. See id. Subsequently, the parties settled the claim

and “Aetna agreed to pay an amount substantially in excess of the cap



____________________________________________


13   Trial Court Opinion, 3/27/2015 (OneBeacon’s Motion), at 4.

14 Although decisions of the Second Circuit Court of Appeals, the federal
district courts, and our sister states are not binding on this Court, they may
provide persuasive authority, particularly where, as here, neither this Court
nor the Pennsylvania Supreme Court has considered this issue.              See
Umbelina v. Adams, 34 A.3d 151, 159-160 n.2-n.3 (Pa. Super. 2011),
appeal denied, 47 A.3d 848 (Pa. 2012).



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stated in the policies.”        Id.     Aetna’s six reinsurers, however, did not

participate in the settlement.

        Thereafter, Aetna asked its reinsurers to pay their proportionate share

of the defense costs.       The reinsurers filed a declaratory judgment action,

requesting the court “limit[] their liability to the amount stated in the

reinsurance certificates.”       Id.    The district court granted the reinsurers’

motion for summary judgment, holding the “Reinsurance Accepted” amount

was an “overall limitation and that the reinsurance certificates were cost-

inclusive and capped by that amount.” Id. at 912. Aetna then appealed to

the Second Circuit, which affirmed the decision of the district court.

        In affirming that decision, the Bellefonte Court first rejected Aetna’s

claim that the “follow the fortunes” doctrine “obligates a reinsurer to

indemnify a reinsured for all of the reinsured’s defense expenses and costs,

even when those expenses and costs” exceed the “Reinsurance Accepted”

amount listed on the certificate. Id. Similar to “General Condition (1)” in

the present case,15 the certificates in Bellefonte included a provision that

stated: “The Company warrants to retain for its own account ... the amount

of liability specified ... above, and the liability of the Reinsurer specified ...

above [i.e., amount of reinsurance accepted] shall follow that of the

Company[.]”       Id. at 911 (emphasis added). The Second Circuit held the


____________________________________________


15   See Certificate at 2, General Condition (1).



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“follow the fortunes” clause did not “render a reinsurer liable for an amount

in excess of the bargained-for coverage.” Id. at 913. The Court explained:

              To read the reinsurance certificates in this case as Aetna
        suggests—allowing the “follow the fortunes” clause to override
        the limitation on liability—would strip the limitation clause and
        other conditions of all meaning; the reinsurer would be obliged
        merely to reimburse the insurer for any and all funds paid. Such
        a reading would be contrary to the parties’ express agreement
        and to the settled law of contract interpretation.

                The “follow the fortunes” clauses in the certificates are
        structured so that they coexist with, rather than supplant, the
        liability cap.    To construe the certificates otherwise would
        effectively eliminate the limitation on the reinsurers' liability to
        the stated amounts.

Id. (citation omitted).

        Next, the Bellefonte Court also rejected Aetna’s argument that the

certificates required the reinsurers to pay defense expenses “in addition” to

liability limits. Id. Similar to “General Condition (3)” in the present case,16

the fourth provision in the Aetna certificates stated, in relevant part:

        All claims involving this reinsurance, when settled by the
        Company, shall be binding on the Reinsurer, which shall be
        bound to pay its proportion of such settlements, and in
        addition thereto, in the ratio that the Reinsurer’s loss payment
        bears to the Company’s gross loss payment, its proportion of
        expenses ... incurred by the Company in the investigation and
        settlement of claims or suits....”

Id. at 911 (emphasis supplied).                The Bellefonte Court found the “‘in

addition thereto’ provision merely outlines the different components of


____________________________________________


16   See Certificate at 2, General Condition (3).



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potential liability under the certificate [and] does not indicate that either

component is not within the overall limitation.” Id. at 913.

      In doing so, the Bellefonte Court also emphasized the “subject to”

clause in the certificates, which made all of the provisions subject to the

liability limits.   Specifically, the first provision in the Aetna certificates

stated, in pertinent part, that the reinsurer “[d]oes hereby reinsure Aetna ...

subject to the terms, conditions and amount of liability set forth herein,

as follows[.]” Id. at 911 (emphasis supplied). The Second Circuit held:

      Whatever the demand, the reinsurers’ entire obligation is
      quantitatively limited by the dollar amount the reinsurers agreed
      to reinsure. Once the reinsurers have paid up to the certificate
      limits, they have no additional liability to Aetna for defense
      expenses or settlement contributions. Any other construction
      of the reinsurance certificates would negate the phrase
      “the reinsurer does hereby reinsure Aetna ... subject to
      the ... amount of liability set forth herein.” (emphasis
      added). The reinsurers are liable only to the extent of the risk
      they agreed to reinsure. They cannot be liable for the insurer’s
      action in excess of the agreement.

             We hold that the “in addition thereto” language of the
      fourth provision of the reinsurance certificates does not exempt
      defense costs from the overall limitation on liability set forth in
      the first two provisions of each certificate. Rather, we hold that
      these costs are “subject to” the express cap on liability in each
      certificate.

Id. at 914 (emphasis supplied).

      Most courts that have considered this issue have relied upon the

Bellefonte decision and held that reinsurers are not required to pay defense

expenses that exceed the “Reinsurance Accepted” amount listed on the

certificates. The Second Circuit considered the issue again in Unigard Sec.


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Ins. Co. Inc. v. North River Ins. Co., 4 F.3d 1049 (2nd Cir. 1993). There,

the reinsured/appellant attempted to distinguish Bellefonte by relying on a

“follow the form” clause in its certificate, which provided that “the liability of

the reinsurers, ‘except as otherwise provided by this Certificate, shall be

subject in all respects to all the terms and conditions of [the underlying

policy].” Id. at 1070-1071 (emphasis in original). The reinsured/appellant

argued that this clause, not considered by the Bellefonte Court, was

significant because the reinsured was ordered to pay expenses via binding

arbitration, rather than pursuant to a settlement agreement which the

reinsurer did not participate in, as in Bellefonte.         However, the Court of

Appeals did not find the facts in Unigard distinguishable.                  Rather, it

emphasized the certificate at issue contained the same “subject to” clause as

in Bellefonte, which limited all of the reinsurer’s obligations in the

certificate to the amount listed as “Reinsurance Accepted.”               Id. at 1071.

Moreover, the Unigard Court noted:              “The efficiency of the reinsurance

industry would not be enhanced by giving different meanings to identical

standard    contract   provisions   depending      upon    idiosyncratic    factors   in

particular lawsuits.” Id.

      The    United    States   District   Court    for   the   Eastern    District   of

Pennsylvania relied upon Bellefonte and Unigard in Aetna Cas. & Sur.

Co. v. Philadelphia Reinsurance Corp. (“PRC”), No. 94-2683, 1995 WL

217631 (E.D. Pa. 1995), and Pacific Employers Ins. Co. v. Global




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Reinsurance Corp. of America (“Global/PEIC I”), No. 09-6055, 2010 WL

1659760 (E.D. Pa. 2010).

      In both cases, the district court ruled in favor of the reinsurer, finding

the language in the facultative certificates at issue was nearly identical to

the language of the certificates in Bellefonte and Unigard.          See PRC,

supra, 1995 WL 217631 at *1; Global/PEIC I, supra, 2010 WL 1659760,

at *1. Both certificates included a provision that required the reinsurer to

pay its proportionate share of losses, and “in addition thereto” its

proportionate share of expenses.      PRC, supra, 1995 WL 217631 at *1;

Global/PEIC I, supra, 2010 WL 1659760, at *1.                  Moreover, both

certificates included an introductory clause that stated the latter provisions

were made “in consideration of the payment of the premium and subject to

the … amount [or limits] of liability set forth herein[.]” PRC, supra, 1995

WL 217631 at *1; Global/PEIC I, supra, 2010 WL 1659760, at *1.

(citation omitted and emphasis in original).

      In PRC, the district court granted summary judgment in favor of the

reinsurer, finding that the reinsured, Aetna, was bound by the ruling in

Bellefonte since it was also a party in that case.     PRC, supra, 1995 WL

217631 at *4.    Aetna attempted to distinguish the facts in Bellefonte by

asserting that the underlying policies were different:     in Bellefonte, the

underlying insurance policy was cost-inclusive, while in PRC, the underlying

policy was cost-supplemental. See id. However, the district court rejected

this claim, stating: “The Bellefonte decision did not depend on whether or

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not the underlying policy included costs in the limit of liability, i.e., was cost-

inclusive.” Id. at *3 (footnote omitted). The court also refused to consider

Aetna’s evidence regarding custom in the reinsurance industry because it

determined the certificate at issue was unambiguous. See id.

       In Global/PEIC I, the district court granted the reinsurer’s motion for

judgment on the pleadings, noting:

       [I]f the parties intended to exclude expenses from the total
       liability limit, they could have made that clear through [the
       “Reinsurance Accepted”] language or another part of the
       Facultative Certificate. They did not do so.

