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Case l:12-cv-11764-FDS

Document 1 Filed 09/21/12 Page 1 of 8

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

NORTHERN ASSURANCE COMPANY OF AMERICA, as successor to EMPLOYERS' SURPLUS LINES INSURANCE COMPANY, Plaintiff, v. CENTURY INDEMNITY COMPANY, as successor to INSURANCE COMPANY OF NORTH AMERICA, Defendant. No.

COMPLAINT AND JURY DEMAND The Plaintiff, Northern Assurance Company of America, as successor to Employers' Surplus Lines Insurance Company ("Northern"), states the following for its causes of action against the Defendant, Century Indemnity Company, as successor to Insurance Company of North America ("Century"):
NATURE O F ACTION

1.

This is an action for breach of a facultative reinsurance contract brought by

Northern against Century. Under that contract, Century agreed to reinsure Northern against liabilities arising under an excess liability insurance policy that Northern issued to Pacific Gas & Electric Company ("PG&E"). 2. Northern has incurred and paid liabilities under the PG&E excess liability

insurance policy. Despite its agreement to reinsure Northern and Northern's demand for

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payment, Century has failed to pay what is due and owing to Northern. Specifically, Century has failed to pay $233,631 that it is legally required to pay in connection with a settlement entered into by and between Northern and PG&E for investigative costs at issue in an arbitration proceeding in California. Accordingly, Northern brings this action to recover damages for Century's breach of contract.
THE PARTIES

3.

Northern Assurance Company of America is an insurance company organized

under the laws of the State of Vermont, with a principal place of business in Canton, Massachusetts. Northern is a member of the OneBeacon Group of insurance companies, and the corporate successor to Employers' Surplus Lines Insurance Company ("ESLIC"). Commercial Union Insurance Company ("CU") is a member of the OneBeacon Group of insurance company and the entity that arbitrated and settled the underlying dispute on behalf of Northern and other entities. 4. On information and belief, Century Indemnity Company is an insurance company

organized under the laws of the Commonwealth of Pennsylvania, with its principal place of business in Philadelphia, Pennsylvania. Century Indemnity Company is successor-in-interest to certain policies of insurance issued by Insurance Company of North America. ACE USA, the United States division of ACE Group, is the parent company of Century Indemnity Company.
JURISDICTION AND VENUE

5.

This Court has jurisdiction pursuant to 28 U.S.C. 1332(a) because the parties'

citizenship is diverse and the amount in controversy exceeds $75,000, exclusive of interest and costs.

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6.

This Court has personal jurisdiction over Century because, inter alia, Century

conducts business regularly within this judicial district. 7. Venue is proper pursuant to 28 U.S.C. 1391(a)(2) because a substantial part of

the events or omissions giving rise to the claims occurred in this judicial district.
UNDERLYING COVERAGE AND APPLICABLE REINSURANCE

8.

Northern's predecessor, ESLIC, issued, inter alia, Excess Policy No. E513567 to

PG&E and other insureds for the policy period of February 28, 1969 to February 28,1972 ("Policy '567"). 9. relevant part: The Assured shall have control and charge of any claim or group of claims and all litigation in respect thereto involving liability covered by this Certificate, but Underwriters may at their option and at their own expense join in or assist the Assured in the investigation or defense thereof. Upon the written request of the Assured, Underwriters shall at their own cost and expense take full charge of the investigation of any such claim or group of cSaims or litigation in respect thereto; provided, however, that if the combined total of any loss payment and costs and expenses does not exceed the Retained Limits, the Assured shall reimburse Underwriters for all Costs and expenses incurred by the Underwriters in connection with such investigation or litigation; and provided further, that if the loss payment is less than the Retained Limits but the combined total of such loss payment and costs and expenses exceeds such Retained Limits the Assured shall reimburse the Underwriters for all such costs and expenses up to the amount of the difference between the loss payment and the amount of the Retained Limits, but in any event Underwriters shall be bound by any judgment rendered therein in excess of the Retained Limits. (Emphasis added.) 10. 11. The Retained Limit applicable to Paragraph E is $500,000. Northern and Century entered into Facultative Certificate No. FRC00100 ("Fac Section VI(E)(1) of Policy '567, entitled "Control of Claims," provides, in

Cert '100") for the policy period of February 28, 1969 to February 28, 1972 with respect to

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Northern's (or its predecessor's) obligations under Policy '567. Century's participation under Fac Cert '100 is $2,500,000 part of $21,500,000, or 11.63%. 12. Under the terms of Fac Cert '100, Century's liability follows that of Northern and

is "subject in all respects to the terms and conditions of [Northern's] policy except such as may create a direct obligation of the Reinsurer to the original insured."13. Under the terms of

Fac Cert '100, Century is bound by Northern's settlement of underlying claims and Century is obligated to pay its proportion of such loss, and Northern's associated expenses, "promptly following receipt of [Northern's] proof of loss."14. Under the terms of Fac Cert '100, Century is obligated to pay "its proportion of expenses ... incurred by the Company in the investigation and settlement of claims or suits ... ." BACKGROUND 15. PG&E was insured under a number of primary and excess policies issued by

Northern and other insurers. 16. Certain administrative agencies asserted claims against PG&E with respect to

multiple environmental contamination sites. PG&E sought insurance coverage for these claims under its primary and excess policies, including Policy '567. 17. Disputes arose between PG&E and Northern with respect to the parties' rights and

obligations. Those disputes were addressed in an arbitration proceeding. 18. On July 23, 2006, the Arbitrator issued a Final Arbitration Award finding that

