# Munich Reinsurance America, Inc. v. American National Insurance

> District Court, D. New Jersey · February 27, 2014 · 999 F. Supp. 2d 690

URL: https://www.frixlaw.com/law-library/cases/8714958

## Case

- **Full name:** MUNICH REINSURANCE AMERICA, INC. v. AMERICAN NATIONAL INSURANCE COMPANY
- **Court:** District Court, D. New Jersey
- **Decided:** February 27, 2014
- **Citations:** 999 F. Supp. 2d 690; 2014 U.S. Dist. LEXIS 25078; 2014 WL 793129
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Wolfson
- **Judges:** Wolfson
- **Cited by:** 7 later opinions in the Frix Law Library

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## Opinion text

OPINION
WOLFSON, District Judge:
This case involves complex retrocessional agreements between Plaintiff Munich Reinsurance America Inc. (“Munich”) and Defendant American National Insurance Company (“ANICO”). Munich filed a Complaint alleging breach of contract for ANICO’s refusal to pay certain claims submitted for payment by Munich under the parties’ agreements, and in response, ANI-CO filed a counterclaim for rescission of the agreements. Following motion prac *697 tice, the Court conducted a nine-day bench trial with numerous experts and witnesses testifying as to each party’s obligations under the agreements as well as their respective business practices.
In light of the evidence presented at trial, the Court concludes that ANICO is not entitled to rescission of the agreements. The Court further finds that Munich satisfied its reporting obligations under the agreements in part, and thus ANICO breached its respective payment obligations for those claims that were properly ceded and reported. To wit, those claims to which Munich is entitled to payment include all claims that were properly ceded to ANICO via IOA Re before the expiration of the Sunset Provision deadlines, including claims that arise from underlying primary policies of workers’ compensation written by either Everest or Everest Re, but they do not include claims arising from injuries sustained by a roofing contractor or subcontractor. Further, Munich is not entitled to payment on those claims that were only first noticed on a spreadsheet Munich provided to IOA Re in August 2008, as that document did not satisfy the reporting requirements of Article XVI of the parties’ agreements.
I. OVERVIEW
A. Reinsurance
Before proceeding to the specifics of this case, the Court sets forth a brief overview of the reinsurance industry. As I noted in my previous opinion resolving the parties’ summary judgment motions, this overview of an issue as complex as reinsurance must be taken with a grain of salt; I merely seek to provide a basic primer to help orient the reader.
In Pacific Employers Ins. Co. v. Global Reins. Corp. of America, 693 F.3d 417 (3d Cir.2012), the Third Circuit described reinsurance as
insurance for insurance companies. A reinsurer agrees to indemnify a reinsured for certain payments the latter makes under one or more of its issued policies. In return, the reinsurer receives a share of the underlying premiums. Ceding a portion of an insured risk prevents a single catastrophic loss from hurling the reinsured into insolvency. It also allows the reinsured to invest more capital or to insure more risks.
Id. at 421 . Reinsurance is comparable to “a contract of indemnity.” Christiania Gen. Ins. Corp. of N.Y. v. Great Am. Ins. Co., 979 F.2d 268, 271 (2d Cir.1992).
“The reinsurance of reinsurance is called a retrocession, and the reinsurers of reinsurers — that is, reinsurers who assume retrocession risk through retrocessional agreements — are called retrocessionaires.” Century Indem. Co. v. Certain Underwriters at Lloyd’s, London, subscribing to Retrocessional Agreement Nos. 950518, 950519, 950616, 584 F.3d 513, 519 (3d Cir.2009). Such retrocession agreements present considerably more complex legal and factual scenarios because “there is another layer of coverage created and another party thrown into the mix.” Plitt, et al., 1A COUCH ON INSURANCE § 9:3.
There are two overarching categories of reinsurance and retrocession — treaty and facultative; the agreements here are the former. Through treaty reinsurance, *698 Pac. Employers, 693 F.3d at 421 . As with primary insurance, reinsurance comes in several basic types, including proportion and “excess of loss” policies. The instant agreements are excess of loss policies, which obligate the retrocessionaire to pay up to its “retention” amount, ie., the amount of “cover” the retrocessionaire agreed to provide the reinsurer, once the total claim amount has surpassed a set monetary limit or “layer” that the reinsurer must first pay. See Hartford Acc. and Indem. Co. v. Ace Am. Reins. Co., 284 Conn. 744 , 750 n. 5, 936 A.2d 224 (2007). Excess of loss policies come in three forms: “per risk,” “annual aggregate,” or “per occurrence.” See Orpett, et al., 3 LAW AND PRAC. OF INS. COVERAGE LITIG. § 41:10 (2012). These three methods differ in the manner in which risks “attach” to the reinsurance agreement. Under a per occurrence policy, like those at issue here, the retrocessionaire’s obligation is triggered by a particular incident, such as a personal injury. Id.
*697 the reinsurer [or retrocessionaire] agrees to accept an entire block of business from the reinsured. Once a treaty is written, a reinsurer is bound to accept all of the policies under the block of business, including those as yet unwritten. Because a treaty reinsurer accepts an entire block of business, it does not assess the individual risks being reinsured; rather, it evaluates the overall risk pool.
*698 B. The Parties and the Agreements
For the purposes of the present case, Munich 1 was the ceding reinsurer and ANICO was the retrocessionaire for two excess of loss retrocessional agreements of workers’ compensation reinsurance, on a per-oecurrence, or per-claim, basis, which cover the periods of November 1, 2000 through December 31, 2000 (referred to by the parties as the “2000 Year Agreement,” and also as the “Stub Year Agreement,” due to its short, two-month duration), and January 1, 2001 through December 31, 2001 (the “2001 Agreement”) (collectively, the “Retrocession Agreements”). The terms of the two agreements are identical except for the following differences: (1) their duration; (2) the relevant provision of Article X (Claims) is reflected in Endorsement No. 1 in the Stub Year Agreement, while the identical corresponding provision for the 2001 Year is in the body of that agreement; and (3) under the Stub Year Agreement, ANICO only took a 75% share of the retrocession. Pl.’s 1 at MRAM-01-0304 to -0305 (Stub Year Agreement); PL’s 2 at MRAM-01-0034, - 0040 (2001 Agreement). 2
As detailed more fully infra, the Retro-cession Agreements provide that ANICO shall not be liable for any single loss until Munich’s loss exceeds $500,000, that ANI-CO is not liable for more than $500,000 per loss occurrence, and that for the 2001 Agreement ANICO is not liable beyond $20,000, 000. PL’s 1-2 (Art. IV). A “loss occurrence” is each and every accident or occurrence, or series of accidents or occurrences, arising out of one event. PL’s 1-2 (Art. VII).
The story behind the Retrocession Agreements, however, is considerably more complex. Underlying the Retrocession Agreements is a reinsurance agreement Munich entered into with Everest National Insurance Company (“Everest”) and Everest Reinsurance Company (“Everest Re”), whereby Munich agreed to reinsure Everest and Everest Re’s workers’ compensation insurance program for the period of January 1, 1998 through December 31, 2001 under an excess of loss reinsurance agreement entitled “Workers’ Compensation Excess of Loss Reinsurance Agreement between Everest National In *699 surance Company, Everest Reinsurance Company and American Re-Insurance Company” (the “Everest Agreement”) for the period November 1, 1997 to December 31, 2001. The Everest Agreement was governed by limits of $750,000 excess of $250,000. This means that under the Everest Agreement, Munich had no liability for any claim of less than $250,000 — the layer from $0 to $250,000 was Everest’s responsibility.
During the periods covered by the Everest Agreement, Munich purchased retrocessional “carve-out” coverage. Another entity, IOA Re, underwrote retrocession contracts for every year in which Munich purchased retrocessional cover for the Everest Agreement. Specifically, Munich obtained carve-out retrocessional coverage for its 1998 and 1999 treaty years through other retrocessionaires, including Continental Casualty Insurance Company (“Continental Casualty”). 6/20/13 Tr. at 93 (Dorosz). For the periods January 1, 1998 to October 31, 1998, November 1, 1998 to October 31, 1999 and November 1, 1999 to October 31, 2000, IOA Re underwrote the retrocession on behalf of Continental Casualty. PL’s 50 at AAHRU-00129 to -00189 (period Jan. 1, 1998 to Oct. 31, 1998), AAHRU-00103 to -00127 (period Nov. 1,1998 to Oct. 31,1999); Def.’s 248 at ANICO-IOA-5836 to -5870 (period Nov. 1, 1999 to Oct. 31, 2000).
In 2000, Munich Re and Everest agreed to extend the Everest Agreement for two months, from November 1, 2000 to December 31, 2000, to enable them to have more time to discuss the terms on which Munich would reinsure the Everest Program for 2001. Munich asked IOA Re whether IOA Re, on behalf of Continental Casualty, would agree to extend the retrocessional agreement for the same two-month period. Def.’s 248 at ANICO-IOA-5790. IOA Re determined that it was interested in continuing to participate in the retrocession; however, at that time IOA Re had lost its authority to write on behalf of Continental Casualty. Id. at ANICO-IOA-5789. Instead, IOA Re proposed, and Munich agreed, that ANICO replace Continental Casualty as the retrocessionaire on the program for the two-month extension and for the calendar year 2001 — the Retrocession Agreements. 3 6/25/13 Tr. at 112:17-113:13 (Hoekstra).
To summarize, Munich purchased a carve-out for the Everest Agreement for the period November 1, 2000 and December 31, 2000, through ANICO and another retrocessionaire; ANICO accepted only a 75% share of the Stub Year Agreement with the other retrocessionaire accepting *700 the other 25%. Munich also purchased retrocessional carve-out for the Everest Agreement for January 1, 2001 through December 31, 2001; ANICO accepted 100% of that risk. 4 The relevant portions of the Retrocession Agreements are set forth as follows.
Article I of the Retrocession Agreements, the “Business Covered” provision, provides:
A. [ANICO] hereby agrees to indemnify [Munich] for the amount of ultimate net loss[ 5 ] as herein provided and specified which may accrue to [Munich] as a result of loss or losses occurring during the term of this Agreement as a result of its participation in the following Reinsurance Agreement, covering insurance or reinsurance business in force at the inception of this Agreement and business written and/or renewed during the term of this Agreement:
WORKERS’ COMPENSATION EXCESS OF LOSS
REINSURANCE AGREEMENT NO. 2726-0001
B. The Reinsurance Agreement listed above (hereinafter referred to as the “Underlying Agreement”) is between [Munich] and the following insurance company or group (hereinafter referred to as the “Original Ceding Company”):
EVEREST NATIONAL INSURANCE COMPANY
Phoenix, Arizona
(as identified in the Underlying Agreement)
Pl.’s 1-2 (Art. I).
Article X(B) of the 2000 Retrocession Agreement and Article X(C) of the 2001 Retrocession Agreement Contracts state:
[ANICO] agrees to pay [Munich Re] on demand, [ANICO]’s proportion of all losses and/or loss expenses paid by [Munich Re] arising from the Underlying Agreement, including any and all expenses incurred directly by [Munich Re] in the litigation, defense and settlement of claims made against [Munich Re] by the Original Ceding Company under the Underlying Agreement, excluding, however, all office expenses of [Munich Re] and the salaries and expenses of its employees.