Id. at *3. Consistent with prior case law, the Global/PEIC I Court found

the “in addition thereto” provision “merely outlined the two separate

proportions to losses and expenses that [the reinsurer] is obligated to

pay[.]” Id. at *4. Moreover, the Court emphasized the “subject to” clause

which made all of the provisions in the certificate, including the one

providing for the payment of expenses “in addition” to losses, subject to the

liability limit.17 Id.

____________________________________________


17 However, as we will discuss infra, the ruling in Global/PEIC concerning
the cap on expenses is of limited precedential value. On appeal after further
proceedings, the Third Circuit reversed the judgment against the reinsurer
and remanded for entry of a “judgment of non-liability” based on the
reinsured’s failure to comply with a condition precedent. Pacific Employers
Ins. Co. v. Global Reinsurance Corp. of Am. (“Global/PEIC II”), 693
F.3d 417, 440 (3d Cir. 2012). Significantly, the Third Circuit declined to
review the reinsured’s challenge to the expense cap issue finding the claim
“moot.” Id. at 425 n.3.




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     It also merits mention that the New York Court of Appeals followed the

Bellefonte and Unigard decisions in Excess Ins. Co. Ltd. v. Factory Mut.

Ins. Co., 822 N.E.2d 768 (N.Y. 2004), and held the reinsurer was not

required to pay “loss adjustment expenses in excess of the stated limit in

the reinsurance policy.”     Id. at 771.     In that case, the reinsurance policy

explicitly provided a “limit” of “$7 million per occurrence.” Id. at 771. The

Excess Court concluded:        “Once the reinsurers have paid the maximum

amount stated in the policy, they have no further obligation to pay [the

reinsured] any costs related to loss adjustment expenses.” Id.

     Further, the Court rejected the reinsured’s attempt to distinguish the

case from Bellefonte and its progeny because the underlying contract at

issue was property insurance rather than liability insurance. See id. at 772.

Moreover, the Excess Court found the parties could have anticipated “the

possibility of incurring loss adjustment expenses in settling a claim,” and

“nothing prevented [the reinsured] from insuring that risk either by

expressly   stating   that   the   defense     costs   were   excluded   from   the

indemnification limit or otherwise negotiating an additional limit for loss

adjustment expenses[.]” Id. The Excess Court stated: “Failing this, the

reinsurers were entitled to rely on the policy limit as setting their maximum

risk exposure.” Id. See also Utica Mut. Ins. Co. v. Clearwater Ins. Co.

(“Clearwater”), No. 6:13-CV-1178, 2014 WL 6610915 (N.D. N.Y. 2014)

(relying upon Bellefonte and Excess in granting summary judgment in

favor of reinsurer; certificate was unambiguous, and did not expressly

                                      - 18 -
J-A02013-17



exclude costs from liability cap); Continental Casualty Co. v. Midstates

Reinsurance Corp., 24 N.E. 3d 122, 127-128 (Ill. App. Ct., 1st Dist. 2014)

(affirming order granting judgment on the pleadings to reinsurer; relying

upon “similar” provisions in Bellefonte, to find certificate language “clearly

and unambiguously” caps expenses under policy limit), appeal denied, 31

N.E. 3d 767 (Ill. 2015).

      Nevertheless, both the Second Circuit Court of Appeals and the United

States District Court for the Northern District of New York have found the

language in other facultative certificates ambiguous, thereby precluding the

entry of summary judgment.         See Utica Mut. Ins. Co. v. Munich

Reinsurance America Inc. (“Munich”), 594 Fed.Appx. 700 (2nd Cir.

2014); Utica Mut. Ins. Co. v. R & Q Reinsurance Co. (“R & Q”), 2015 WL

4254074 (N.D. N.Y. 2015).

      In Munich, the certificate explicitly stated the reinsurer “agrees to

indemnify [the reinsured] against losses or damages … subject to the

reinsurance limits shown in the Declarations[.]”        Munich, supra, 594

Fed.Appx. at 703 (emphasis supplied and citation omitted). The certificate

also included a later provision making the reinsurer “liable for its proportion

of allocated loss expenses incurred by the [reinsured] in the same ratio that

the Reinsurer’s share of the settlement or judgment bears to the total

amount[.]” Id.

      Based on the above provisions, the Munich Court found the language

in the certificates was ambiguous as to whether or not the reinsurer was

                                    - 19 -
J-A02013-17



obligated to pay defense expenses in excess of the stated liability limits. On

the one hand, the Court stated:

      the Certificate can be read to exclude expenses from [the
      reinsurer’s] $5 million limit of liability.       The fact that [the
      reinsurer’s] obligation to indemnify [the reinsured] against
      “losses or damages” is expressly made “subject to” the
      Certificate’s limit of liability suggests that the parties intended to
      exclude [the reinsured’s] liability for expenses—which is not
      expressly made “subject to” the limit of liability—from that limit.

Id. However, the Court also noted that while the “subject to” provision did

not expressly include settlement payments, the reinsured “does not argue

that the limit of liability excludes settlements.” Id. Accordingly, the Court

found “the Certificate is ambiguous as to whether its limit of liability includes

expenses” and remanded for the district court’s consideration of extrinsic

evidence. Id.

      In doing so, the Court of Appeals specifically found the facts in

Bellefonte, Unigard and Excess distinguishable. The Court opined:

      In holding that the Certificate’s limit of liability unambiguously
      includes expenses, the district court [herein] concluded that
      three prior decisions—two from this Court and one from the New
      York Court of Appeals—established a presumption that limits of
      liability in facultative reinsurance certificates are unambiguously
      expense-inclusive. But those decisions interpreted different
      policies than the one at issue in this case. The former two
      cases [Bellefonte and Unigard] turned on a provision in the
      policies at issue that expressly made all of the reinsurers’
      obligations “subject to” the limit of liability; they did not hold
      that a limit of liability, without such “subject to”
      language, is presumptively expense-inclusive. In the third
      case, Excess … the Court of Appeals arguably extended the
      rationale of our earlier decisions and suggested that a limit of
      liability, standing alone, is presumptively expense-inclusive
      because it serves to cap a reinsurer’s total exposure (for losses

                                     - 20 -
J-A02013-17


      and expenses) at a specific, negotiated amount.               This
      presumption may best reflect the contracting parties’ intentions
      in the mine run of cases, but in the reinsurance context as in any
      other, a party is bound by the terms to which it has agreed. And
      unlike the district court, we do not read Excess as holding
      that any presumption of expense-inclusiveness can be
      rebutted only through express language or a separate
      limit for expenses. As we have explained, the Certificate’s
      statement that “losses or damages” are “subject to” the limit of
      liability reasonably implies that expenses are not. Although this
      negative implication is not strong enough—in the context of the
      Certificate as a whole—to demonstrate that expenses are
      unambiguously excluded from the limit of liability, we think it is
      sufficient to render the Certificate ambiguous, even in light of
      Excess.

Id. at 704 (emphasis supplied and internal citations omitted).     Therefore,

the Munich Court interpreted the certificate based on the language provided

therein, and rejected the presumption created by the Excess Court that

defense costs are capped by the liability limits unless they are explicitly

excluded elsewhere in the certificate.

      In R & Q, supra, the District Court for the Northern District of New

York considered whether defense costs were capped by the liability limits

when the certificate at issue provided, inter alia: (1) the reinsurance was

“subject to the terms hereon and the general conditions set forth on the

reverse side hereof[;]” (2) the reinsurer agreed to indemnify the reinsured

“against loss or damage … subject to the Reinsurance Accepted limits shown

in the Declarations[;]” and (3) when a reinsured settles an underlying claim,

should the reinsured’s “policy limit include expenses, the Reinsurer’s

maximum amount of liability shall be as stated in Item 4, of the

Declarations.” R & Q, supra, 2015 WL 4254074, at *1-2.


                                    - 21 -
J-A02013-17



      The R & Q Court first held the “subject to” clause at issue, while

similar to the language in Bellefonte and Unigard, was nonetheless

distinguishable. The Court explained:

      The preamble in this case makes the reinsurer’s obligations
      “subject to the terms hereon and the general conditions” of the
      Certificate. This “subject to” clause is, as R & Q argues, similar
      to those in Bellefonte and Unigard because one of the “terms
      hereon” is the amount of reinsurance accepted. But the “subject
      to” clause in this case does not unambiguously cap R & Q's
      liability for expenses to that policy limit because it does not
      expressly refer to the liability limit and, as set forth below, two
      of the conditions in the Certificate can be interpreted to support
      Utica's claim that R & Q is liable for expenses in excess of the
      policy limit.

Id. at *8 (emphasis in original).

      Next, the Court found that the R & Q certificate contained language

nearly identical to that in Munich, by which the reinsurer agreed to

indemnify the reinsured “against loss or damage … subject to the

Reinsurance Accepted limits[.]” Id. at *9 (emphasis removed). The R & Q

Court noted that, as in Munich, this language “reasonably implied that

expenses are not subject to those limits.” Id.

      Lastly, the Court emphasized the following certificate language,

applicable when the reinsured settles an underlying claim:       “[S]hould the

[reinsured’s] policy limit include expenses, the Reinsurer’s maximum limit of

liability shall be stated in Item 4, of the Declaration [i.e., $1 million].” Id.

