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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

ACE PROPERTY AND CASUALTY INSURANCE COMPANY v. ARGONAUT INSURANCE COMPANY

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
2:14-cv-01925 Search Pacer
Court Type: 
Federal
US District Court: 
Eastern District of Pennsylvania
Date Filed: 
Apr 2 2014

Factual Background

7. On or before January 8, 1974, CNI and Argonaut entered into the
Reinsurance Contract, pursuant to which Argonaut agreed to indemnify ("reinsure") CNI with
respect to the liability that may accrue to CNI as a result of losses occurring under the insurance
policy issued to Lehigh Valley Railroad by Central National Insurance Company ("CNI Policy").
A copy of the underlying policy, CNS 093087, is attached hereto as Exhibit "B."
8. The CNI Policy was issued with an effective date of November 29,1973
for a 36-month period, but was cancelled short as of November 29,1975.
9. The Reinsurance Contract was written with layers of reinsurance assumed
by various reinsurers, including Argonaut. As set forth in the Reinsurance Contract, Argonaut
agreed to assume a 50% quota share of the liabilities within its reinsured layer.
10. In accordance with the Reinsurance Contract, CNI paid Argonaut
appropriate premium in respect to the reinsurance assumed by Argonaut under the Reinsurance
Contract.
11. APU, the successor in interest to Lehigh Valley Railroad, sued various
insurers for insurance coverage to pay for environmental remediation and investigation costs at
eleven (11) sites for its operations at these various sites from approximately 1916 - 1985. In
total, APU demanded approximately $90 million from its insurers.
12. APU sought coverage from the ACE Companies under the CNI Policy and
under certain California Union policies for environmental remediation and investigation costs at
multiple sites.
13. Approximately 87% of APU' s demand to the ACE Companies was for
remediation costs incurred at the Lehigh Valley train derailment site in Leroy, New York. The
claims at this site arose primarily from the derailment of two tank cars in 1970 that resulted in
soil, bedrock and groundwater contamination extending over three miles.
14. The ACE Companies and APU finalized a settlement to resolve these
claims in June 2006.
15. As part of this settlement, the ACE Companies agreed to pay APU
$875,000 in exchange for a full environmental release.
16. The $875,000 settlement payment was allocated among the ACE
Companies' relevant policies consistent with APU's policy-specific, time-specific, and sitespecific
settlement demand.
17. The CNI Policy, reinsured by Argonaut pursuant to the Reinsurance
Contract, paid $577,500 of the settlement payment.
18. The settlement payment was allocated equally to each of the two annual
periods contained in the CNI Policy.
19. In accordance with the terms and conditions of the Reinsurance Contract,
CNI advised its reinsurers, including Argonaut, of the APU claim and then of the subsequent
settlement.
20. As of January 2014, Argonaut has failed to pay $306,005.96 due to CNI
under the Reinsurance Contract.

COUNT ONE

Breach of Contract
21. CNI incorporates by reference paragraphs 1 through 20, as if those
averments were fully set forth herein.
22. Pursuant to Section D of the Reinsurance Contract, "All loss settlements
made by the Company, provided they are within the terms and conditions of the original
policy(ies) and within the terms and conditions of this certificate of reinsurance, shall be binding
on the Reinsurer." Ex. A, at 2.
23. In accordance with Section D of the Reinsurance Contract, Argonaut is
bound by the ACE Companies' settlement resolving the claims against the underlying CNI
Policy.
24. Pursuant to Section D of the Reinsurance Contract, "the Reinsurer shall
promptly pay its proportion of such loss as set forth in the Declarations." Ex. A, at 2.
25. Notwithstanding receipt of the billings for the settlement made pursuant to
the CNI Policy, Argonaut has failed to pay the amounts due and owing.
26. Argonaut's failure to pay the amounts due and owing is a breach of the
Reinsurance Contract, and is without defense or justification.

COUNT TWO

Breach of Duty of Utmost Good Faith and Dealing
27. CNI incorporates by reference paragraphs 1 through 26, as if those
averments were fully set forth herein.
28. Argonaut owes CNI a duty of utmost good faith and fair dealing.
29. CNI has provided all information requested by Argonaut and complied
with all of the terms and condition of the Reinsurance Certificates.
30. Argonaut has improperly refused to honor its obligations under the
Reinsurance Contract by not timely paying CNI's outstanding billings.
31. Argonaut's wrongful refusal to honor the obligations of the Reinsurance
Contract is a violation of its obligations.
32. As a direct and proximate cause of Argonaut's conduct, CNI has sustained
and continues to sustain damages, including incurring attorneys' fees and other costs in
connection with this lawsuit, which resulted from Argonaut's breach of its duty of utmost good
faith and fair dealing.
33. CNI is therefore entitled to judgment against Argonaut for the breach of its
obligations owed to CNI, including Argonaut's breach of its duty of good faith and fair dealing,
and Argonaut is liable for all resulting damages, including attorneys' fees and interest.

Prayer for Relief

WHEREFORE, Ace Property and Casualty Insurance Company respectfully
requests a judgment against Argonaut Insurance Company as follows:
1. judgment for breach of contract in the amount of $306,005.96;
2. compensatory damages for pre and post-judgment interest, attorneys' fees
and costs, as determined by this Court;
3. such other relief as this Court deems just and proper.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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