Id. at 1 (Art. X(B)); id. at 2 (Art. X(C)).
Disputes eventually arose between the parties over payment of claims, primarily over whether Munich was properly reporting claims to ANICO, and whether these claims were within ANICO’s obligations to pay under the Retrocession Agreements.
*701 C. Procedural History
On December 22, 2009, Munich filed its Complaint, alleging three claims against ANICO. See Dkt. No. 1. In Count I, Munich contends that it billed ANICO for claims under the Stub Year Agreement but did not receive payment, amounting to breach of contract and damages estimated at $674,897.27. See Dkt. No. 117 (“Final Pretrial Order”), 5. In Count II, Munich alleges similar breach of the 2001 Agreement, amounting to estimated damages of $5,587,847.62. Id. at 16-17. Munich’s Count III seeks a declaratory judgment that Munich is entitled to payment for unspecified future losses under the Retro-cession Agreements for its reinsurance of Everest. See Dkt. No. 1. On February 16, 2010, ANICO filed its answer, affirmative defenses, and a counterclaim alleging it overpaid Munich under the Retrocession Agreements, and was entitled to a refund. See Dkt. No. 7. Munich answered ANI-CO’s counterclaim and asserted affirmative defenses on March 4, 2010. See Dkt. No. 11. On April 20, 2011, ANICO filed its First Amended Answer, bringing counterclaims and affirmative defenses against Munich for rescission, breach of the Retro-cession Agreements, fraudulent inducement, breach of the duty of utmost good faith, breach of the duty of good faith and fair dealing, for offset under the contracts •for claims not properly payable, and for estoppel, waiver, and failure of consideration. See Dkt. No. 60. Munich filed an answer on May 9, 2011, alleging the affirmative defenses of waiver, estoppel, failure to mitigate damages, excuse of performance due to contractual breach by ANICO, and breach of the duty of utmost good faith and fair dealing. See Dkt. No. 61.
The parties filed cross-motions for partial summary judgment. This Court ruled that the Retrocession Agreements calculated retention on a ground-up basis, 6 and the Court granted summary judgment dismissing ANICO’s untimely claim defense. See Dkt. No. 96, 893 F.Supp.2d 686, 689 (D.N.J.2012). On rehearing, the Court granted summary judgment in part for ANICO, concluding that ANICO did not have to pay claims Munich submitted after the December 31, 2007 “Sunset” deadline for the 2000 Retrocession Agreement. 7 Dkt. No. 112, 936 F.Supp.2d .475, 478 (D.N.J.2013). The Court also dismissed ANICO’s untimely claims defense under Article X, holding that the prior grant of summary judgment to Munich on ANI-CO’s Article X prejudice defense stood. Id. All remaining issues were left for trial.
The Court held a bench trial on June 17, 2013, that spanned 9 days. During the trial, both parties presented witnesses and experts and supplied volumes of exhibits relating to the specific Retrocession Agreements as well as the business practices of Munich, ANICO, IOA Re, and Everest generally. Following trial, the parties submitted their proposed findings of facts and conclusions of law. For convenience, I provide below a list of the trial witnesses and general summaries of the scope of their knowledge.
*702 Name_Title/Role_
Michael Alan Frantz Munich employee who currently manages Munich’s reinsurance _claim operations division. 6/17/13 Tr. at 62-63 (Frantz)._
Thomas J. Mauch Munich’s senior accounting manager for the retrocessional accounting department, he currently manages accounting for all retroces_sional programs, including billing. 6/18/13 Tr. at 3-4 (Mauch).
Arthur Giacobbe Munich senior claims consultant for the Everest Agreements. _6/18/13 Tr. 127-29; 6/19/13 Tr. at 168 (Giacobbe).___
Timothy Schmidt Employee of Am Re Brokers — a subsidiary of Munich that served as the broker and intermediary between Munich and IOA Re when the Retrocession Agreements were negotiated — whose main function was reinsurance reeoverables and claims handling between _2002 and 2009. 6/19/13 Tr. at 93-4 (Schmidt)._
Samuel J. Freda Munich’s Claims Director who has overseen the Everest Agreement from August 2007 to the present, and is responsible for ensuring proper reporting, updates, billing overview, reserving, and program _oversight. 6/19/13 at Tr. 167-68 (Freda)._
Susan Mack Munich’s expert witness on reinsurance claims administration and reporting, including industry custom and practice with respect to claims administration and reporting generally, and in connection with commutation or “Sunset” provisions in the Retrocession _Agreements. 6/20/13 Tr. at!2-13 (Mack)._
Walter Dorosz IOA Re’s Chief Operating Officer, his involvement with the Retro-cession Agreements was on IOA Re’s operational side after coverage was bound, including premium and claims payment. 6/20/13 Tr. _at 60, 67 (Dorosz)._
Cyndi Charney A former IOA Re employee, she was the Assistant Vice President and Director of Reinsurance Operations, and oversaw staff, including claims adjusters who received and processed loss notices, and _payment requests. Id. at 181-83 (Charney).____
Cathy Washburn IOA Re employee in the claims department, she began handling workers’ compensation claims for the Retrocession Agreements in _2004. 6/21/13 Tr. 3, 7 (Washburn)._.
Ed Pawlowski Currently a Munich Vice President, he served as Munich’s treaty underwriter for the Program for the Retrocession Agreements ____before promotion to account executive. 6/24/13 Tr. 4-6 (Pawlowski).
Lisa Hoekstra Former IOA Re employee who underwrote the Retrocession Agreements, evaluated the risks submitted, and proposed pricing for the _coverage on ANICO’s behalf. Id. at 177-78 (Hoekstra)._
Steven Schouweiler ANICO’s Executive Vice President responsible for accident and _health business. 6/25/13 Tr. at 130 (Schouweiler)._
James Stelling ANICO’s Vice President of Compliance, id. at 149 (Stelling), he sent • correspondence to Munich tendering a return of net premiums. _Def.’s 269._
Linda Martin Barber ANICO’s expert on reinsurance claims operations and administration, the industry and practice for reinsurance claims handling, the duty of utmost good faith, and reinsurance industry and practice with respect to the Retrocession Agreements’ Sunset provisions. _7/1/13 Tr. at 8 (Barber)._
Thierry Verhaegen Currently a Munich account manager in the business runoff division, he was an account executive in charge of Munich’s relationship with Everest during the times relevant to this case. Id. at 37 __(Verhaegen)._
Richard Waterman ANICO’s expert in reinsurance and retrocessional underwriting, including the placement process, industry custom and process, and the duty owed by a cedent to a retrocessionaire in the underwriting _process. Id. at 150-52 (Waterman)._
*703 Lydia B. Kam Lyew Munich’s expert in reinsurance and retrocession underwriting, including workers’ compensation, excess of loss, and carve-out retro-cession, and in industry custom and practice in the underwriting process, the disclosure of information, and the duties owed between _a reinsured and its retrocessionaire. 7/2/13 Tr. at 19-20 (Lyew).
II. FINDINGS OF FACT
A. Formation of the Retrocession Agreements
1. Undenuriting Process
In entering into the Retrocession Agreements, both Munich and ANICO relied on brokers. Munich was represented by its wholly owned subsidiary, Am Re Brokers, 8 who operated as Munich’s intermediary in obtaining retrocessional coverage for the Everest Agreements. 6/24/13 Tr. at 23-25 (Pawlowski). ANICO was represented by its independent broker, IOA Re, who, as noted, also represented other retrocessionaires. 6/20/13 Tr. at 65 (Dorosz). Indeed, Munich’s relationship with IOA Re was not limited to the Munich-ANICO Retrocession Agreements: for every year that Munich obtained retrocessional coverage for the Everest Agreements, IOA Re acted as the retrocessional underwriter: for 1998, 1999 and the period from January 1 to October 31, 2000, IOA Re underwrote the retrocession on behalf of Continental Casualty; for the period from November 1 to December 31, 2000 and for 2001, IOA Re underwrote the retrocession on behalf of ANICO. 9 6/24/13 Tr. at 181:9-181:15 (Hoekstra) (1998); id. at 186:13-187:19 (2000 and 2001); 6/25/13 Tr. at 22:4-29:11 (Hoekstra) (Jan. 1, 1998 to Oct. 31, 1998); id. at 29:12-61:5 (Nov. 1, 1998 to Oct. 31, 1999); id. at 61:4-79:13 (Nov. 1, 1999 to Oct. 31, 2000). IOA Re served as ANICO’s reinsurance manager in placing and underwriting the retrocessional contracts; additionally, IOA Re also acted as ANICO’s servicing agent, which included paying claims and receiving and distributing premiums. Id. In particular, IOA agreed to manage and administer ANICO’s reinsurance business, including: marketing, underwriting, billing and processing premiums, and receiving reinsurance claims and adjusting losses. Def.’s 246 (IOA-ANICO Reinsurance Management Agreement) at 2-3; see also supra Note 3.
Lisa Hoekstra was an underwriter at IOA Re for workers’ compensation excess of loss reinsurance from 1993 to 2004, and was the point of contact for Am Re Brokers with respect to obtaining retrocessional coverage for the Everest Agreements. 6/24/13 Tr. at 176:21-177:14 (Hoekstra). As an underwriter at IOA Re, it was Ms. Hoekstra’s job to evaluate risks for retrocessional coverage submitted to IOA Re, and to provide proposed pricing for coverage on behalf of the companies IOA Re represented, including ANICO. Id. at 178:3-178:8.
In underwriting and proposing retrocessional coverage, IOA Re relied primarily on the nature of the insurance polices underlying the reinsurer’s business, in order to ascertain the risk of loss on those policies. Thus, in the case of providing retrocessional cover for Munich’s reinsurance of the Everest program, Ms. Hoekstra explained that her underwriting process fo *704 cused on the policies written by Everest, not on Munich’s reinsurance of Everest. Id. at 17:4-13. That said, as a retrocessional underwriter, Ms. Hoekstra relied on the retrocedent — Munich—to provide all information material to IOA Re’s underwriting process. Id. at 178,194.
During the period encompassing the reinsurance of the Everest program, Am Re Brokers supplied Ms. Hoekstra the same information that Munich had received from Everest in the form of an underwriting package; Ms. Hoekstra used the same underwriting package to underwrite both the 2000 Stub Year and 2001 Retrocession Agreements. Id. at 187:9-188:6; 6/25/13 Tr. at 80:18-22 (Hoekstra). It was Munich’s practice, through Am Re Brokers, to supply these materials each year it sought retrocessional coverage, and to then wait for any follow up questions or additional requests from IOA Re regarding the package. 6/24/13 Tr. at 8:20-23 (Pawlowski); 7/1/13 Tr. at 66:1-16, 67:18-23, 68:18-69:7 (Yerhaegen). Through this, Am Re Brokers hoped and expected that the underwriting package conveyed the information necessary to calculate IOA Re’s clients’ exposure, and to accurately price retrocessional coverage. 6/24/13 Tr. at 8:24-9:14 (Pawlowski). Indeed, Ms. Hoekstra agreed that the types of submissions she received from Am Re Brokers were typical of the underwriting submissions for the workers’ compensation excess of loss program covered by the Everest program. 6/25/13 Tr. at 22:15-22:19 (Hoekstra).