Northern "has no duty to indemnify PG&E against these administrative claims nor is it obligated to provide a defense." However, the Arbitrator also found: It is undisputed that PG&E made the written request required of PG&E in paragraph E(l). That request triggered [Northern's! obligation to take full charge, at (Northern'si cost and expense (as limited by other

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portions of this section E) fof| the investigation of the administrative agencies claim or claims against PG&E, (Emphasis added.) 19. Northern thereafter negotiated individual settlements with respect two of the

PG&E environmental sites and paid a combined total of $1,610,942 in investigative costs with respect to those sites. 20. Northern later settled with PG&E with respect to remaining environmental sites

and paid PG&E an additional $12,329,058 for investigative costs. 21. Northern paid a total of $ 14,000,000 in settlement of investigative costs. Of that

amount, Northern allocated $2,008,867.82 to Policy '567 with respect to the following five environmental sites:
SITE NAME ALLOCATION T O POLICY '567

NGGS Moss Landing Power Plant Topack Santa Rosa Hunter's Point

$ 412,394.08 $ 181,417.58 $1,354,031.99 $ 50,122.32 $ 10,901.85

THE REINSURANCE BILLINGS

22.

On November 30, 2007, Northern billed Century $47,961 as Century's share of

the settlement relating to investigative costs allocated to the NGGS site. 23. Century has failed and refused to acknowledge its reinsurance obligations and to

pay any sums billed for its share of the settlement amounts allocated to the NGGS site. 24. On November 30, 2007, Northern billed Century $21,099 as Century's share of

the settlement relating to investigative costs allocated to the Moss Landing Power Plant site.

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25.

Century has failed and refused to acknowledge its reinsurance obligations and to

pay any sums billed for its share of the settlement amounts allocated to the Moss Landing Power Plant site. 26. On November 30, 2007, Northern billed Century $157,474 as Century's share of

the settlement relating to investigative costs allocated to the Topack site. 27. Century has failed and refused to acknowledge its reinsurance obligations and to

pay any sums billed for its share of the settlement amounts allocated to the Topack site. 28. On November 30, 2007, Northern billed Century $5,829 as Century's share of the

settlement relating to investigative costs allocated to the Santa Rosa site. 29. Century has failed and refused to acknowledge its reinsurance obligations and to

pay any sums billed for its share of the settlement amounts allocated to the Santa Rosa site. 30. On November 30, 2007, Northern billed Century $ 1,268 as Century's share of the

settlement relating to investigative costs allocated to the Hunter's Point site. 31. Century has failed and refused to acknowledge its reinsurance obligations and to

pay any sums billed for its share of the settlement amounts allocated to the Hunter's Point site. 32. The total amount that Northern has billed to Century to date is $233,631 for its

share of the settlement related to investigative costs as allocated among five environmental sites. 33. 34. Century has failed and refused to pay the amounts due. Century is obligated to pay under the terms of Policy '567 and Fac Cert '100, and

its failure to pay constitutes a breach of contract.


COUNT I - B R E A C H O F CONTRACT

35.

Northern restates and realleges the allegations set forth in paragraphs 1 through

34, as if set out in full herein.

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36.

Policy '567 and Fac Cert '100 constitute valid and legally enforceable contracts,

which were entered into for valuable consideration. 37. All obligations required of Northern under Policy '567 and Fac Cert '100 have

been performed or waived. 38. By failing to pay the amounts that it owes under the terms of Policy '567 and Fac

Cert '100, Century has breached its contract. 39. Northern has been damaged by the breach. COUNT II - DECLARATORY RELIEF 40. Northern restates and realleges the allegations set forth in paragraphs 1 through

39, as if set out in full herein. 41. An actual controversy exists between Northern and Century respecting the

parties' rights and obligations under Policy '567 and Fac Cert '100 with respect to the arbitration between PG&E and Northern and the resultant settlements. 42. Northern is entitled to a declaration by this Court of its rights and Century's

obligations under Policy '567 and Fac Cert '100 with respect to the arbitration between PG&E and Northern and the resultant settlements.
PRAYER FOR RELIEF

WHEREFORE, Northern respectfully requests that this Court enter judgment in favor of Northern and against Century and grant the following relief: (a) (b) A judgment that Century is in breach of contract; An award of compensatory damages, along with pre-judgment and post-judgment interest; (c) An award of consequential damages;

Case l:12-cv-H764-FDS Document 1 Filed 09/21/12 Page 8 of 8

(d)

A declaration that Century is bound under Policy '567 and Fac Cert' 100 to reimburse Northern for Century's assumed share of all indemnity amounts and other costs that Northern paid in connection with the arbitration between PG&E and Northern and the resultant settlements;

(e) (f)

Attorneys' fees and costs; and Such other and further relief in favor of Northern as the Court deems fair and just.
JURY DEMAND

Northern demands a trial by jury on all claims and issues. The Plaintiff, NORTHERN ASSURANCE COMPANY OF AMERICA, as successor to EMPLOYERS' SURPLUS LINES INSURANCE COMPANY, By its attorneys,

Dated: September 21,2012

Kevirf^'Connor,BB^^Ss^49 koconnor @hermesnetburn .com Lynda Riesgo Jensen, BBO No. 652498 lj ensen@hennesnetburn.com HERMES, NETBURN, O'CONNOR & SPEARING, P.C. 265 Franklin Street, Seventh Floor Boston, MA 02110-3113 (617) 728-0050 (617) 728-0052 (fax)

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