(citation omitted).   The R & Q Court commented:          “[T]he fact that the

Certificate states one particular instance in which [the reinsurer’s] liability



                                     - 22 -
J-A02013-17



limit includes expenses implies that its liability limit does not include

expenses in other instances.” Id. Accordingly, the Court found the contract

language ambiguous with regard to whether expenses were capped by the

liability limits. Id. at *10.

      With this background in mind, we consider the trial court’s ruling in the

present case.    In comparing the language of the facultative certificates at

issue herein with that in Bellefonte, the trial court determined that “while

similar” the language of the present certificates contain “slight variations

which lead[] to a different conclusion.”       Trial Court Opinion, 3/27/2015

(OneBeacon’s Motion), at 5. The trial court emphasized that in Munich, the

Second Circuit “clarified that Bellefonte did not establish a blanket rule that

all limits of liability are presumptively expense-inclusive,” and that each

certificate must be analyzed “as a whole to discern its meaning[.]” Id.

      With respect to the certificate language, the trial court opined:

      First, the language on the front side of the certificates states the
      premium is “subject to the general conditions set forth on the
      reverse side hereof ….” General Condition 1 reinforces this
      premise as it states that “[t]he liability … shall be subject … to all
      the terms and conditions of the Company’s policy.”               The
      difference between this language and that of Bellefonte cannot
      be ignored. Instead of the terms and conditions being
      subject to the liability as in Bellefonte, the liability is
      subject to the terms and conditions. This places greater
      emphasis on the conditions themselves, which may trump other
      aspects of the certificates. As a result, a condition that
      excludes expenses in calculating the total loss limit holds
      more weight than the amount of “Reinsurance Accepted”
      when interpreting these certificates.

            Bellefonte highlighted the importance of the “subject to”
      clause, and [Munich] demonstrated the ability of a court to

                                     - 23 -
J-A02013-17


      reach a different interpretation. If anything, the terms of the
      certificates may have created a presumption of expense-
      exclusiveness. Having scrutinized the precise terms on their
      own, and the viewing the certificate as a whole, this court finds
      that [OneBeacon] is not entitled to summary judgment on this
      issue.

Id. at 5-6 (some emphasis in original; some emphasis added).

      OneBeacon argues, however, that the language of the facultative

certificates unambiguously limits its liability, for both losses and expenses,

to the “Reinsurance Accepted” amount in Section IV. OneBeacon’s Brief at

17-18.

      First, it contends the “Reinsurance Accepted” section does not

distinguish between losses and expenses; therefore, it caps both. Id. at 23.

Second, OneBeacon claims that while General Condition (3) lists the two

components of the reinsurance – losses and expenses – it does not “in any

way differentiate between ‘loss’ and ‘expenses’ with respect to application of

the Reinsurance Accepted amount.”             Id. at 21.    Third, OneBeacon

emphasizes the language in General Condition (1) – the “following form”

clause – which provides “the liability of [OneBeacon] specified in Section

IV shall follow that of [Century/PEIC.]” Id. at 23, quoting Certificate at 2,

General Condition (1). Because the Condition does not state “the liability …

specified in Section IV” applies only to losses, OneBeacon maintains it

must apply to expenses as well.        Id. at 24.    Moreover, while General

Condition (1) further states the reinsurance is “subject in all respects” to the

underlying policy’s terms - which supports concurrency between the

reinsurance and the underlying policy – OneBeacon stresses that the

                                     - 24 -
J-A02013-17



language is precipitated by the clause “expect as otherwise specifically

provided herein[.]”        Certificate at 2.       OneBeacon argues “because the

‘Reinsurance Accepted’ amount is ‘specifically provided’ in Section IV … [it]

constitutes an exception to the general condition that the certificate is

subject    to   the   terms    and    conditions    of   the   [underlying]   policy.” 18

OneBeacon’s Brief at 24.

____________________________________________


18   We note OneBeacon also repeatedly challenges the trial court’s
“misquotation” of the certificate language. OneBeacon’s Brief at 18-19, 22-
23. Specifically, it points to Finding of Fact # 27 in the court’s post-trial
findings of fact and conclusions of law, where the trial court states the
following:

       27. Section 1 of each certificate - which states that the “liability
       of the reinsurer shall be subject to the terms and conditions of
       the condition’s policy”-provides that “liability of the reinsurer
       shall follow that of the ceding company” and that Section 3
       provides that the “expenses will be paid in addition to limits.”
       [See N.T. 1/11/16 PM pp. 45-46].

Trial Court’s Findings of Fact and Conclusions of Law, 2/23/2016, at ¶ 27.
OneBeacon claims the trial court “alters and omits crucial language in the
actual text” of General Condition (1), and incorrectly quotes the language in
General Condition (3), which states “expenses will be paid in addition to
loss,” not limits.    OneBeacon’s Brief at 22-23 (emphasis in original).
However, we find this argument is a red herring. Finding of Fact 27 appears
under the heading “Industry Custom and Usage.” Trial Court’s Findings of
Fact and Conclusions of Law, 2/23/2016, at ¶ 27. The trial court was
quoting the testimony of Century/PEIC’s reinsurance industry expert, Robert
Hall, regarding his interpretation of the certificate language, not the actual
language itself. See Trial Court’s Findings of Fact and Conclusions of Law,
2/23/2016, at ¶ 27. Our analysis, for purposes of reviewing the summary
judgment ruling, is limited to the certificate language.




                                          - 25 -
J-A02013-17



      Furthermore, OneBeacon argues “a consistent line of case law,” led by

Bellefonte, supports its interpretation of the facultative certificates.

OneBeacon’s Brief at 27. It maintains:

      [S]tate and federal courts around the country have followed
      Bellefonte on multiple occasions in interpreting facultative
      certificates under Pennsylvania, New York, or Illinois law, and
      holding that the “Reinsurance Accepted” amount stated in a
      facultative certificate unambiguously sets forth the full extent of
      the reinsurer’s liability.

Id. at 30. OneBeacon insists “[t]here is no material difference” between the

relevant language at issue herein and that in Bellefonte.            Id. at 29.   In

addition, it emphasizes that the certificates in Excess, Clearwater, and

Continental Casualty did not contain the “subject to” clause, which the

trial court found to be lacking herein.      Id. at 35.   Moreover, OneBeacon

argues Munich and R & Q are distinguishable since those certificates

explicitly stated that the “reinsurer’s obligation to pay ‘losses or damages’

was subject to the ‘Reinsurance Accepted’ amount, but did not provide that

the obligation to pay expenses was subject to that restriction.”         Id. at 36

(emphasis omitted).

      Conversely,   Century/PEIC    maintain     the   certificate    language    is

ambiguous, particularly in light of the presumption of concurrency in the

reinsurance industry.   See Century/PEIC’s Brief at 21.        They explain this

presumption is necessary so that the “reinsurer, which typically agrees to

accept a portion of the policy risk in exchange for the same portion of the

policy premium, is actually taking on risk proportional to its premium share.”


                                    - 26 -
J-A02013-17



Id. at 22 (emphasis omitted). Therefore, the “following form” language in

General Condition (1) ensures that where the underlying policy covers

defenses expenses above the liability limits, so does the reinsurance policy.

See id. at 23-24. Furthermore, Century/PEIC maintain Bellefonte and its

progeny are distinguishable based on their facts.

       Considering the certificates herein, we agree General Conditions (1)

and (3) contain language almost identical to that in Bellefonte. However,

as the trial court points out, the “subject to” clause in the present case is

materially different.

       In Bellefonte and its progeny, the “subject to” clause stated the

reinsurance was “subject to the terms, conditions and amount of liability

set forth herein.” Bellefonte, supra, 903 F.2d at 911 (emphasis added).19

In the present case, however, the “subject to” clause states the reinsurance

is “subject to the general conditions set forth on the reverse side.”

Certificate at 1 (emphasis added). It does not expressly provide that all of

the coverage is subject to the “Reinsurance Accepted” limit.20
____________________________________________


19 See also Unigard, supra, 4 F.3d at 1071 (“subject to the terms,
conditions, limits of liability and Certificate provisions set forth herein.”)
(emphasis and citation omitted); PRC, supra, 1995 WL 217631 at *1
(“subject to the terms, conditions and amount of liability set forth herein”)
(emphasis and citation omitted); Global/PEIC I, supra, 2010 WL 1659760,
at *1 (“subject to the terms, conditions and limits of liability set forth
herein”) (citation omitted and emphasis in original).

20Nor, however, does the certificate language herein imply that only “losses
or damages” are subject to the “Reinsurance Accepted” amount as in
(Footnote Continued Next Page)


                                          - 27 -
J-A02013-17



      Furthermore, Century/PEIC’s “underlying policies provide coverage for

expenses in addition to the limits.”           Trial Court’s Findings of Fact and

Conclusions of Law, 2/23/2016, at ¶ 29, citing N.T., 1/11/2016 (afternoon

session), at 43-44. Therefore, because the reinsurance certificate “follows”

that of the underlying policy, it would cover expenses above the liability

limit. This is factually different from the situation in Bellefonte, where the

(Footnote Continued) _______________________

Munich and R & Q. The language of the certificates at issue does not
explicitly include or implicitly exclude defense expenses from the
“Reinsurance Accepted” cap.