Ms. Hoekstra did not follow any specific checklist for required underwriting submissions; however, under IOA Re’s general underwriting guidelines, Ms. Hoekstra explained that she expected to receive the following information from a ceding rein-surer in order to accurately propose retrocessional coverage, each pertaining to the underlying insurer: (i) loss control, (ii) historical splits of business by hazard code by state, (iii) a summary of the underwriting, loss control and claims departments, and (iv) any audit reports. Id. at 127:8-128:6. Ms. Hoekstra further noted that beyond this information, she would not typically request other materials that may be in the retrocedent’s possession because she would not be in the position to know what other information existed; however, if she were to request, for example, audit reports, she expected to receive all such reports available to the ceding reinsurer. Id. at 126:12-17, 128:23-25. Indeed, as described infra, it is generally a matter of industry custom and practice for the ceding company to send an underwriting package to the retrocessionaire or its broker, and await specific follow-up questions or requests — and this was the process followed by IOA Re in the years it served as the broker underwriting the Munich retro-cession. 7/2/13 Tr. at 35:22-39:12; 43:22-45:8 (Lyew). In sum, Ms. Hoekstra trusted that Munich’s underwriting package contained everything material to IOA Re’s underwriting process, and it was her practice, after reviewing this package, to request additional information she believed relevant and necessary to her underwriting process, and in doing so, to generally memorialize these questions in writing in her file. Id. at 20:6-21:10.
Significantly, Ms. Hoekstra explained that in calculating the premium rate for retrocessional coverage for Munich during the years covered by Munich’s reinsurance of the Everest program, she relied on data related only to Everest’s business, not that of Munich. In calculating a rate for retrocessional coverage, IOA Re used a “Treaty Underwriting Work Sheet” and “Basis Underwriting Information” form; these documents are completed solely from data pertaining to Everest — e.g., the opportunity summary, description of the business to be written, underwriting guidelines, historical results, projected premium and expected loss ratios on these worksheets relate to *705 Everest — and do not allow for any input of data related to the ceding reinsurer. Id. at 20:2-5, 35:20-36:11, 37:8-39:9, 41:9-45:9, 53:12-54:4, 61:19-64:7, 68:18-69:18, 81:10-24, 86:9-88:12; see also Pl.’s 50 at AAHRU 00104; Def.’s 248 at ANICO-IOA-5842, 5801. At the same time, Ms. Hoekstra would also review prior years’ performance of retrocessional cover written by IOA Re for the Everest program. 6/25/13 Tr. at 21:25-22:3 (Hoekstra).
With this information, IOA Re applied its proprietary internal model to create a “manual rate” for retrocessional coverage. 10 Id. at 50:4-51:6. After the manual rate was generated, Ms. Hoekstra further discounted the rate based on discretionary adjustment factors that again related solely to Everest, not Munich. 11 Id. at 71:2-74:10. In performing each of these calculations and discounts, IOA Re does not take into account the ceding reinsurer’s— Munich’s — own rate that it charged Everest or the cedent’s own expected loss ratio. Id. at 54:24-60:12. Similarly, Ms. Hoekstra did not factor Munich’s experience into IOA Re’s calculation of the rate it would propose to Munich, as Munich’s reinsurance coverage of the Everest program was different than what IOA Re would propose as retrocessional coverage. Id. at 112:3-16. That said, Ms. Hoekstra conceded that had Munich disclosed additional information that it had in its possession, it is possible that IOA Re would not have entered into the Retrocession Agreements on behalf of ANICO at the same rate or at all. 6/24/13 Tr. at 208-211 (Hoekstra).
Ms. Hoekstra also learned additional information regarding Munich’s reinsurance of the Everest program, outside of the underwriting packages, through discussions with Am Re Brokers. For example, Ms. Hoekstra was aware that Munich Re was losing money on the $250,000 excess $250,000 layer of its reinsurance. 12 6/25/13 Tr. at 107:10-108:3 (Hoekstra); 110:11-111:2; Def.’s 248 at ANICO-IOA-5799. *706 Indeed, at the time the Retrocession Contracts were being underwritten, IOA Re was aware of a number of losses that had reached the retrocession layer for prior years of the program, including a full limits loss in March 2000, and was projecting additional loss development to those years. 6/25/13 at 90:11-95:8 (Hoekstra); Defi’s 248 at ANICO-IOA-5807. Munich told Ms. Hoekstra that the results of Munich’s prior years covering Everest were unsatisfactory, and Ms. Hoekstra’s file reflects Munich was losing money on its prior years of reinsurance and was displeased with the performance of this program. 6/24/13 Tr. at 21:21-22:5 (Pawlowski); Def.’s 248 at ANICO-IOA-5799.
Ms. Hoekstra nevertheless explained that Munich’s losses were not something she considered or took into account when underwriting retrocessional coverage; thus, she did not inquire further into Munich’s own financial experience with the Everest program, such as why Munich was not profitable at the $250,000 excess $250,000 layer, nor did she request any information regarding Munich’s own evaluation of the profitability of reinsuring Everest. 6/25/13 Tr. at 107:10-112:16, 109:21-110:9, 121:12-123:25 (Hoekstra). Rather, Ms. Hoekstra explained that, in reviewing Munich’s reinsurance of Everest, she focused on the layer of coverage for which Munich was seeking retrocessional coverage; for that reason, IOA Re did not expect that that the loss ratio for Munich’s reinsurance of Everest would be the same as Everest’s own loss ratio or for the layer of any assumed retrocessional coverage of Munich’s own layer. Id. at 66:13-67:23. Put differently, Ms. Hoekstra understood that ANICO, through IOA Re, was reinsuring only part of Munich’s coverage: only losses that breached the $500,000 layer of an Everest-issued workers’ compensation policy would impose liability on ANICO under the retrocession. Id. at 16:24-17:3. Because IOA Re expected there to be more losses in the $250,000 excess of $250,000 layer than in the $500,000 excess of $500,000 layer, the projected loss ratios, and corresponding premium rate, for the $750,000 excess of $250,000 layer would not be the same as the projected loss ratios and rate for the $500,000 excess $500,000 layer, notwithstanding that that layer falls within the $750,000 excess $250,000 layer. Id. at 56:16-58:2. Thus, in the case of the losses amounting to less than $500,000, Ms. Hoekstra explained that those losses did not significantly affect her underwriting of the $500,000 excess $500,000 layer because she was more focused on the potential for a catastrophic loss, not on the frequency of losses, which were different for the $500,000 excess $500,000 layer than for the layer of $0 up to $500,000. Id. at 111:3-12, 112:3-16. In Ms. Hoekstra’s view, the only “sharing of risk” between Munich and ANICO would be that they both shared the common risk associated with the underlying Everest policies. Id. at 18:25-19:22. For this reason, IOA Re’s calculated premium price, on behalf of ANICO, for the retrocession of the Everest program from Munich was a percentage of the premiums Everest received from the policies it issued, not the premium Munich received from Everest. Id. at 28:25-29:11.
In that connection, it was Ms. Hoekstra’s assumption that Munich would be conducting its own evaluation of the Everest underwriting package, including (i) doing due diligence on the losses and loss history as well as audits of Everest and (ii) reviewing the performance of its prior years of reinsuring the Everest workers’ compensation program. Id. at 21:11-24, 26:19-27:11. In spite of this assumption, Ms. Hoekstra never requested any such information from Am Re Brokers. 13 Id. at
*707 27:12-25.
2. Findings of Munich’s (Nondisclosures
The Court finds that Munich supplied IOA Re with the same underwriting files that it received from Everest, and that Munich supplied virtually all information that IOA Re requested of Munich. Beyond that, the Court finds that Munich failed to disclose, or failed to fully disclose, information relating to Munich’s own evaluation of Everest, and its reinsurance of the Everest program. I pause to note that these facts form the basis of ANICO’s counterclaim for rescission, as ANICO contends that this undisclosed information was material to IOA Re’s underwriting process and decision to provide retrocessional coverage. Although materiality is a question of fact, it is guided by legal principles. Thus, for ease of understanding, I set forth my findings on materiality within my analysis of ANICO’s counterclaim, infra.
a. Munich’s Review of Changes to Everest’s Business in and around 2000
Thierry Verhaegen, the account manager of the Everest Agreements in the business runoff operations at Munich, 7/1/13 Tr. at 37:1-37:15 (Verhaegen), explained that Munich first looked to Everest because Munich was interested in growing its workers’ compensation line of business. Id. at 37. Initially, Mr. Verhaegen considered Everest’s business to be “pretty poor.” 14 Del’s 229; 7/1/13 Tr. at 75 (Verhaegen). However, Munich’s view of the Everest program quickly changed to positive, and Munich continued to renew the program, sometimes at reduced rates. 7/1/13 Tr. at 42:10-45:8 (Verhaegen); Pl.’s 70. In that connection, in or around August 2000, Everest informed Munich that it would be adding a book of business from a new managing general agent (“MGA”), American All Risk Insurance Services (“AARIS”), to its program beginning on November 1, 2000, and thus Munich was required to consider the consequences to its reinsurance based on this additional book of underlying policies. Def.’s 67; 6/24/13 Tr. at 31-32 (Pawlowski). Mr. Verhaegen explained that this was initially received as “good news,” because it would double the size of the Everest program, allowing Munich to further expand its workers’ compensation line of business Def.’s 248 at ANICO-IOA-5786; Pl.’s 94; 7/1/13 Tr. at 45:17-47:1 (Verhaegen).
Munich proceeded to review AARIS from an underwriting standpoint in September 2000. Def.’s 281 at MRAM-0601337. At the time, Ed Pawlowski, Munich’s treaty underwriter on the Everest program, see 6/24/13 Tr. at 4-6 (Pawlowski), sent an email to Mr. Verhaegen with *708 respect to Munich’s current estimated premium after the inclusion of AARIS; in particular, Mr. Pawlowski was concerned that AARIS had unfavorable historical losses. Def.’s 70; 6/24/13 Tr. at 74-76 (Pawlowski). In October 2000, Mr. Verhaegen sent an email to Everest expressing these concerns regarding the AARIS book of business, and on November 2, 2000, Mr. Verhaegen sent Everest another email regarding an AARIS claims review, specifically noting that one of Munich’s concerns about AARIS was the “stair-stepping” of reserves. 15 Def.’s 78, 238.
