Old Republic Insurance Company v. Ace Property and Casualty Insurance Company

SUPREME COURT CASES

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State: Illinois

Court: 1st District Appellate

Docket No: 1-07-2668 Rel

Case Date: 03/24/2009

Preview:SECOND DIVISION MARCH 24, 2009 1-07-2668

OLD REPUBLIC INSURANCE COMPANY,

) ) Plaintiff-Appellee, ) ) v. ) ) ACE PROPERTY and CASUALTY INSURANCE COMPANY, ) as Successor in Interest to The Central National Insurance ) Company of Omaha, ) ) Defendant-Appellant. )

Appeal from the Circuit Court of Cook County.

No. 06 CH 03502

Honorable Martin S. Agran, Judge Presiding.

JUSTICE CUNNINGHAM delivered the opinion of the court: The defendant Ace Property and Casualty Insurance Company1 (Ace Casualty), as a successor-in-interest to Central National Insurance Company of Omaha (Central National), appeals from the circuit court of Cook County's August 29, 2007 order holding that: (1) Ace Casualty's arbitration demand against the plaintiff, Old Republic Insurance Company2 (Old Republic), is stayed; and (2) the rights and obligations of both Ace Casualty and Old Republic under all reinsurance agreements entered into between Old Republic and Central National prior to August 3, 1990, were extinguished by a commutation agreement entered into on that same date. On appeal, Ace Property alleges that: (1) the trial court's legal conclusion established in the August 29, 2007 order was inherently flawed and inconsistent with its factual findings; (2) the trial court committed reversible error when it held that the commutation agreement was not ambiguous, despite its two prior rulings
1

Ace Casualty is a Pennsylvania corporation doing business in Cook County, Illinois. Old Republic is a Pennsylvania corporation doing business in Cook County, Illinois.

2

1-07-2668 to the contrary and the evidence presented at the bench trial in support of Ace Casualty's position; and (3) two of the trial court's factual findings were against the manifest weight of the evidence. For the following reasons, we affirm. BACKGROUND On November 18, 1982, Old Republic issued a certificate of casualty facultative reinsurance (the certificate) to Ace Casualty's predecessor-in-interest, Central National. Under the terms of the certificate, Old Republic provided reinsurance to Central National for a comprehensive liability policy issued by Central National3 to Seattle School District #1 for the coverage period from August 31, 1982, to August 31, 1984. The face of the comprehensive liability policy issued to the Seattle School District #1 includes both the names of Central National and Cravens, Dargan & Company Pacific Coast (CDPC). At trial, Michael Davlin, a representative of Central National, testified that throughout the relevant time period, CDPC was an insurance agency that was wholly owned by Ace Casualty and that CDPC used Central National as a "fronting" company in order to write insurance policies in Central National's name. The certificate included an arbitration clause. In 1990, Central National experienced financial difficulties and was required to be placed in rehabilitation by the State of Nebraska in which it was operating at that time. At that time, multiple reinsurance contracts existed between Central National and Old Republic--some in which Central

A fronting arrangement is created when "an insurer underwrites a risk of the policyholder while simultaneously passing on to a reinsurer all or virtually all of the risk and almost all of the corresponding premium. The original insurer thus merely acts as a pass through or a `front,' and its is the reinsurer that truly assumes the risk of loss." B. Ostrager & M. Vyskocil, Modern Reinsurance Law & Practice

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