       We note OneBeacon argues the “subject to” clause distinction is
irrelevant because, while the certificates do not expressly state expenses are
subject to the “Reinsurance Accepted” amount, they also do not expressly
state losses are subject to that limit either. Accordingly, OneBeacon argues
under Century/PEIC’s reasoning, there would be “no cap whatsoever on
either component of reinsurer liability[.]” OneBeacon’s Brief at 22 n.11. We
disagree with this characterization. Clearly, the “Reinsurance Accepted”
amount limits OneBeacon’s liability to pay for losses. Nonetheless, it is the
language advocating concurrency (and the fact the underlying policy exclude
expenses from their limits), and the acknowledgment that expenses will be
paid “in addition to” losses, which muddles the meaning of the certificate as
a whole.

       Furthermore, OneBeacon asserts Century/PEIC’s own expert, Robert
Hall, conceded at trial that the “inclusion or absence of the ‘subject to’ the
‘amount of liability’ language found in Bellefonte is irrelevant” and his
interpretation of the certificates would be the same even if they included the
Bellefonte “subject to” clause. See OneBeacon’s Brief at 35. However,
OneBeacon is comparing apples to oranges. Hall’s testimony concerned his
opinion regarding the custom and usage of reinsurance contracts in the early
1980’s. See N.T., 1/11/2016 PM, at 74-75 (Hall explaining, “I’m not here to
testify about my legal opinion. I’m here to testify about the understanding
of the industry at the time.”). The relevancy of the “subject to” clause in
Bellefonte, however, depends upon our interpretation of a legal decision.




                                         - 28 -
J-A02013-17



defense costs were paid as part of the reinsured’s settlement agreement

with the underlying insured – an agreement to which the reinsurer was not a

party.     Accordingly, absent language providing the entire certificate is

“subject to” the “Reinsurance Accepted” amount, a reasonable interpretation

of the language is that where the underlying policy covers expenses in

addition to liability limits, the reinsurance certificate provides the same

coverage.21

         Nor do we find the language in General Condition (1) compels a

different result. OneBeacon emphasizes that General Condition (1) states its

____________________________________________


21 We note the PRC Court found the fact that expenses were not included in
the underlying policy in Bellefonte insignificant, stating: “The Bellefonte
decision did not depend on whether or not the underlying policy included
costs in the limit of liability, i.e., was cost-inclusive.” PRC, supra, 1995 WL
217631, at *3. However, it merits emphasis that the decision in PRC also
did not turn on this fact. Rather, the PRC Court concluded that Aetna, who
was the reinsured in both Bellefonte and PRC, was “estopped” by the
holding in Bellefonte. Id. at *4.

       Moreover, the District Court for the Southern District of New York
rejected a similar claim in Global Reinsurance Corp. of American v.
Century Indemnity Co. (“Global/Century I”), 2014 WL 4054260, *5
(S.D.N.Y. 2014), citing Unigard as support. However, as we will discuss
infra, on appeal, the Second Circuit questioned the legitimacy of the
Global/Century I decision, before ultimately certifying that exact question
to the New York Court of Appeals. See id. at 128 (certifying question to
New York Court of Appeals to decide if the decision in Excess, supra,
“impose[d] either a rule of construction, or a strong presumption, that a per
occurrence liability cap in a reinsurance contract limits the total reinsurance
available under the contract to the amount of the cap regardless of whether
the underlying policy is understood to cover expenses[.]”). Therefore, the
case law that undermines the significance of the coverage in the underlying
policies is far from settled.



                                          - 29 -
J-A02013-17



liability as “specified in Section IV” follows that of the reinsured, and notes

the terms and conditions of the certificate follow that of the underlying policy

“except as otherwise specifically provided herein.”              Certificate at 2.     It

asserts that because the language does not specify the amount applies only

to losses, its “liability” specified in Section IV must include expenses as well.

See OneBeacon’s Brief at 24. Further, OneBeacon argues that because the

“Reinsurance     Accepted”   limit    is    “specifically    provided   [therein],”   the

certificate coverage follows the terms and conditions of the underlying policy

only to the extent of the “Reinsurance Accepted” amount. Id.

      However, viewing the certificate as a whole, we do not find the

language unambiguously limits OneBeacon’s entire liability for losses and

expenses    to   the   “Reinsurance         Accepted”       amount.      A   reasonable

interpretation of the certificate’s reference to OneBeacon’s “liability …

specified in Section IV” is that it refers only to liability for losses.         This is

particularly true in light of General Condition (3), which requires the

reinsurer to pay its proportion of losses, “and in addition thereto” its

proportion of expenses. Certificate at 2. Similarly, the “except as otherwise

provided herein” language is also ambiguous because the certificate does

not explicitly state that expenses are included in (or “subject to”) the

“Reinsurance Accepted” limit.        Pursuant to this reasoning, if the certificate

follows the underlying policy, expenses must be reimbursed in addition to

the policy limits. Accordingly, because we agree with the conclusion of the

trial court that the certificate language is ambiguous as to whether defense

                                           - 30 -
J-A02013-17



expenses are limited by the “Reinsurance Accepted” amount, the court

properly    denied     OneBeacon’s       motion      for   summary    judgment,   and

OneBeacon is entitled to no relief on its first claim.

       Next, OneBeacon argues the trial court “compounded” its pretrial

ruling - finding the language of the facultative certificates was ambiguous

and permitting Century/PEIC to present extrinsic evidence - by relying on

testimony that was “inadmissible and does not support the trial court’s

interpretation of the certificates.”22          OneBeacon’s Brief at 38 (footnote

omitted). Specifically, OneBeacon asserts the trial court cited no evidence in

support of its factual finding that OneBeacon’s share of the premium

corresponded with the share of the risk it undertook. See id. at 30, citing

Trial Court’s Findings of Fact and Conclusions of Law, 2/23/2016, at ¶ 24.

Moreover,      OneBeacon        contends       the   testimony   of    Century/PEIC’s

underwriters, Ronald Moreland and William Greene, was “unpersuasive” for

the following reasons:

       (i) neither has any independent recollection of the placement of
       the reinsurance certificates at issue; and (ii) neither
       communicated to OneBeacon’s predecessor [Century/PEIC’s]
       purported intent that expenses would be covered in excess of
       “Reinsurance Accepted” amounts (and there is no other evidence
       demonstrating that OneBeacon’s predecessor knew, or had
       reason to know of [this] purported intent).

____________________________________________


22We note that OneBeacon couples these two objections together and fails
to differentiate how the testimony was inadmissible, as opposed to
unpersuasive.



                                          - 31 -
J-A02013-17



OneBeacon’s Brief at 39 (record and case citation omitted).                Further,

OneBeacon claims the testimony of Century/PEIC’s expert witness, Robert

Hall, was inadmissible because Hall offered only his own interpretation of the

certificate language, and did not establish that any of the words used in the

certificate   had   a   “specialized   meaning   in   the   reinsurance   industry.”

OneBeacon’s Brief at 41.

      When considering a trial court’s verdict in a non-jury trial, we must

bear in mind the following:

      Our standard of review in non-jury trials is to assess whether the
      findings of facts by the trial court are supported by the record
      and whether the trial court erred in applying the law. Upon
      appellate review the appellate court must consider the evidence
      in the light most favorable to the verdict winner and reverse the
      trial court only where the findings are not supported by the
      evidence of record or are based on an error of law. Allegheny
      County Housing Authority v. Johnson, 908 A.2d 336, 340
      (Pa.Super.2006). Our scope of review regarding questions of
      law is plenary. Id.

Skiff re Bus., Inc. v. Buckingham Ridgeview, LP, 991 A.2d 956, 962

(Pa. Super. 2010).       Moreover, “[t]he [trial] court’s findings are especially

binding on appeal, where they are based upon the credibility of the

witnesses, unless it appears that the court abused its discretion or that the

court’s findings lack evidentiary support or that the court capriciously

disbelieved the evidence.” Infante v. Bank of Am., N.A., 130 A.3d 773,

776 (Pa. Super. 2015) (quotation omitted), appeal denied, 138 A.3d 5 (Pa.

2016).