Much of these discussions relating to AARIS were not disclosed to IOA Re. That said, Munich’s internal evaluation of AARIS was based off of the same underwriting package from Everest that IOA Re had for retrocessional coverage purposes. 6/24/13 Tr. at 76:15-76:25 (Pawlowski). Further, when Ms. Hoekstra requested specific loss history for AARIS, Am Re Brokers provided her with an underwriting audit report of AAIRS from September 2000. After reviewing this audit report, Ms. Hoekstra determined that the audit report was “favorable” in that it would support extending retrocessional coverage of the Everest program even with the inclusion of the AARIS book of business. Def.’s 248 at ANICO-IOA5786; 6/25/13 Tr. at 113:20-115:19 (Hoekstra); 6/24/13 Tr. at 195:2-5 (Hoekstra).
b. Fay Isik Memorandum
Munich did also not disclose to IOA Re a memorandum from Fay Isik, a former Munich underwriter for the Everest program, to her replacement, Mr. Pawlowski, who, as noted, served as Munich’s underwriter of the reinsurance of Everest for the 2000 and 2001 years. Def.’s 69. In the memorandum, Ms. Isik provided a retrospective assessment and summary of the performance of the Everest program from its inception up to the date of August 15, 2000, and explained, inter alia, that (i) Everest and Munich considered their relationship to be “opportunistic,” 16 (ii) an actuarial exposure rating study had been prepared due to recent loss activity, (iii) Munich needed a rate increase, which had already been discussed with Everest, (iv) a statistical study had been performed in October 1999, and was scheduled to be updated in August 2000, 17 (v) in 2000, several underwriting reviews had been performed, and one included a “needs improvement” recommendation, 18 and (vi) Munich was pro *709 jecting a loss ratio of 150 percent on its own coverage for the 2000 year. Id.; 6/24/13 Tr. at 6, 31, 52-57, 142-144 (Pawlowski); Def.’s 69. Most of these details were not disclosed to IOA Re at the time of the formation of the Retrocession Agreements. 19
c. Munich’s Rate Calculations
Around the time that Munich was seeking to renew its retrocessional coverage of the Everest Agreements, Munich had sustained higher than expected losses to its reinsurance of the Everest program, which led Munich to increase its premium rate going forward. 7/1/13 Tr. at 47:12-48:23 (Verhaegen); 6/24/13 Tr. at 48 (Pawlowski); Def.’s 69 at MRAM-06-00708. Nevertheless, Munich still decided to extend its coverage of the Everest program without first obtaining continuing retrocessional coverage; this decision was made because Everest agreed to pay a new higher premium rate, which satisfied Munich’s underwriting guidelines without the need for a retrocession. 6/24/13 Tr. at 100:15-24, 101:4-9, 157:15-158:3, 160:25-161:18, 164:22-165:13 (Pawlowski); Def.’s 77. Although these facts were generally known or apparent to IOA Re, see 6/25/13 Tr. at 21:11-15 (Hoekstra), the specifics underlying Munich’s decision to renew its coverage of the Everest Agreements, such as the actual premium rate, were not provided to Ms. Hoekstra or IOA Re.
In determining whether to renew the Everest programs for 2000, Munich reviewed underwriting information from pri- or years. 6/24/13 Tr. at 14-15 (Pawlowski). For example, on August 28, 2000, an underwriting experience report of the entirety of Munich’s coverage of Everest— including the carve out layer that ANICO eventually assumed — revealed a loss. 20 Id. at 62 (Pawlowski); Pl.’s 98. A September 10, 2000 rate study on the Everest program was also run in a manner that included the carve out layer. 6/24/13 Tr. at 72 (Pawlowski); Def.’s 235. Beyond these studies, Munich’s internal correspondence shows that while Munich’s overall evaluation of reinsuring the Everest program was positive, Munich did not expect to make much money off of Everest, if at all; 21 however, Munich expected that renewing the Everest business for 2001 would make sense from an overall business and economic standpoint. Def.’s 239; 6/24/13 Tr. 95-97 (Pawlowski); id. at 173:15-174:24 (Pawlowski). These internal communications, including Munich’s loss ratios for years prior to 2000, were not shared with IOA Re during the underwriting of the retrocessional agreements. 22
*710
d. Munich’s Underwriting Standards
Munich relied not only on underwriting profitability in determining whether to renew its reinsurance coverage of Everest, but also on profits gained off investments made from premiums. 7/1/13 Tr. at 144 (Verhaegen); 6/24/13 Tr. at 139 (Pawlowski). Munich did not disclose to IOA Re that it was considering investment gain as a portion of its profitability on the Everest program, although it was not uncommon for workers’ compensation reinsurers to do so at that time. 6/24/13 Tr. 139; 140-42 (Pawlowski).
Similarly, Munich also did not fully disclose to IOA Re that it was considering using an offshore entity, Inter-ocean, for the 2001 renewal of Munich’s coverage of the Everest program. See id. at 117. At the time, Munich determined that if it was unable to adjust its pricing rate, its internal guidelines would have required Munich to move its reinsurance of the Everest program into an entity like Inter-ocean for accounting purposes. Def.’s 72; Def.’s 238 at MRAM-23-00066; Def.’s 248 at ANI-CO-IOA-05786. Munich only disclosed to IOA Re that it was considering Inter-ocean for tax discount purposes. Def.’s 248 at ANICO-IOA-05786. Ultimately, Munich did not need to proceed with using Inter-ocean because it obtained a more favorable pricing rate with Everest. 6/24/13 Tr. at 174:25-175:1 (Pawlowski); 7/1/13 Tr. at 48:24-49:22, 52:2-57:24 (Verhaegen); Pl.’s 125.
e. Commodore
Also around the time that Munich was entering into the Retrocession Agreements, it was arranging with Everest to make adjustments on another, unrelated reinsurance program between Everest and Munich, named Commodore. 24/13 Tr. at 90 (Pawlowski); Def.’s 238; see also Def.’s 219. The Commodore program, which was coming to an end around 2000, had performed unsatisfactorily from Munich’s perspective, and so Munich negotiated retroactive adjustments of Commodore, in the form of a payback, 23 as part of Munich’s agreement to continue reinsuring Everest’s workers’ compensation program. Def.’s 238; 6/24/13 Tr. at 175:2-5 (Pawlowski); 7/1/13 Tr. at 58:6-60:19 (Verhaegen). Although Munich received this adjustment on Commodore in connection with the workers’ compensation program, Munich’s decision to continue to reinsure Everest was not contingent on the Commodore adjustments or vice-versa; nevertheless, IOA Re was not made aware of Munich’s deal with Everest regarding Commodore. 6/24/13 Tr. at 90-91, 93, 127, 175 (Pawlowski); 7/1/13 Tr. at 58:6-60:19 (Verhaegen).
3. Expert Testimony on Underwriting
Both Munich and ANICO presented testimony at trial from experts in the field of insurance and reinsurance underwriting concerning the formation of the Retrocession Agreements. 24 Munich relied on Ms. Lydia Kam Lyew, and ANICO on Richard *711 Waterman. Ms. Lyew has extensive and current experience working for companies that assume and cede reinsurance, and has extensive experience underwriting workers’ compensation reinsurance and workers’ compensation carve out reinsurance. 7/2/13 Tr. at 10:25-18:19 (Lyew). Mr. Waterman also has extensive experience in the field of reinsurance; however, he has not been employed by a company that assumes or cedes reinsurance for more than 20 years and has never underwritten workers’ compensation carve out reinsurance. 7/1/13 Tr. at 151:12-151:23 (Waterman).
Ms. Lyew testified that the relevant material information that needed to be disclosed between Munich and IOA Re was all information pertaining to the layer that ANICO would be reinsuring, as well as information about Everest, ie., the same materials that were available to Munich. 7/2/13 Tr. at 24:9-24:22, 25:6-27:17, 70:7-70:17 (Lyew). With regard to industry customs and practices, Ms. Lyew testified that ceding companies typically send underwriting packages like those sent by Munich to the reinsurer or retrocessionaire, or the broker, and then expect the reinsuring entity or broker to follow up with any questions or requests for additional information. Id. at 35:22-39:12, 43:22-45:8. To that end, Ms. Lyew explained that the ceding company would not typically include in the underwriting package (i) audit reports that do not contain materially adverse information. — -and stair stepping of reserves was not, at the time, considered in the industry to be materially adverse information; (ii) loss ratios for prior coverage years; or (iii) the use or proposed use of an offshore entity. Id. at 22:6-17, 23:6-14, 40:11-43:21, 45:20-46:14, 52:12-57:5, 61:18-25, 62:10-64:8, 83:5-85:24.
Mr. Waterman agreed that the standard between the cedent and the reinsurer is to disclose all information reasonably material to the underwriting process. 7/1/13 Tr. at 194:7-8 (Waterman). Mr. Waterman disagreed with Ms. Lyew as to what constituted “material” information, for example, testifying that it would be material for an underwriter, such as Ms. Hoekstra, to know (i) that Munich had loss ratios over 150% on its prior coverage of the Everest program, (ii) the reasons Munich was considering using an offshore entity, and (iii) of the stair-stepping of reserves at MGAs covered by the Everest program. Id. at 156:2-159:1. According to Mr. Waterman, this information should have been disclosed because it was clear to him that, in pricing and assessing the risk of the Everest program, Munich was relying on information not contained in the underwriting package that it shared with IOA Re. Id. at 159:2-20.
The Court determines that while both witnesses were generally credible, based on the testimony of the experts and the testimony of the other witnesses, Ms. Lyew’s descriptions of the industry customs and practices were better supported. Ms. Lyew’s explanation that the ceding reinsurer typically sends the underwriting package to the retrocessionaire in the same form as the reinsurer receives it, and then waits for any follow up from the retrocessionaire, aligns with Ms. Hoekstra’s testimony and IOA Re’s business practices. Compare 7/2/13 Tr. at 35:22-39:12, 43:22-45:8 (Lyew) with 6/25/13 Tr. at 107:10-112:16 (Hoekstra). Moreover, Mr. Waterman agreed with Ms. Lyew that a potential retrocessional such as ANICO, or its experienced broker IOA Re, would know and expect that the ceding reinsurer would be conducting internal audits of the underlying program, and that the ceding reinsurer does not have an affirmative duty to disclose audit reports in its possession if those reports do not contain materially adverse information. 7/1/13 Tr. at 188:7-190:8 (Waterman); 7/2/13 Tr. at *712 8:13-8:25 (Waterman). Indeed, Mr. Waterman further agreed that it is incumbent on the retrocessionaire, or its broker, to request from the ceding reinsurer any audits or other information of which it may be aware. 7/1/13 Tr. at 191:7-191:16 (Waterman). Overall, given that Mr. Waterman does not have recent experience in underwriting reinsurance, or any experience with workers’ compensation carve out reinsurance, I place little weight on his description of what information would be “material” to a retrocessionaire underwriter.
A Munich’s Payment Demand and Schouweiler’s Testimony
Steven Schouweiler is an Executive Vice-President for ANICO, responsible for the accident and health business, including the business covered by the Retrocession Agreements. 6/25/13 Tr. at 130:13-130:17 (Schouweiler). At a certain point after litigation began in the instant case, Mr. Schouweiler determined that there were sufficient facts being disclosed in discovery previously unknown to him, ANICO, or IOA Re, that would justify rescission of the Retrocession Agreements — particularly deposition testimony from Mr. Pawlowski. 6/25/13 Tr. 133 (Schouweiler); see Def.’s 67-70, 72, 76-77, 81-82. Indeed, much of Mr. Schouweiler’s basis for rescission turns on the discovery, following Mr. Pawlowski’s deposition, of Munich’s internal calculations of its estimated loss ratios for the years covered by the Retrocession Agreements, which, as noted above, were not disclosed to IOA Re. 6/25/13 Tr. at 133 (Schouweiler). After this point, ANICO did not receive premium from, or pay any claims to, Munich, and shortly thereafter, in January 2011, ANICO moved to amend its answer to include the rescission counterclaim, which motion was granted in April 2011. 25
In addition to a tender of premium allegation in ANICO’s Amended Answer, AN-ICO wrote to Thomas Mauch, Munich’s senior accounting manager, in December 2011, and offered a tender in the amount of premiums received, offset pursuant to the contracts by amounts paid by ANICO for claims. 26 Def.’s 269. Around this time, in 2012, ANICO and Munich realized that they had different understandings of the amount of premiums Munich had paid under the Retrocession Agreements, to wit, whether ANICO, through IOA Re, had received premium payments for the 2000 Stub Year. Munich therefore rejected AN-ICO’s tender offer, inter alia, because it did not include remittance of the premiums Munich had paid IOA Re for the 2000 Stub Year. Def.’s 270.
Upon further investigation by Munich and IOA Re in 2012, the following facts became apparent regarding the 2000 Stub Year premium. During the years that Munich obtained retrocessional coverage for the Everest program between 1998 and 2001, IOA Re, in addition to acting as the broker, operated as a servicing agent by paying claims and receiving and distributing premiums for retrocessional companies. These companies included Continental Casualty, whose coverage was managed by a “runoff manager” known at times as either Castlewood, International Solutions, or ENSTAR (collectively, “Castlewood”) 27 *713 See 6/20/13 Tr. at 93:3-94:16 (Dorosz). Prior to the 2000 Stub Year, Munich had obtained from IOA Re retrocessional coverage from Continental Casualty for the period from November 1, 1999 to October 31, 2000 (the “1999 Year”). Id. at 92:23-93:15. Following the expiration of Continental Casualty’s coverage of Munich at the end of the 1999 Year, Castlewood took over Continental Casualty’s business as its runoff manager; Continental Casualty’s records and premiums were transferred to Castlewood, and Munich’s future claims were directed to Castlewood. Id. at 93:16-95:11, 96:11-22. Review of Munich’s files reveal that when Munich remitted payment to IOA Re in 2002, 28 it supplied a check in the amount necessary to cover premiums for both the 1999 Year and the 2000 Stub. Year, but failed to indicate to IOA Re that the check was intended to cover both years; instead, it appeared from Munich’s remittance that the check was intended for only the 1999 Year. 29 See id. at 109:12-110:16; Pl.’s 20; Def.’s 314. Accordingly, IOA Re sent the entire payment that Munich submitted for both the 1999 Year and the 2000 Stub Year to Continental Casualty/Castlewood; only after IOA Re reviewed its files in 2012 did it determine that the amount remitted by Munich at that time should have been applied to both the 1999 Year and the 2000 Stub Year. 6/20/13 Tr. at 109:12-110:16; 174-76 (Dorosz); Pl.’s 20; Def.’s 313-15. Indeed, in an email response to Munich following this discovery, Mr. Dorosz stated that it he was “not sure how anyone would have been able to determine that the [Stub Year] was included in what you sent me.” Def.’s 313. Both IOA Re’s and ANICO’s subsequent attempts to determine if Continental Casualty/Castlewood actually received the premium for the 2000 Stub Year have been unavailing, and thus ANICO contends it cannot tender that premium because it never received it. 6/20/13 Tr. at 105:23-106:20 (Dorosz); 6/25/13 Tr. 153-54 (Stelling).
In light of the foregoing, the Court finds that IOA Re received the 2000 Stub Year premium, but erroneously, based on Munich’s failure to properly identify the payment, remitted the premium to Castlewood Casualty/Continental as part of the 1999 Year adjusted premium; the Court further finds that Mr. Stelling credibly testified that ANICO itself has never received the premium for the 2000 Stub Year.
B. Claims Reporting under the Retro-cession Agreements
1. Munich’s Reporting Procedures
As discussed above, Munich’s reinsurance obligations and ANICO’s retrocessional obligations related to the Retrocession Agreements arise solely from claims paid by Everest on its workers’ compensation polices under the Everest Agreement. In that connection, Article X of the Retro-cession Agreements (“Article X”) provides in relevant part:
A. [Munich] agrees to advise [IOA Re for and on behalf of ANICO] promptly of all claims under this Agreement on being advised by [Everest National], and to furnish the Reinsurer with *714 such particulars and estimates regarding the same as are in the possession of [Munich]. An omission on the part of [Munich] to advise [IOA Re for and on behalf of ANICO] of any loss shall not be held to prejudice [Munich]’s rights hereunder.
B. In addition, the following categories of claims shall be reported to [IOA Re for and on behalf of ANICO] immediately, regardless of any questions of liability of [Munich] or coverage under the Agreement:
1. Any accident reserved at 50% of the reinsured attachment point;
2. Any accident involving a brain injury;
3. Any accident resulting in burns over 25% or more of the body; or
[4]. Any spinal cord injury.
Pl.’s 1-2 (Art. X); Dkt. No. 117, ¶4 (Pretrial Order).
For claims arising under those Everest policies covered by the Everest Agreement, Everest would report to a claims handler at Munich in the “Assumed Claims Department.” 6/18/13 Tr. at 140:11-141:13 (Giacobbe). Upon receipt of a reported claim, the claims handler would ensure that there was a proper basis for the claim, and would review other details such as the description, date of the loss, and whether the claim arose from the claimant’s employment; also at that time, the claims handler would review the amount of reserves posted by Everest and would then set Munich’s own reserves. Id.
For purposes of its retrocessional coverage, when Munich’s Assumed Claims Department processed a paid loss from Everest, resulting in Munich having to set reserves and/or pay Everest, this information would be entered into a computer system accessible by Munich’s Retrocession Accounting Department (“Retro Accounting”). 6/18/13, Tr. at 7:23-8:15 (Mauch). Retro Accounting would receive notifications from this system as well as generate weekly, monthly, and quarterly reports for claims reserved or paid by the Assumed Claims Department. Id. If Munich sent a payment to Everest that fell within the retrocessional coverage under the Retrocession Agreements, Munich’s system would generate a bill for the retrocessionaire; if Munich had not sent a payment but only had set reserves that fell within the retrocessional coverage, Retro Accounting would still generate a notification for the retrocessionaire but there would be no underlying payment information in the Munich system. Id. at 10:5-11:4. In either event, Retro Accounting would not bill or notify IOA Re directly; rather, after a Retro Accounting accountant reviewed the claim or reserve information entered by the Assumed Claims Department for the purposes of determining retrocessional coverage, Retro Accounting sent the information to Am Re Brokers. 30 Id. at 7:25-8:11. Am Re Brokers then processed that information and entered it into its own computer system, known as ARBISS, which automatically generated a bill or notice to be sent to IOA Re, based on the coverage under the Retrocession Agreements. Id. at 6:6-7:6, 8:11-15, 81:5-16; 6/19/13 Tr. at 95 (Schmidt). The financial information reported to IOA Re from Am Re Brokers— such as reserves and paid/loss information — was essentially the same information that was provided by Munich’s claims department. 6/19/13 Tr. at 96 (Schmidt) From the start of the Retrocession Agreements until 2002, Munich’s claim *715 handler in charge of the Everest program was Joseph Canuncio. 6/17/13 Tr. at 140 (Frantz). When Mr. Canuncio retired in 2002, Arthur Giacobbe was hired to replace him in claims handling. 6/18/13 Tr. at 127- 28 (Giacobbe). For the period spanning 2002 to 2007, Mr. Giacobbe served as the senior claims handler for claims arising under the Everest Agreement, handling only standard workers’ compensation claims, and reporting claims to IOA Re via Am Re Brokers employee Timothy Schmidt. Id. at 53-55, 127-29, 132-33, 159-60 (Giacobbe); 6/19/13 Tr. at 168 (Freda); 6/19/13 Tr. at 93-94 (Schmidt). In 2007, Samuel Freda assumed Mr. Giacobbe’s duties with respect to claims from the Everest program. 6/18/13 Tr. at 133-34 (Giacobbe); 6/19/13 Tr. at 173 (Freda). Mr. Freda had previously worked for Everest, and had been involved in handling Everest’s claims under the program. 6/19/13 Tr. at 167 (Freda); 6/18/13 Tr. at 128- 29 (Giacobbe). Mr. Freda continued reporting claims to IOA Re through Mr. Schmidt at Am Re Brokers. 6/19/13 Tr. at 93-94 (Schmidt)
When Mr. Giacobbe started working on the Everest program, in line with Munich’s general practices, he received no formal or informal training regarding retrocessional reporting procedures, including none ■ by his predecessor Mr. Canuncio, nor was he provided with copies of the Retrocession Agreements or any portion thereof. 31 6/19/13 Tr. at 83, 127-28, 134-36 (Giacobbe). Instead, Mr. Giacobbe reviewed Mr. Canuncio’s history of reporting to the retrocessionaires, and endeavored to continue reporting in the same fashion — ie., when the incurred amount for any particular claim reached $500,000. 32 6/18/13 Tr. at 133:22-134:1; 136:9-136:21 (Giacobbe). According to Mr. Giacobbe, he believed this satisfied the reporting and notice terms of the Retrocession Agreements. Id. at 39:8-42:24. Indeed, in Mr. Giacobbe’s experience as a claims handler, it was not uncommon for the reporting threshold to be at the attachment point of the reinsurer or retrocessionaire’s coverage — here, $500,000. 6/19/13 Tr. at 43:12-44:21 (Giacobbe).
Contrary to Mr. Giacobbe’s understanding of the reporting requirements under the Retrocession Agreements, under Article X, claims were to be reported to IOA based upon the reserve amount, regardless of any amount actually paid. 6/18/13 Tr. at 142-43 (Giacobbe); Pl.’s 1-2 (Art. X.B). Additionally, Munich.was required to re- ' port to IOA Re immediately, for the follow categories of claims: those reserved at 50% of the attachment point of the Retro-cession Agreements — ie., at $250,000— and those involving a brain injury, spinal cord injury, or resulting in burns over more than 25% of the body. 33 6/17/13 Tr. at 107-108, 110 (Frantz); PL’s 1-2 (Art. X). Mr. Giacobbe did not follow these reporting requirements during the period 2002 to 2007. 34 Indeed, during this time, Giacobbe never looked at the Retrocession Agreements or the underlying agreements between Everest National and Munich. 6/18/13 Tr. 134 (Giacobbe).
*716 Beyond Mr. Giacobbe’s incorrect understanding of his reporting obligations under the Retrocession Agreements, there were also claims that were reported late to IOA Re due to delayed reporting by Everest to Munich. 6/19/13 Tr. at 15:20-23 (Giacobbe). When Mr. Giacobbe received a late claim from Everest, he would ask Everest why it was being first reported at that point; typically, the response would be that Everest “missed” the claim. 6/18/13 Tr. at 155:16-23 (Giacobbe). When this occurred, Mr. Giacobbe “didn’t think of reporting it to ANICO” if it had not yet reached retention. 35 See 6/19/13 Tr. at 21:6-12 (Giacobbe). Notwithstanding these reporting issues from Everest, Mr. Giacobbe sometimes would choose not to monitor — in his words, “de-control” — Everest claims where the initial reported claim reserves were relatively low. 6/19/13 Tr. at 15:5-18:8. When Mr. Giacobbe decontrolled a claim, he did not set reserves for the claim, and instead relied on Everest to re-report the claim if there had been any changes. Id. Mr. Giacobbe did not inform IOA Re when he made a decision to de-control a claim. Id. at 66:21-67:8.