                                        - 32 -
J-A02013-17



       Here, our review of the record reveals ample support for the trial

court’s factual findings. Although, as OneBeacon contends, the court did not

provide a record citation to support Finding of Fact #24 - pertaining to

proportionality between the share of the premium and the corresponding

share of the risk - Century’s underwriter, Ronald Moreland, testified that

“one of the cardinal rules of reinsurance was that everybody be treated

equally with regard to risk and the premiums payable on that … if one

company was taking one-fifth of the risk, they got one-fifth of the

premium.”23 N.T., 11/11/2016 AM, at 101. See also N.T., 1/11/2016 PM,

at   48-49    (Hall   reviewing      Exhibit   P-13,   Century’s   Memorandum   of

Reinsurance, showing reinsurer received same percentage of the premium




____________________________________________


23 Moreland later explained, however, that the proportion of the premium
was not paid in the exact same percentage as the risk.              See N.T.,
1/11/2016, at 15-16.       For example, OneBeacon’s predecessor did not
receive 12% of the premium although it insured 12% of the risk, which
would have been $3 million of $25 million. Id. at 15. Rather, Moreland
testified the risk was layered with $5 million in the bottom layer, another $5
million in the middle layer, and $15 million in the top layer. Id. He further
explained:

       And a premium was determined for each of those three layers
       based upon the risk. Usually the bottom – we call it the bottom
       layer, the first 5 million, which has the most potential for risk,
       would get a larger premium, certainly larger than the second 5
       million, and then the 15 would get even a smaller premium[.]

Id. at 16.



                                          - 33 -
J-A02013-17



as the percentage of the risk it assumed; “If you do the math, … 80 percent

of the risk, 80 percent of the premium went to the reinsurers.”).24

       Furthermore, with regard to OneBeacon’s objection to the testimony of

Century/PEIC’s underwriters, Moreland and Greene, we note both testified

that at the time the facultative certificates herein were issued, it was their

intention, and, indeed, a requirement of their employer, that the reinsurance

provide concurrent coverage with the underlying policies.                    See N.T.,

1/11/2016      AM,    at   85-86    (Moreland,     the   underwriter   for   Century’s

predecessor, testifying that all reinsurance certificates were reviewed by

____________________________________________


24 In its Reply Brief, OneBeacon emphasizes that, in addition to their
proportionate share of the commission, Century/PEIC retained a ceding
commission of up to 32.5% of the gross premium. OneBeacon’s Reply Brief
at 20-21. Because this ceding commission “could or did include ‘income’ or
a ‘fee’” for Century/PEIC, OneBeacon argues “the economics of the
transactions contradict [Century/PEIC’s] contention that the certificates
should be construed to hold OneBeacon liable for a proportionate share of
[their] expenses irrespective of the ‘Reinsurance Accepted’ caps.” Id. at 22
(emphasis removed).

       Both Moreland and Greene testified Century/PEIC took a ceding
commission which covered administrative expenses and overhead. Moreland
explained Century’s ceding commission of 27.5% included 15% for the
insurance broker who brought the underlying insured to Century, and the
remaining was for “premium taxes” and “overhead.” N.T., 1/11/2016 PM, at
22.     Greene testified PEIC retained a 7.5% override of the ceding
commission that was used to pay “administrative expenses, paid their board,
their taxes, and I’m sure there was income for – a fee from the use of the
paper.” Deposition of William H. Greene, 12/3/2014, at 92. Indeed,
Century/PEIC handled all of the paperwork for the claims, and brought the
business to the reinsurers. Moreover, there was no testimony this ceding
commission was contemplated to cover defense expenses.




                                          - 34 -
J-A02013-17



underwriters to ensure concurrency with the underlying policy; “the

important thing was to make sure that if [a policy] was reinsured, it was a

hundred percent reinsured”); Deposition of William H. Greene, 12/3/2014, at

122-123 (Greene, PEIC’s underwriter, explaining “it was paramount that the

reinsurance which was purchased was concurrent with the policy,” and that

his “job security depended upon [it]”). To the extent OneBeacon argues this

testimony was inadmissible because neither Moreland nor Greene had an

independent recollection of the certificates at issue, we agree with

Century/PEIC    that   this   criticism     relates   to   the   credibility,   not   the

admissibility, of the underwriters’ testimony. Here, the trial court, sitting as

fact-finder, concluded their testimony was credible, and we find no basis to

disturb the court’s determination. See Infante, supra.

      We also reject OneBeacon’s contention that the testimony of Moreland

and Green was “not only inadmissible but unpersuasive” because neither

communicated to OneBeacon their subjective intent that the “Reinsurance

Accepted” amount was expense-exclusive. See OneBeacon’s Brief at 39. In

support of this claim, OneBeacon focuses on to the following language in a

40-year-old decision of this Court: “Also, a statement by one of the parties

as to his understanding of ambiguous terms, even if made when the policy

was being negotiated, is not material unless it was communicated to the

other party.” Celley v. Mut. Benefit Health & Acc. Ass'n, 324 A.2d 430,

435 (Pa. Super. 1974).        However, we find the factual posture of Celley

distinguishable from the present matter.

                                          - 35 -
J-A02013-17



      In Celley, the testimony at issue was being offered to explain the

insured’s understanding of the term “eye trouble” in an elimination

endorsement of a medical insurance policy. Id. at 432. The insured and his

agent believed the term excluded only medical issues involving the insured’s

right eye, because he had surgery on his right eye in the past. Id. at 433.

However, the insurance company interpreted the endorsement to exclude

coverage on both eyes.       Id.    Significantly, the insured also signed a

document acknowledging the insurance company was not bound by any

statements made by or to an agent.        Id.   At trial, the court declined to

permit the insurance agent to testify regarding his conversations with the

insured, and their mutual understanding regarding the policy exclusion. Id.

In that context, it was evident neither the insurance agent nor the insured

communicated their mutual understanding regarding the exclusion to the

insurance company.      Here, however, Moreland and Greene’s testimony

regarding their intent in obtaining reinsurance coverage did not concern their

“subjective” intent of otherwise unambiguous terms; rather, their testimony

reflected the industry’s custom at that time. Accordingly, we find no abuse

of discretion of the part of the trial court in permitting and considering their

testimony.

      With regard to the testimony of Century/PEIC’s expert, Robert Hall, we

reiterate:   “[t]he admission of expert testimony is a matter of discretion

[for] the trial court and will not be remanded, overruled or disturbed unless




                                     - 36 -
J-A02013-17



there was a clear abuse of discretion.” Portside Inv'rs, L.P. v. N. Ins. Co.

of N.Y., 41 A.3d 1, 12 (Pa. Super. 2011) (quotation omitted).

       OneBeacon contends the court erred in admitting Hall’s testimony

because he “simply offered his own inadmissible interpretation of the

certificates.”   OneBeacon’s Brief at 41.      Again, we disagree.   Hall offered

expert testimony on custom and usage regarding the language in facultative

certificates issued during the early 1980’s. See N.T., 1/11/2016 PM, at 39-

40. The Pennsylvania Supreme Court has held custom and usage testimony

may be relevant in contract disputes:

       Where terms are used in a contract which are known and
       understood by a particular class of persons in a certain special or
       peculiar sense, evidence to that effect is admissible for the
       purpose of applying the instrument to its proper subject matter.

Resolution Trust Corp. v. Urban Redevelopment Auth. of Pittsburgh,

638 A.2d 972, 975 (Pa. 1994). See id. at 973 (finding that trial court erred

in   granting    partial   summary   judgment    because   “mortgage    guaranty

insurance company, in the absence of a policy provision, may show through

custom in the trade that the mortgagee financial institution is responsible for

the misrepresentations of a mortgagor[.]”).

       Accordingly, we find no abuse of discretion on the part of the trial

court in permitting Hall to testify “on custom and usage in the facultative




                                      - 37 -
J-A02013-17



reinsurance industry,”25 particularly since OneBeacon presented its own

expert, Jack Koepke, who disputed Hall’s findings. Here, Hall opined:

        My conclusion was that it was the understanding of the industry
        at the time that the reinsurance accepted portion of these
        facultative certificates was not a cap on liability and expenses.
        It was only a cap on indemnity.

N.T., 1/11/2016 PM, at 40. Conversely, Koepke testified that, based on his

experience, he did not “think there was an understanding of that nature in

the industry at that time.” N.T., 1/12/2016, at 28. Rather, Koepke stated,

“The underwriting intent is expressed in the contract as written, and the way

it is written, there is no intent to cover expenses in addition to limits.” Id.

at 29-30.     The trial court, sitting as fact finder, reconciled these differing

opinions in favor of Century/PEIC.26           See Infante, supra.   No relief is

warranted.

        Next, OneBeacon argues the trial court erred in refusing to find as a

matter of law that Century/PEIC were collaterally estopped from “asserting

that any certificate at issue obligates OneBeacon to pay expenses in excess

____________________________________________


25   Trial Court’s Findings of Fact and Conclusions of Law, 2/23/2016, at ¶ 25.

26 We note the trial court did not explicitly state Hall’s expert testimony was
more credible than Koepke’s expert testimony. See Trial Court’s Findings of
Fact and Conclusions of Law, 2/23/2016, at ¶¶ 25-29.           Rather, the court
stated:    “The evidence provided by the expert witnesses … while not
dispositive, did provide some assistance in placing the certificate language in
context with the policy provisions.” Id. at ¶ 26. Nevertheless, one can infer
from the court’s analysis of the certificate language and citation to the
record, that it relied upon Hall’s interpretation. See id. at ¶¶ 27-29.