From 2002 until 2005, Mr. Giacobbe was not aware of any potential problems with his reporting method under the Retrocession Agreements; no one at IOA Re’s claims department contacted him in that regard. 36 6/18/13 Tr. at 145:2-9 (Giacobbe). On December 7, 2005, Mr. Giacobbe received an email from Cyndi Charney at IOA Re, who oversaw IOA Re’s claims operations, noting that “[i]n recent months several claims have been reported to [IOA Re] under the subject agreement where either the initial notice or updates were delayed well beyond the date of loss.” Def.’s 42; see also 6/18/13 Tr. at 161:25-163:14 (Giacobbe). Based on this delayed reporting, Ms. Charney requested in her email that Munich provide “a complete listing of all claims reported by Everest Re [sic], reserved and precautionary, to all years of this agreement.” Def.’s 42 (emphasis added). Mr. Giacobbe responded to Ms. Charney’s email that same day as follows:
Cyndi,
My understanding is that we report all claims on this program when the total ground up reserve reaches 500,000. Do you have something stating different? I will continue reporting at this level in the future. Do you have something in writing that changed the reporting procedures?
*717 Thanks,
Art Giacobbe
Id.; see also 6/18/13 Tr. at 163:9-20 (Giaeobbe). Shortly thereafter, Ms. Charney wrote back to Mr. Giacobbe, stating, in her own words, that “the contract calls for reporting of certain serious injury claims, including: brain injuries, burns, and spinal cord injuries and any claim at 50% of the retention.” Def.’s 42; see also 6/18/13 Tr. at 167:1-10 (Giacobbe). Ms. Charney repeated her earlier request that IOA Re “would prefer to receive notice of all claims reported by Everest Re [sic ]” but that if Mr. Giacobbe “insisted] on strictly following the contract wording,” then IOA Re would ask that he “provide a listing of all of the serious injury claims and all that are currently reserved at 50% of the retention in accordance with the contract terms.” Def.’s 42 (emphasis added). Lastly, Ms. Charney noted that it might be appropriate for IOA Re to preform a review of Munich’s files, and that she would be in touch to schedule such an audit in early 2006. Id. Although Ms. Charney referenced the Retrocession Agreements, she did not attach the actual agreements or any portion thereof to her email as Mr. Giacobbe had requested. Nor did Ms. Charne/s email directly answer Mr. Giacobbe’s question as to whether reporting was proper at $500,000 ground-up retention.
Notwithstanding Ms. Charney’s communications, at no point did Mr. Giacobbe search the computer system for the terms of the agreements or ask anyone at Munich for copies of the Retrocession Agreements. Id. at 138-139, 144. In sum, Giacobbe took no affirmative steps to determine what Munich’s reporting obligations were during his time as a claims handler at Munich for the Everest program. There was, however, also no follow up by anyone at IOA Re following the 2005 emails, including with respect to the proposed audit of Munich’s files. It also must be noted in that regard that it was never communicated to Cathy Wash-burn, the IOA Re claims adjuster specifically handling Munich’s retrocession of the Everest program, that Ms. Charney had had an email exchange with Mr. Giacobbe on the matter of claims handling. Similarly, Ms. Washburn was never instructed to deny any late reported claims or, in paying claims, send a reservation of rights on behalf of the retrocessionaire-— as was IOA Re’s typical practice for claims it considered to be improperly reported. 6/21/13 Tr. at 155:22-156:24 (Washburn); 6/20/13 Tr. at 148:1-5, 149:17-24 (Dorosz).
When Mr. Freda began working at Munich around August 2007, he too was not officially trained in the reporting requirements under the Retrocession Agreements. 6/19/13 Tr. at 168, 173-74 (Freda). Rather, Mr. Giacobbe told Mr. Freda that Munich’s responsibilities were to report claims when they incurred $500,000. Id. at 173-74, 176. Although Mr. Freda was provided with a copy of the original Retro-cession Agreement, it was not a complete copy because it did not contain the addendum to Article X reporting requirements. Id. at 174-75. Around July 2008, following a round of communications between Mr. Freda, Mr. Schmidt, and Ms. Washburn at IOA Re, Mr. Freda raised the issue with Ms. Washburn of Munich’s reporting under the Retrocession Agreements. 6/19/13 Tr. 170, 179 (Freda). Mr. Freda thereafter requested from Ms. Washburn a full copy of the Retrocession Agreements; after he looked at the reporting provision, Mr. Freda immediately reviewed his files of the Everest program to ensure that claims had been properly reported, and to report any claims that had not. Id. at 171-72.
During the same time period of 2002 to 2007, in addition to the problem of when *718 Munich reported claims arising under the Everest Agreement to IOA Re, there was confusion over some of Munich’s other reporting requirements. For example, there were notices sent out by Munich/Am Re Brokers that were inconsistent in that some calculated claims on a ground-up basis and others used an ultimate net loss basis. 37 6/19/13 Tr. at 151 (Schmidt). Munich’s general understanding was that claims were to reported ground-up, whereas IOA Re believed that the Retrocession Agreements operated under an ultimate net loss basis. See generally Dkt. No. 96 (Opinion dated Sept. 28, 2012), 893 F.Supp.2d at 706-12 . Significantly, this dispute over the contract terms was not resolved until my decision on the parties’ partial summary judgment motions, in which I determined that the parties’ obligations under the Retrocession Agreements were based on ground-up loss calculations. See id. Additionally, in a few instances Munich supplied claim summaries .that did not exactly match the information contained in the accompanying claim notices — causing IOA Re problems in matching records. 38 6/21 /13 Tr. at 19, 26-28, 31-33 (Washburn). While these discrepancies might have initially caused IOA Re difficulties in matching claims to its own records, Ms. Charney credibly explained at trial that it was her understanding that as long as there was a Munich claim number on the document, she would be able to cross-reference it to IOA Re’s internal claim number. See 6/20/14 Tr. at 194:8-12 (Charney). Lastly, Am Re Brokers wrongly sent several claims notices to Castlewood instead of to IOA Re; some of these claims were then forward by Castle-wood to IOA Re. 39 6/19/13 Tr. 143 (Schmidt); Def.’s 310 (ten claims Am Re Brokers incorrectly sent to Castlewood); Def.’s 311 (claims IOA Re received from Castlewood).
2. IOA Re’s Claims Handling Procedures
With respect to IOA Re’s claims handling, IOA Re issues a written denial of coverage for claims it believes to be outside the scope of retrocessional coverage, and a written reservation of rights where retrocessional coverage is unclear. 6/20/13 Tr. at 148:1-5, 149:17-24 (Dorosz). Notwithstanding the foregoing issues with Munich’s claim handling under the Retrocession Agreements from 2002 up to 2009, IOA Re did not issue any denials or reservations of rights due to late reporting of claims for those claims at issue in this litigation. 40 6/20/13 Tr. at 153:10-13 (Do *719 rosz); 6/21/13 Tr. at 132:5-15 (Washburn); see, e.g., Pl.’s 17; see also 6/20/13 Tr. at 209:16-213:12 (Charney); 6/21/13 Tr. at 133:7-133:19 (Washburn). Moreover, in circumstances where IOA Re had no record of receiving a bill on a claim, but then later received a subsequent bill that included a new request for payment as well as reflected the amount of the prior, unpaid, claim, a fortiori IOA Re would be aware that Munich was seeking payment of the entire outstanding amount — including previous amounts for which IOA Re had no record of having received a bill. See 6/21/13 Tr. at 87:17-99:5 (Washburn). 41
8. IOA Re’s Audit and Explanation of Nonpayment
It is also IOA Re’s practice, and its right under the Retrocession Agreements, to audit the ceding company when necessary. Id. at 156:5-25; PL’s 1-2 (Article XII). Yet, it was not until November 2009, after internal discussions between Ms. Charney, Ms. Washburn, and Walt Dorosz, the Chief Operating Office of IOA Re, that IOA Re undertook its first audit of Munich related to the Retrocession Agreements. 42 6/20/13 Tr. at 60, 69-70 (Dorosz). During the audit, Munich declined to disclose all records requested by IOA Re, including Am Re Broker files. 6/20/13 Tr. at 83-85 (Dorosz). After IOA Re conducted its audit, it provided Munich with a written explanation for why IOA Re had not, and would not, pay certain claims in part or in full; these claims were limited to the claims where IOA Re disputed the amount of retention owed, roofer claims, and “Sunset” claims 43 — no other basis for non-payment, including (i) late reporting, (ii) claims handling, (iii) insufficient access to materials during the audit, or (iv) possible rescission of the Retrocession Agreements, was explicitly identified in the written explanation. PL’s 161; see also 6/20/13 Tr. at 163:1-166:18 (Dorosz). At that time, IOA Re, based on the foregoing disputes, paid what it calculated to be due on Munich’s outstanding invoices; that is, IOA Re paid on an ultimate net loss calculation, rather than ground-up, and did not pay the roofer claims at issue in this litigation, or the claims it believed were first reported *720 after the “Sunset” period. See Pl.’s 161 (IOA Re letter enclosing payment and explaining IOA Re’s calculation of the payment). Nowhere in the letter did IOA Re state that it was reserving its rights or denying claims based on late payment or claims handling. Id.
A Expert Testimony
Both parties presented experts on the issue of claims handling: Munich offered Susan Mack, and ANICO offered Linda Martin Barber. 44 Ms. Mack testified that, under industry custom, a claims handler who began working on an existing retrocessional program would endeavor to report to retrocessionaires in line with how the predecessor claims handler had been reporting. Tr. 6/20/13 at 18:6-22:11 (Mack). On the other hand, Ms. Barber testified that claims handlers should nevertheless be aware of their reporting obligations under the relevant contracts. 7/1/13 Tr. at 13 (Barber). Significantly, both experts agreed that it would be customary in the industry for a claims handler such as Mr. Giacobbe to attempt to obtain a copy of the contract upon being notified by the retrocessionaire that there was an apparent problem in how claims were being reported. 6/20/13 Tr. at 43-44 (Mack); 7/1/13 Tr. at 16 (Barber). The experts differed as to whether it was the practice for a retrocessionaire to issue reservation of rights or denial letters, with Ms. Mack testifying that failure to issue any such letter may lead to waiver of any later defense by the retrocessionaire to payment on the claim, while Ms. Barber stated that such letters were in line with “best practices,” and thus not necessary to satisfy the standard of care. 6/20/13 Tr. at 17:15— 21 (Mack); 7/1/13 Tr. at 32-33 (Barber). Lastly, Ms. Barber acknowledged that both the retrocedent and retrocessionaire have a duty to act in accordance with the terms of the contract. 7/1/13 Tr. at 31 (Barber).