                                          - 38 -
J-A02013-17



of   its   ‘Reinsurance   Accepted’   amount.”     OneBeacon’s     Brief   at   42.

Specifically, OneBeacon maintains the court erred in denying its motion for

summary judgment on this claim, and later, in refusing to address it

following trial. See id. at 49-51.

       Collateral estoppel bars the re-litigation of a previously decided issue

in a later action. Balent v. City of Wilkes-Barre, 669 A.2d 309, 313 (Pa.

1995). Collateral estoppel applies only when all of the following elements

are met:

        (1) the issue decided in the prior case is identical to one
       presented in the later case; (2) there was a final judgment on
       the merits; (3) the party against whom the plea is asserted was
       a party or in privity with a party in the prior case; (4) the party
       or person privy to the party against whom the doctrine is
       asserted had a full and fair opportunity to litigate the issue in the
       prior proceeding and (5) the determination in the prior
       proceeding was essential to the judgment.

Heldring v. Lundy Beldecos & Milby, P.C., 151 A.3d 634, 644 (Pa. Super.

2016) (citation omitted). Moreover, a federal court judgment is entitled to

“due force and full effect in state courts.” Weissberger v. Myers, 90 A.3d

730, 733 (Pa. Super. 2014) (quotation omitted).

       Here, OneBeacon asserts the decisions of the federal district courts in

Global/Century I, supra, and Global/PEIC I, supra, bar Century/PEIC’s

claim herein. In both cases, the court considered the same question raised

here, that is, whether the reinsurer’s obligation to pay defense expenses was

capped by the “Reinsurance Accepted” amount listed on the parties’

certificate.   See Global/Century I, supra, 2014 WL 4054260, at *4;


                                      - 39 -
J-A02013-17



Global/PEIC I, supra, 2010 WL 1659760, at *2.              Furthermore, in both

cases, the district court, citing Bellefonte and its progeny, found the

language of the certificates limited the reinsurer’s total liability, inclusive of

expenses, to the “Reinsurance Accepted” amount. See Global/Century I,

supra, 2014 WL 4054260, at *5 (referring to “subject to” clause and

stating, “[h]ere the relevant language in Global’s Certificates is nearly

identical to the language relied on by the Second Circuit in Bellefonte.”);

Global/PEIC I, supra, 2010 WL 1659760, at *5 (noting preamble in

certificate “makes clear that Global’s reinsurance obligations,” including

payment of expenses are “‘subject to the … limits of liability’ contained in

the   Declarations[;]”     finding   Bellefonte    “well-reasoned,    persuasive

authority”) (emphasis removed).          Because the identical argument is

presented in this case, and Century/PEIC were both parties in the former

cases and had “a full and fair opportunity” to litigate this issue, OneBeacon

maintains they are bound by district court rulings in the Global decisions.

OneBeacon’s Brief at 43, 46, 48.

      In denying OneBeacon’s motion for summary judgment, the trial court

stated:

             [OneBeacon] also moves for summary judgment on the
      grounds that [Century/PEIC] are collaterally stopped from
      arguing their case due to the holdings in [Global/PEIC I], and
      [Global/Century I]. However, these cases do not hold the
      necessary weight of final judgments at this juncture in order to
      apply collateral estoppel against [Century/PEIC].3 Also, this
      court shall not apply collateral estoppel on the basis that the
      slightly different wording of the “subject to” clause may prove to
      be an influential factor in the interpretation of the certificate.

                                      - 40 -
J-A02013-17


        __________
           3 In PEIC v. Global, due to its finding on another issue,
           the Third Circuit chose not to consider the “limit-of-liablity”
           issue and dismissed it as moot. PEIC, 693 F.3d at 425
           n.3. The court in Global v. Century referred the matter
           to a Magistrate judge so the parties could negotiate the
           terms of a final order. Global, 2014 WL 4054260; see
           also [OneBeacon’s] Motion for Summary Judgment, at 27.
           Since the finding remains subject to a motion for
           reconsideration and has not been appealed, it does not
           qualify as a final judgment.

Trial Court Opinion, 3/27/2015 (OneBeacon’s Motion), at 7-8.

        We find no error or abuse of discretion in the ruling of the trial court.

See Pappas, supra.             Although the issue in Global/Century I and

Global/PEIC I was identical to the issue in the present case, OneBeacon

glosses over the fact that the language in the reinsurance certificates under

review is different.         Indeed, OneBeacon maintains “[t]he facultative

certificates at issue in the Global cases are identical in all relevant respects

to the certificate at issue in this case.”         OneBeacon’s Brief at 43.   We

disagree. As explained supra, the “subject to” clause in the present case is

materially different from that in Bellefonte, and those in the Global

decisions.     Here, as noted above, the “subject to” clause states the

reinsurance is “subject to the general conditions set forth on the reverse

side,”27 rather than “subject to the terms, conditions and amount [or

limits] of liability set forth herein[,]” as the certificates in Bellefonte and
____________________________________________


27   Certificate at 1 (emphasis added).




                                          - 41 -
J-A02013-17



the Global cases.28        Therefore, OneBeacon’s certificate does not expressly

provide that all of the coverage (including expenses) is subject to the

“Reinsurance Accepted” limit.          Consequently, we conclude the materially

different language in the certificates herein precludes the operation of

collateral estoppel. See Restatement (Second) of Judgments § 27 (1982),

Comment (c) (“Preclusion ordinarily is proper if the question is one of the

legal effect of a document identical in all relevant respects to another

document whose effect was adjudicated in a prior action.”) (emphasis

added).

       Furthermore, we also agree with the trial court’s determination that

the Global decisions do not constitute final judgments for purposes of

collateral estoppel.      With regard to Global/PEIC I, after granting the

reinsurer’s (Global’s) motion for judgment on the pleadings on the expense

issue, the district court later denied Global’s motion for summary judgment

on its claim that the PEIC had breached another part of the contract, which

relieved Global of its obligation to provide coverage.                 See Pacific

Employers Ins. Co. v. Global Reinsurance Corp. of Am. (“Global/PEIC

II”), 693 F.3d 417, 425 (3d Cir. 2012).            Following this ruling, the parties

stipulated to the entry of a final judgment, with Global’s coverage, including


____________________________________________


28 Bellefonte, supra, 903 F.2d at 911 (emphasis added); Global/Century
I, supra, 2014 WL 4054260, at *5; Global/PEIC I, supra, 2010 WL
1659760, at *4.



                                          - 42 -
J-A02013-17



defense costs, capped by the “Reinsured Accepted” amount on the

certificate.   Both parties appealed, and PEIC specifically challenged the

court’s earlier ruling that Global’s obligation to pay expenses was capped by

the liability limit. See id.

      On appeal, the Third Circuit found the district court’s summary

judgment ruling was erroneous, and that PEIC’s failure to comply with a

condition precedent excused Global’s obligation to provide any coverage

under the certificate.    See id. at 439-440.      Therefore, the Third Circuit

“reverse[d] the District Court’s Final Order and Judgment, and remand[ed]

with instructions that the Court enter a judgment of non-liability in Global’s

favor.” Id. at 440. The Third Circuit also explained that as a result of its

ruling, PEIC’s expense cap issue was moot:

      Because Global is entitled to a judgment of non-liability as a
      result of our holding, PEIC’s limit-of-liability appeal is moot.
      Thus we have no occasion to consider the Second Circuit’s
      decision in Bellefonte Reinsurance Co. v. Aetna Cas. & Sur.
      Co., 903 F.2d 910 (2d Cir.1990), which PEIC asserts is much
      maligned in the reinsurance industry.

Id. at 425 n.3.

      With regard to Global/Century I, following the district court’s ruling

granting Global’s motion for summary judgment on the expense cap issue,

Century appealed the decision to the Second Circuit Court of Appeals. See

Global Reinsurance Corp. of Am. v. Century Indemnity Co., 843 F.3d

120 (2d. Cir. 2016) (“Global/Century II”).            Significantly, the Second

Circuit questioned the viability of its prior ruling in Bellefonte, stating:


                                      - 43 -
J-A02013-17


      [W]e find it difficult to understand the Bellefonte court’s
      conclusion that the reinsurance certificate in that case
      unambiguously capped the reinsurer’s liability for both loss and
      expenses. Looking only to the language of the certificate, we
      think it is not entirely clear what exactly the “Reinsurance
      Accepted” provision in Bellefonte meant. Evidence of industry
      custom and practice might have shed light on this question, but
      the Bellefonte court did not consider any such evidence in its
      decision, although it is unclear if any was presented.

            The purpose of reinsurance is to enable the reinsured to
      “spread its risk of loss among one or more reinsurers.” If the
      amount stated in the “Reinsurance Accepted” provision is an
      absolute cap on the reinsurer’s liability for both loss and
      expense, then Century’s payments of defense costs could be
      entirely unreinsured. This seems to be in tension with the
      purpose of reinsurance. … Interpreting the “Reinsurance
      Accepted” provision as a cap for both losses and expenses, as
      we did in Bellefonte, could permit Global to receive 50% of the
      premium while taking on less than 50% of the risk.

Id. at 126 (emphasis in original and citation omitted). However, while the

Court found “these arguments worthy of reflection[,]” it was also concerned

with “the principle of stare decisis” and overruling prior precedent. Id.

      Therefore, recognizing “[t]he interpretation of the certificates at issue

here is a question of New York Law[,]” the Second Circuit sought guidance

from the New York Court of Appeals as to “whether a consistent rule of

construction specifically applicable to reinsurance contracts exists[.]” Id. at

127. The Court acknowledged the holding in Excess, supra, which Global

argued was controlling, but found the facts of that case were distinguishable.

Namely, in Excess:      (1) the parties agreed the policy contained a per

occurrence “liability cap;” (2) the cap provision was labeled “Limit” rather

than “Reinsurance Accepted;” and (3) the reinsured sought coverage for loss



                                    - 44 -
J-A02013-17



adjustment     expenses,      rather    than   general    defense   expenses.       Id.

Therefore, the Second Circuit certified the following question to the New

York Court of Appeals:

       Does the decision of the New York Court of Appeals in Excess
       [supra,] impose either a rule of construction, or a strong
       presumption, that a per occurrence liability cap in a reinsurance
       contract limits the total reinsurance available under the contract
       to the amount of the cap regardless of whether the underlying
       policy is understood to cover expenses such as, for instance,
       defense costs?

Id. at 128.

       Consequently,       neither     the     ruling    in   Global/PEIC       I   nor

Global/Century I constituted a final judgment for purposes of collateral

estoppel. The decision in Global/PEIC I was rendered moot after the Third

Circuit found Global had no duty at all to provide reinsurance coverage

based on PEIC’s breach of the certificate terms, and explicitly reversed the

district court’s order. Likewise, the ruling in Global/Century I is not a final

judgment because the Second Circuit has certified the question to the New

York Court of Appeals. Accordingly, OneBeacon’s collateral estoppel claim is

without merit.29



____________________________________________


29Because we have found that the first two requirements for application of
the doctrine of collateral estoppel – i.e., identical issues and a final judgment
– have not been met, we need not consider the remaining elements. See
Heldring, supra, 151 A.3d at 644 (“For collateral estoppel to apply, all of
these elements must be met.”).




                                          - 45 -
J-A02013-17



       OneBeacon’s fourth and final claim pertains to damages. Specifically,

it asserts the trial court erred in (1) awarding damages to Century because

its evidence did not support the award, and (2) granting Century/PEIC’s

motion for partial summary judgment on the issue of prejudgment interest.

See OneBeacon’s Brief at 51-58.

       First, OneBeacon maintains that Century failed to prove its damages

because “the amounts shown on [its] summary [trial] exhibit for periods

prior to August 23, 2013 bear no relationship to the aggregate billings

actually issued to OneBeacon.” OneBeacon’s Brief at 51. Preliminarily, we

note that our review of the voluminous certified record in this case has failed

to uncover the summary trial exhibit of which OneBeacon complains, P-

180(b).30 We remind OneBeacon that “[i]t is an appellant's duty to insure

that the certified record contains all documents necessary for appellate

review[,]” and when a necessary document is not included in the certified

record, we may find the issue waived on appeal.          Love-Diggs v. Tirath,

911 A.2d 539, 541 (Pa. Super. 2006). Nevertheless, we find our review is

not hampered by the missing exhibit.

       OneBeacon complains the billing information included on the summary

trial exhibit “b[ore] no relationship to the aggregate billings actually issued

to OneBeacon.”       OneBeacon’s Brief at 51.      Moreover, it argues Century’s

____________________________________________


30 We note that Century/PEIC moved Exhibit P-180(b) into evidence at the
close of its case-in-chief. See N.T., 1/11/2016 PM, at 79.



                                          - 46 -
J-A02013-17



Vice President, Head of Reinsurance, Christine Russell, “could not explain

this discrepancy.” Id. at 52. However, the record belies OneBeacon’s claim.

      Russell testified that Century changed its billing in August 2013. N.T.,

1/11/2016 AM, at 58.      Prior to that date, Century billed on a “combined

product and non-product basis.”     Id. at 57.   In August of 2013, Century

began to separately bill for products only.      Id.    Russell explained the

discrepancy between the earlier billings and the summary trial exhibit was

due to this billing change:

      [T]o figure out when we changed the billing, to take out the non-
      products, you can’t just take out the amount billed for non-
      products. You have to go back and reevaluate the loss from
      ground up. So the total dollars – if you’re looking at the proof of
      loss, the total dollars in your top right box paid loss would be
      less, and you have to go back and recalculate the whole thing
      from [the] ground up. And so what this is showing is what the
      dollars would have been and how much would have hit of the bill
      at the point in time, based on a reevaluating of the whole loss
      from [the] ground up. There are fewer total dollars, so it’s going
      to proceed up the layers slower than it would have before.

Id. at 63-64.      Therefore, Century did provide an explanation for the

discrepancy in the amounts due as reflected on the exhibit, compared with

the actual billings.

      Furthermore, in determining Century’s damage award, the court

considered all of the proofs of loss supplied by Century in support of the

total amount due listed on the summary trial exhibit.       See Trial Court’s

Findings of Fact and Conclusions of Law, 2/23/2016, at ¶¶ 32-34, citing




                                    - 47 -
J-A02013-17



N.T., 1/11/2016 AM, Trial Exhibits P-178-A to P-178-L. Accordingly, we find

Century met its burden of proving damages.

       OneBeacon also claims the trial court erred when it granted partial

summary judgment to both Century and PEIC on the issue of prejudgment

interest.   It contends Century is not entitled to interest on proofs of loss

issued prior to August 23, 2013, because OneBeacon could not ascertain the

correct amount due before that date as a result of Century’s improper

billings.   See id. at 53-55.        Moreover, with regard to PEIC, OneBeacon

asserts PEIC failed to provide requested information regarding its billing until

May 14, 2013.       See id. at 56.       Because it was contractually obligated to

make the information available, OneBeacon contends PEIC is not entitled to

interest accruing prior to July 13, 2013, in other words, 60 days after PEIC

provided the requested information.31 See id.

       In TruServ Corp. v. Morgan's Tool & Supply Co., 39 A.3d 253 (Pa.

2012), our Supreme Court explained how prejudgment interest is awarded in

breach of contract cases:

       In Fernandez[ v. Levin, 548 A.2d 1191 (Pa. 1988)], this Court
       adopted Section 354 of the Restatement (Second) of Contracts
____________________________________________


31As noted above, the certificates required OneBeacon to pay Century/PEIC
“promptly following receipt of proof of loss.” Certificate at 2, General
Condition (4) (emphasis added). Although the certificates did not specify a
particular time period that would satisfy the prompt payment requirement,
both OneBeacon and Century/PEIC agree that payment within 60 days of
proof of loss constitutes prompt payment. See OneBeacon’s Brief at 54-55;
Century/PEIC’s Brief at 47.



                                          - 48 -
J-A02013-17


     as the law of this Commonwealth with respect to the recovery of
     interest as damages in breach of contract actions. Section 354,
     titled “Interest As Damages,” provides:

       (1) If the breach consists of a failure to pay a definite sum
       in money or to render a performance with fixed or
       ascertainable monetary value, interest is recoverable from
       the time for performance on the amount due less all
       deductions to which the party in breach is entitled.

       (2) In any other case, such interest may be allowed as
       justice requires on the amount that would have been just
       compensation had it been paid when performance was
       due.

     Restatement (Second) of Contracts § 354. In adopting Section
     354, we stated:

       For over a century it has been the law of this
       Commonwealth that the right to interest upon money
       owing upon contract is a legal right. West Republic
       Mining Co. v. Jones & Laughlins, 108 Pa. 55 (1885).
       That right to interest begins at the time payment is
       withheld after it has been the duty of the debtor to make
       such payment. Palmgreen v. Palmer's Garage, Inc.,
       383 Pa. 105, 108, 117 A.2d 721, 722 (1955).

     Fernandez, 519 Pa. at 379, 548 A.2d at 1193.

            With regard to prejudgment interest, we have explained,
     “[i]nterest has been defined ‘to be a compensation allowed to
     the creditor for delay of payment by the debtor,’ and is said to
     be impliedly due ‘whenever a liquidated sum of money is
     unjustly withheld.’” School Dist. of City of Carbondale v.
     Fidelity & Deposit Co. of Maryland, 346 Pa. 491, 492, 31
     A.2d 279, 280 (1943) (citations omitted).          However, “as
     prerequisites to running of prejudgment interest, the debt must
     have been liquidated with some degree of certainty and the duty
     to pay it must have become fixed.” Id. at 493, 31 A.2d at 280;
     Restatement (Second) of Contracts § 354(1) (“If the breach
     consists of a failure to pay a definite sum of money or to render
     a performance with fixed or ascertainable monetary value,
     interest is recoverable.”).




                                  - 49 -
J-A02013-17



Id. at 263-264 (footnotes omitted). See also Cresci Const. Servs., Inc.

v. Martin, 64 A.3d 254 (Pa. Super. 2013).