5. Findings
The Court finds that between 2002 and 2008, when Mr. Freda finally brought Munich’s reporting into compliance with Article X of the Retrocession Agreements, Everest claims were not reported to IOA Re in accordance with the notice requirements of Article X. Munich failed to train its claims handlers in the sense that it did not provide Mr. Giacobbe or Mr. Freda with any formal or informal instructions or guidance on Munich’s reporting obligations under Article X, and likewise, failed to supervise its claims handlers to ensure that the Article X requirements were being followed. These failures caused Munich to not timely report claims under the terms of the Retrocession Agreements. 45
At the same time, it is clear from these facts that IOA Re was aware at least since 2005 that Munich was improperly and/or inconsistently reporting claims in line with its obligations under Article X of the Retrocession Agreements. There is no evidence that, other than one or two brief communications in 2003 and 2005, IOA Re sought to bring this issue to Munich’s attention or demand resolution of the problem. In that connection, I do not find Ms. Charney’s email to Mr. Giacobbe to clearly *721 evince that IOA Re informed Munich it was reporting improperly. In her email, Ms. Charney requested all claims that Everest had reported to Munich; only after Mr. Giacobbe raised a question as to whether that was necessary under the contract did Ms. Charney state, in her own words, that the Retrocession Agreements had specific reporting requirements. Moreover, it is unclear from this email whether Ms. Charney wholly disagreed with Mr. Giacobbe’s assessment that, for other than serious injuries, reporting occurred when retention reached a $500,000 ground-up loss. Indeed, one of the ongoing disputes between IOA Re and Munich over the reporting requirements concerned whether the Retrocession Agreements relied on ground-up or ultimate net loss calculations — an issue that was not resolved until this Court issued its decision on the parties’ motions for partial summary judgment in 2012. Similarly, I find that Mr. Giacobbe credibly testified that the reason he reported to IOA Re in the manner that he did was because (i) that was how he understood his predecessor, Mr. Canuncio, to have been reporting, and (ii) it also aligned with what he understood to be reporting requirements common to reinsurance.
To that end, there is no evidence that IOA Re followed up on its 2005 communication with Mr. Giacobbe, or took any other related actions such as denying claims or issuing reservations of rights for claims it believed were improperly reported under Article X, even though that was otherwise IOA Re’s policy to do so. Lastly, in light of the experts’ testimony, I find that although Munich’s claims handling and training procedures were not necessarily out of line with industry custom and practice, nevertheless Mr. Giacobbe had a duty to retrieve copies of the Retrocession Agreements after IOA Re alerted him to reporting problems in 2005. Similarly, although IOA Re was not obligated to issue reservation of rights letters, it had a duty to inform Munich when there was a discrepancy with claims handling that could form a basis for IOA Re’s denial of a claim.
C. ANICO’s Claim Specific Defenses
1. Roofer Claims
ANICO contends that certain claims were not properly ceded by Munich to ANICO pursuant to the Retrocession Agreements because (i) the individual covered by the policy was injured while working on a roof, or (ii) IOA Re was told by Munich that the person was a “roofer.” Only two claims are involved in this dispute: the Fields claim, which arises under the 2000 Stub Year, and the Jones claim, which arises under the 2001 Retrocession Agreement 46 Article VIII of the Retrocession Agreements lists “Exclusions” to the retrocessional coverage; the parties have stipulated that although Article VIII does not contain any exclusion for “roofing contractors,” roofing contractors were excluded from the underlying Everest program for the years covered by the Retrocession Agreements. See Dkt. No. 117, (Final Pretrial Order) § III, ¶ 10. ANICO takes the position that when Munich was renewing retrocessional coverage through IOA Re for the years covered by the Retrocession Agreements, there was an understanding that no roofer claims would be covered going forward, even if they did not come *722 from an employer who was a roofing contractor. 47
Mr. Dorosz explained that in 2009, when IOA Re was auditing Munich and examining its claims under the Retrocession Agreements, IOA Re determined that statements and materials in the underwriting materials for the 1999 year indicated that Everest was not renewing its workers’ compensation excess of loss coverage to existing roofing contractors. 6/20/13 Tr. at 140:19-145:1 (Dorosz); Def.’s 248 at ANI-CO IOA-5850 to -5854. In particular, IOA Re relied on information in the underwriting file stating that employers with NCCI Code 5551 — the industry code used to classify an insured employer’s business as a roofing contractor' — were to be excluded going forward from 1999. 6/20/13 Tr. at 145:2-146:24 (Dorosz). IOA Re also relied on the following description in the underwriting package for the Retrocession Agreement that Everest was renewing its program without roofing contractor coverage: Def.’s 238 at ANICO-IOA-5854. Based on the fact that coverage for roofing contractors was excluded, when IOA Re reviewed the Retrocession Agreements in 2009, it further concluded that any claims arising out of or related to roofing were excluded, even if the employer covered by the policy was not identified as a roofing contractor or by NCCI Code 5551. See id. at 146:26-147:9; Tr. 6/24/13 at 203:4-13 (Hoekstra).
After analysis of their book it was decided to non-renew any existing roofing contractors and temporary or leasing agencies. These classes were never a significant portion of the book but contributed to a disproportionate share of losses. It should be noted that these classes were always subject to specific and more stringent underwriting/risk selection criteria. Even so, these classes are better left to those companies who specialize in them.
In reaching this conclusion, IOA Re further pointed to Munich’s internal communications during the years covered by the Retrocession Agreements. In an October 21,1999 email, Ms. Isik explained to Victor Marques, at Am Re Brokers, that “the [Everest] book is more homogenous with a milder hazard complexion; e.g., they are not writing roofing contractors.” Def.’s 29. Additionally, in August 2000, Munich documents make clear its internal understanding that roofing companies were excluded from the workers’ compensation business in the Everest book. Def.’s 67 at MRAM-06-01362. Mr. Pawlowski corroborated this understanding in his testimony at trial. 6/24/13 Tr. 32 (Pawlowski) (“One of the exclusions stated was roofing companies, yes.”).
Thus, in 2009, in connection with its audit of Munich, IOA Re determined that because Fields was “injured working on a roof,” his claim was not eligible for payment, and accordingly took a refund of the payment that it made on the Fields claim in 2007. See Dkt. No. 117 (Final Pretrial *723 Order), § III, ¶¶ 13-14. IOA Re also concluded at that time that the Jones claim was ineligible for payment as a “roofing” claim, although it had not yet issued a denial for the that claim. See id., § III, ¶ 16, 6/21/13 Tr. at 144:3-144:7 (Wash-burn). In denying and/or disputing these claims, IOA Re relies entirely on information in the Jones and Fields claim files indicating that these individuals’ injuries occurred in connection with being on a roof; it is of no import to IOA Re that the employers for which Jones and Fields were employed at the time of their injuries are not categorized as roofing contractors or identified by NCCI Code 5551. See 6/20/13 Tr. at 146:26-147:9 (Dorosz); Tr. 6/24/13 at 203:4-13 (Hoekstra).
The Court finds as follows. Workers’ compensation insurance policies are issued to employers, not individuals. 6/20/13 Tr. at 145:2-7. This is one of the reasons insurers, such as Everest, rely on NCCI codes, which categorize an employer’s general line of business. Id. at 145:8-19. Indeed, the underwriting file, as well as Munich’s internal documents, only reference employers who are categorized as roofing contractors; there is no reference in the underwriting materials or in Munich’s files referring to claims based on injuries sustained while on or near a roof. Moreover, IOA Re paid the Fields claim in 2007, even though the description of the injury related to Fields having fallen off a roof. Similarly, IOA Re acknowledged in its own file that the Jones claim was eligible for coverage while simultaneously describing Jones as a “roofer.” Indeed, the only evidence of any dispute regarding roofer claims arose solely in connection with IOA Re’s audit of Munich based on other reporting and claims handling issues. There was no evidence presented that at the time of contracting, the parties understood that all claims involving injuries sustained in connection with work on a roof were to be excluded. 48
In that connection, the Court further finds Ms. Hoekstra’s and Mr. Dorosz’s testimony at trial that IOA Re understood that no roofer claims would be covered from the inception of the Retrocession Agreements to be not credible. Ms. Hoekstra testified in response to the question “What was your intention with respect to roofing claims”: “With the class of roofers being removed from the book, we would not have roofing claims, we would not have roofing contractors, and no roofing claims as a result.” 6/24/13 Tr. at 203:8-13. I interpret this testimony to be consistent with the finding that the parties intended to exclude roofing contractors; I do not find credible Ms. Hoekstra’s conclusion that all claims involving workers injured on a roof would necessarily be excluded simply because roofing contractors were excluded. Neither Ms. Hoekstra nor Mr. Dorosz provided any explanation for why this should be so, in light of the fact that workers’ compensation policies are categorized and issued by employer class, *724 not employee work. See 6/20/13 Tr. at 145:2-19. Furthermore, to the extent that Ms. Hoekstra’s testimony could be understood to mean that it was her intent at the time of underwriting to exclude any claim involving injuries sustained from roofing, that testimony is contradicted by IOA Re’s payment of the Fields claim. 49
Thus, in determining whether the roofing exclusion applies to the Fields or Jones claims, I look to whether they were employed by companies whose primary business was as a roofing contractor or subcontractor. 50 In denying the Fields claim, IOA Re relied solely on information in the Fields claim file indicating that this individual’s injuries occurred in connection with being on a roof; this is insufficient to show that Fields was employed by a roofing contractor or subcontractors at the time of his injury. 51 Def.’s 3; 6/21/13 Tr. at 136 (Washburn). His claim is not excluded from coverage under the Retrocessional Agreements. Conversely, in denying the Jones claims, IOA Re relied on Munich’s representations that Jones was an independent contractor whose job title was “roofer,” and that his injuries occurred on the third story of a building on which he was working. 52 6/21/13 Tr. at 62:2-16 (Washburn); see also Def.’s 286 (Jones claim file). This evidence is sufficient to show that the Jones claim pertains to a roofing contractor or subcontractor, and thus is excluded from coverage under the Retrocession Agreements.
2. Everest Re Claims
ANICO also disputes coverage for claims arising under polices written by Everest Reinsurance (“Everest Re”), as opposed to Everest, arguing that Everest *725 Re policies are not -within the scope of coverage of the Retrocession Agreements. These include claims for Russell Fields, Lavern Marion, and Ronald Moreira, (collectively, “Everest Re Claims”). See Dkt. No. 117 (Final Pretrial Order), § III, ¶ 8. 53 ANICO argues that the Retrocession Agreements only provide for retrocessional cover of claims arising from policies issued by Everest, and, further, exclude coverage for any assumed reinsurance. In contrast, Munich argues that because the Everest Re Claims are all claims arising under policies of primary workers’ compensation insurance — and not assumed reinsurance — and because the underlying Everest Agreement is between Munich and both Everest and Everest Re, these claims are properly ceded and payable under the Retrocession Agreements. 54
Article I of the Retrocession Agreements provides the scope of coverage, and provides:
ARTICLE I — Business Covered
A. The Reinsurer hereby agrees to indemnify the Company for the amount of ultimate net loss as herein provided and specified which may accrue to the Company as a result of loss or losses occurring during the term of this Agreement as a result of its participation in the following Reinsurance Agreement ...
B. The Reinsurance Agreement listed above (hereinafter referred to as the “Underlying Agreement”) is between the Company and the following insurance company or group (hereinafter referred to as the Original Ceding Company.):
EVEREST National Insurance Company
Phoenix, Arizona
(as identified in the Underlying Agreement)
Pl.’s 1-2 (Art. I) (emphasis added). 55
In that connection, the “Underlying Agreement” identified in Article I is the Everest Agreement, see 6/17/13 Tr. at 64:12-64:23, 80:13-81:10 (Frantz), which in turn provides:
THIS AGREEMENT is made and entered into by and between EVEREST NATIONAL INSURANCE COMPANY of Phoenix, Arizona and EVEREST REINSURANCE COMPANY of Wilmington, Delaware, both with administrative offices in Liberty Corner, New Jersey (“the Company”), and AMERICAN REINSURANCE COMPANY of Dover, Delaware, having administrative offices *726 in Princeton, New Jersey (“the Reinsurer”).