      In other words,

      prejudgment interest is a matter of right where the amount is
      ascertainable from the contract. Where the amount due and
      owing is not sufficiently definite, prejudgment interest is
      awardable at the discretion of the trial court.

Ely v. Susquehanna Aquacultures, Inc., 130 A.3d 6, 15 (Pa. Super.

2015) (citation omitted), appeal denied, 136 A.3d 982 (Pa. 2016).             “Our

review of an award of pre-judgment interest is for abuse of discretion.”

Kaiser v. Old Republic Ins. Co., 741 A.2d 748, 755 (Pa. Super. 1999).

      With regard to Century’s award of prejudgment interest, OneBeacon

argues it “had no duty to pay any proofs of loss until after Century corrected

its billings on August 23, 2013[.]”       OneBeacon’s Brief at 54.        It claims

Century was awarded interest on the $6 million dollar payment it made in

2013 based upon the summary exhibit that demonstrated the $6 million

became due between 2011 and January of 2013.                 Id. at 53.   However,

OneBeacon maintains that the proofs of loss, which were issued prior to the

corrected billing, included both product and non-product losses and it was

“impossible for OneBeacon to ascertain the amount of ‘products’ losses and

expenses that were actually due[.]”            Id.     It also claims that Century

“conceded”    this   point,   referring   to     the     deposition   testimony   of




                                     - 50 -
J-A02013-17



Century/PEIC’s designated corporate representative, Stefanie Walterick.32

See id., citing Deposition of Stefanie Walterick, 11/19/2014, at 159-160.

Moreover, OneBeacon asserts the “incoherent” explanation of how the

amounts due were calculated on summary trial exhibit, which involved a

“ground up analysis,” provided by Century’s Vice President, Head of

Reinsurance, Russell, further supports its claim that it could not ascertain

the proper amount of product losses and expenses due prior to August 2013.

Id. at 54.

       Preliminarily, we note that Century did not concede that it was

impossible for OneBeacon to determine its proportionate share of product

losses until Century changed its billing in August of 2013. While Walterick

acknowledged that it was “impossible to break out” the products only billings

if OneBeacon “just look[ed] at the proof[s of loss] in a vacuum and [] never

look[ed] at anything else,” she explained that the proofs of loss were

accompanied       by   billing   letters   that     provided   the   requisite   detailed

information. Deposition of Stefanie Walterick, 11/19/2014, at 159-160.

       In granting Century’s motion for partial summary judgment the trial

court opined:



____________________________________________


32  Walterick testified that she is an assistant vice-president for the
Brandywine Group of Insurance & Reinsurance Companies, which includes
both Century and PEIC. See Deposition of Stefanie Walterick, 11/19/2014,
at 18-19.



                                           - 51 -
J-A02013-17


       The parties have supported their arguments with a substantial
       amount of evidence, including the copies of the billings
       themselves and depositions of individuals involved with the
       claims.     Based on the record, [OneBeacon] had sufficient
       information to calculate within a reasonable degree the amount
       owed under the Century certificates, and therefore is required to
       pay Century prejudgment interest for late payments under the
       certificates.

Trial Court Opinion, 3/27/2015 (Century/PEIC’s Motion), at 5-6. We find no

abuse of discretion on the part of the trial court.               OneBeacon’s argument

consists of parsing out excerpts from the testimony of Century’s witnesses in

an attempt to demonstrate Century knew its billings were incomprehensible.

The   trial   court,   however,     reviewed       the   actual    proofs   of   loss   and

accompanying billing letters before concluding OneBeacon could ascertain

“within a reasonable degree” the amount due under the facultative

certificates. Id. See Affidavit of Stefanie Walterick, 1/20/2015, Exhibits B-

F.33 Accordingly, we find no abuse of discretion, and no relief is warranted.

See Ely, supra, 130 A.3d at 15 (“Where the amount due and owing is not

sufficiently definite, prejudgment interest is awardable at the discretion of

the trial court.”).

____________________________________________


33 In particular, Exhibit F to Walterick’s affidavit is a chart that calculates the
interest due for all of the Century/PEIC billings. See id. at Exhibit F. The
earlier interest for the Century (Formosa) billings began to run on November
27, 2011, 60 days after OneBeacon received the proofs of loss on
September 28, 2011. See id. As for PEIC, the earliest interest began to run
on July 22, 2012, 60 days after OneBeacon received the proofs of loss on
May 23, 2012. See id. The trial court used these calculations for its pretrial
award of pre-judgment interest.          See Trial Court Opinion, 3/27/2015
(Century/PEIC’s Motion), at 6.



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      As for the award of prejudgment interest to PEIC, OneBeacon argues it

had no duty to pay until July 14, 2013, 60 days after PEIC provided

OneBeacon with information it had requested to verify the amount it was

being billed was correct.      See OneBeacon’s Brief at 55-56.           OneBeacon

further contends it made written requests for this information in June of

2012, and April of 2013, but PEIC did not provide the materials until May 14,

2013. The facultative certificates require the reinsured to “make available

for inspection and place at the disposal of the Reinsurer at reasonable times

any of its records relating to [the] reinsurance or claims in connection

therewith.”   Certificate at 2, General Condition (1).         OneBeacon maintains

PEIC “failed to fulfill this obligation, as it did not make the records available

at   OneBeacon’s    disposal   until   May      14,   2013,”    and,   consequently,

OneBeacon’s duty to pay the proofs of loss was discharged until that time.

OneBeacon’s Brief at 57.

      The trial court disposed of this claim as follows:

             Here, the fourth provision of the certificate simply provides
      that “[p]ayment … will be made by [OneBeacon] to [PEIC]
      promptly following receipt of proof of loss.” No other conditions
      are attached. [OneBeacon’s] obligation to make payment was
      triggered once it received proof of loss. While the parties are
      bound by all of the terms in the contract, the policy cannot be
      interpreted so that the fourth provision has no effect on the
      parties until, and only until, all of the other enumerated terms
      have first been satisfied. Moreover, the first provision of the
      certificates merely requires [PEIC] to “make available for
      inspection and place at the disposal of [OneBeacon] at
      reasonable times any of its records relating to this reinsurance or
      claims     in   connection     therewith.”    (emphasis      added).
      [OneBeacon’s] request that PEIC mail OneBeacon specific


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J-A02013-17


      records relating to the proofs of loss, while seemingly
      reasonable, and perhaps commonplace, technically goes beyond
      what is required of [PEIC]. Since [PEIC] only had to “make
      available” the records at [OneBeacon’s] “disposal,” the onus was
      on [OneBeacon] to actively seek and collect the records, rather
      than passively wait for [PEIC] to satisfy its requests.       In
      conclusion, [OneBeacon] was required to make payment
      promptly upon receiving proof of loss, and its failure to do so
      entitles [PEIC] to the resulting interest.

Trial Court Opinion, 3/27/2015 (Century/PEIC’s Motion), at 4-5 (footnote

omitted).

      Again, we find no abuse of discretion on the part of the trial court. As

PEIC points out in its brief, OneBeacon did not contend “that the PEIC proofs

of loss left it unable to calculate how much it owed under the Gould

certificates.”   Century/PEIC’s Brief at 48 (emphasis supplied).      Rather,

OneBeacon sought additional information “to verify that it was being

properly billed.”   OneBeacon’s Brief at 11.      Further, while OneBeacon

emphasizes PEIC’s corporate representative, Walterick, conceded that

OneBeacon’s request for information was not “unreasonable,” it fails to

acknowledge Walterick’s additional testimony that she sent OneBeacon a

response to its June 2012 request four months later.       See Deposition of

Stefanie Walterick, 11/19/2014, at 256-260. See also id. at 258 (“I think

we provided a good response to [OneBeacon’s] queries and provided a

substantive and complete response.”).

      Here, the trial court concluded that General Condition (4) explicitly

required OneBeacon to promptly pay PEIC following receipt of proofs of loss,

and was not dependent upon PEIC’s duty under General Condition (1) to


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make records available for inspection. See Trial Court Opinion, 3/27/2015

(Century/PEIC’s Motion), at 4-5. As a panel of this Court previously stated,

even “[w]here the amount due and owing is not sufficiently definite,

prejudgment interest is awardable at the discretion of the trial court.” Ely,

supra, 130 A.3d at 15. Accordingly, no relief is due on this claim.34

       Because we find no error or abuse of the trial court, we affirm the

judgment entered in favor of Century/PEIC and against OneBeacon.

       Judgment affirmed.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 10/17/2017




____________________________________________


34 We note OneBeacon requests that this Court take “judicial notice” of the
pleadings in a federal district court case, filed in the District of Connecticut,
in which Century, “PEIC’s sister-company and co-plaintiff,” purportedly took
the position of OneBeacon herein, that is, Century (as a reinsurer) “refused
to pay more than $6 million … due to [the reinsured’s] failure to provide
information requested by Century.” OneBeacon’s Brief at 57. However, we
decline to take judicial notice of pleadings in an unrelated federal court
case.



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