Pl.’s 3 (emphasis added).
The Everest Re Claims have never actually been denied by IOA Re, and in fact, the Marion claim was paid by IOA Re in April 2007, without question or any reservation of rights. 6/21/13 Tr. at 138:1-3; Pl.’s 17. At trial, the parties stipulated that, notwithstanding Everest Re’s name, the Everest Re Claims all constitute primary workers’ compensation insurance claims, not assumed reinsurance claims. 6/17/13 Tr. at 79:23-80:10. Also at trial, Mr. Dorosz, for IOA Re, agreed that for the purposes of the Retrocession Agreements, a claim arising from a primary policy of workers’ compensation insurance written by Everest Re, and ceded to Munich under its reinsurance of Everest, is covered by the Retrocession Agreements. 6/20/15 Tr. at 138:21-139:2 (Dorosz). No evidence was presented as to whether Everest Re is a reinsurer, a primary insurer, or both, of workers’ compensation policies.
Finally, although not addressed by the parties, is an email exchange in 2001 between Mr. Marques at Am Re Brokers and Ms. Hoekstra at IOA Re regarding the formation of the Retrocession Agreements. On April 18, 2001, Mr. Marques wrote an email requesting, inter alia, that the Retrocession Agreements “allow reinsurance [to be] accepted on an inter-company basis within the Everest Re group,” as well as for the retrocessional carve-out cover. Def.’s 248 at ANICO-IOA-5785. On April 23, 2001, Ms. Hoekstra responded to Mr. Marques’ email with “OK.” Id. at ANICOIOA-5784. Although there appears to have been no subsequent change to the actual wording of the Retrocession Agreements, as requested by Mr. Marques, when viewed in light of the parties’ performance under the Retrocession Agreements, this email exchange further evidences the parties’ intent that primary workers’ compensation policies written by either Everest or Everest Re were to be covered under the Retrocession Agreements. 56
In sum, given the April 23, 2001 email, Mr. Dorosz’ testimony at trial as to the intent of the parties, the logical inference — based on the stipulation that Everest Re Claims are primary insurance claims — that Everest Re writes primary insurance policies in addition to whatever other policies it may issue, the Court finds that the parties intended the Retrocession Agreements to include primary workers’ compensation policies written by Everest Re and otherwise properly ceded to Munich under the Everest Agreement.
S. Article XVI Claims (Sunset provision)
ANICO’s final claim-specific defense is based on Article XVI of the 2001 Retrocession Agreement — the Sunset provision. 57 The Court previously ruled that Article XVI notice is a condition precedent to ANICO’s coverage obligation under the 2001 Retrocession Agreement and, absent such notice, ANICO has no liability to Munich for those claims. See Dkt. No. 112 (Reconsideration Opinion), 936 F.Supp.2d 475 at 490-91 . The operative date for the Sunset provision for the 2001 Retrocession Agreement is December 31, 2008; claims *727 first noticed after that date will not give rise to liability on ANICO’s part. 58
Article XVI provides in relevant part:
A. Seven years after the expiry of this Agreement, the Company shall advise the Reinsurer of all claims for said annual period, not finally settled which are likely to result in a claim under this Agreement. No liability shall attach hereunder for any claim or claims not reported to the Reinsurer within this seven year period.
Pl.’s 1-2 (Art. XVI).
In support of its position that the 11 disputed claims were timely noticed to ANICO under the terms of Article XVI (the “Sunset Claims”), Munich relies on an August 8, 2008 spreadsheet submitted to IOA Re (the “August Spreadsheet”). 59 This 24-page spreadsheet lists all Everest claims that had been reported to Munich for all years of the Everest program, including those years outside the period of the Retrocession Agreements, up through August 2008. Pl.’s 13; see also 6/19/13 Tr. at 163 (Schmidt); 6/18/13 Tr. at 27 (Mauch). The August Spreadsheet listed these claims individually by Everest and Munich’s respective claim numbers, and included the following additional, corresponding information: (i) underwriting year; (ii) the code of either A/C; (iii) the code LOB; (iv) “Cause”; (v) named insured; (vi) date of loss; (vii) date of loss reported to Munich; (viii) “S-T”; (ix) “Paid Loss”; (x) “Paid ALAE”; (xi) “OSA-LAE”; (xii) “Reported Loss”; (xiii) “Reported Loss Plus Paid ALAE”; (xiv) “Reported Loss WCD ISC”; (xv) “Salvage and Subro.”; (xvi) “ACRINC in RPT loss in ALAE”; (xvii) “Attachment”; (xviii) “MRAm Limit”; (xix) “AAD (yes/no)”; (xx) “CIPHER (yes/no)”. Pl.’s 7(28); Pl.’s 13.
There is no key or legend on the spreadsheet itself providing an explanation of the terms used on the August Spreadsheet, nor is there any explanation of the codes used under each column with respect to specific claims; however, during trial, Michael Frantz, who manages Munich’s reinsurance claim operations division, see 6/17/13 Tr. at 62-63 (Frantz), attempted to explain the meaning of each column head-
*728 ing code or description. 6/17/13 Tr. at 84:9-94:12, 149:25-150:20 (Frantz); see 6/20/13 Tr. at 116:17-121:9. Nevertheless, Mr. Frantz could not identify all of the codes used in the column entries, such as the codes used in the “Cause” column, and Mr. Schmidt, the Am Re Broker who forwarded the spreadsheet to IOA Re, similarly was unfamiliar with all the codes used in the column headings or entries. See 6/17/13 Tr. at 149:25-150:20 (Frantz); 6/20/13 Tr. at 116:17-121:9 (Schmidt). Moreover, Mr. Frantz testified that he did not know whether IOA Re had ever been provided with a key or explanation for the codes and descriptors used on the August Spreadsheet. 6/17/13 Tr. at 150:21-24 (Frantz). In that regard, Ms. Washburn testified that upon receipt of the August Spreadsheet, she was able to understand several of the headings and codes used, but not all, and that when she received this document, she first went to her superior, Ms. Charney, for advice on how to proceed. See 6/21/13 Tr. at 120:8-122:10 (Washburn). Notwithstanding the foregoing, Munich considers the spreadsheet’s format to be typical for the type of reporting it receives from its own cedents for reporting under similar Sunset provisions, although Mr. Schmidt testified that he had never reported to IOA Re using a report like the August Spreadsheet because all previous claims had been reported individually. 6/17/13 Tr. at 94:13-19 (Frantz); 6/19/13 Tr. at 150:12-151:5 (Schmidt).
When Mr. Schmidt forwarded, by email, the August Spreadsheet from Munich’s internal audit division to Ms. Washburn at IOA Re, he noted that he thought the document would be helpful to “working out contract issues,” as it comprised a listing of all of Munich’s “assumed claims from Everest.” Pl.’s 13; 6/19/13 Tr. at 149:8-150:2 (Schmidt). It was never Mr. Schmidt’s understanding that the August Spreadsheet constituted a report under Article XVI; rather, it was merely intended to ensure that IOA Re had copies of all losses under the Everest program prior to the Sunset date. 60 6/19/13 Tr. at 156:6-10 (Schmidt). And while Mr. Schmidt believed that it would be possible for IOA Re to set its own reserves based on the information in the spreadsheet, he also acknowledged that it would not be possible for IOA Re to do its own independent analyses of these claims. 61 Id. at 156:11-157-16. In that connection, Mr. Frantz testified that when Am Re Brokers sent IOA Re the August Spreadsheet, Munich had not made any “definitive determination” whether the claims listed on the spreadsheet would be likely to impact AN-ICO’s retrocessional coverage. 6/17/13 Tr. at 95:4-11 (Frantz).
When Ms. Washburn received the August Spreadsheet, she consulted with Ms. Charney on how to proceed. Although Ms. Charney understood the document to be Munich’s attempt to report claims under Article XVI, she instructed Ms. Wash-burn to write back to Mr. Schmidt via email and explain that the August Spreadsheet was “not considered adequate notice of loss. Individual notices must be provided for each claimant and should include claimant name, complete claim details, and financial data broken down by medical, *729 indemnity, and expense.” Pl.’s 14; 6/20/13 Tr. at 194:13-23 (Charney). It was Ms. Charney’s belief that in order to satisfy the notice requirement of Article XVI, Munich was obligated to provide a listing of claims with particulars and estimates, as required under Article X. 6/20/13 Tr. at 194:24^195:2 (Charney). Responding to Ms. Washburn’s email, Mr. Schmidt indicated that he “agreed,” and explained that Munich was “working on getting you the necessary back up documentation.” Pl.’s 14 (emphasis added). Despite his response, Mr. Schmidt testified at trial that when he said he agreed with Ms. Wash-burn’s email, he meant only that Munich still needed to send IOA Re supporting documentation; he did not mean to agree with Ms. Washburn’s statement that the August Spreadsheet did not constitute adequate notice to IOA Re. 6/19/13 Tr. at 123 (Schmidt).
Mr. Dorosz also testified, in connection with the sufficiency of the August Spreadsheet, that ANICO’s decision to commute 62 the Retrocession Agreements required a determination of whether it made sense to settle both (i) the current outstanding claims and (ii) any future claims likely to arise. 6/20/13 Tr. at 72 (Dorosz). In other words, it was Mr. Dorosz’s understanding that IOA Re needed to have sufficient information from Munich and Everest to allow the individual at IOA Re in charge of setting reserves — a nurse with experience in the medical issues related to workers’ compensation claims — to determine the potential future cost of the claim. Id. at 99.
Both parties’ experts testified as to the industry standard for adequate reporting under requirements like those set forth in the Sunset Provision. Ms. Mack, Munich’s expert, opined that the August Spreadsheet “constitutes reasonable and customary notification of loss” for clauses like the Sunset provision. 6/20/13 Tr. at 13:20-14:1 (Mack). Ms. Mack explained that she considered the spreadsheet to be a “bordereau” report, 63 which is “the customary and reasonable way to notify [sic ] claims under a Sunset provision.” Id. at 14:3-24. In that connection, Ms. Mack stated that it *730 is common for such reports to be somewhat over-inclusive of the claims noticed. Id. at Tr. 15. In sum, Ms. Mack concluded that the August Spreadsheet suffices for notice purposes under Article XVI, although she acknowledged that the document does not contain any information about the type or severity of the injury. Id. at 82, 46-47.
ANICO’s expert, Ms. Barber, flatly disagreed with the assessment that the August Spreadsheet was sufficient notice under Article XVI. 7/1/13 Tr. at 17:4-18 (Barber). Rather, Ms. Barber explained that the Sunset provision required “information that permits a retrocessionaire to determine the value of each claim,” which the August Spreadsheet did not provide. Id. at 17:22-24. And while Ms. Barber acknowledged that workers’ compensation insurance and reinsurance is a “long-tail” business — meaning claims can take years to develop — she testified that in deciding whether to commute, it is nevertheless expected that the parties will have sufficient basis on which to value present and future claims. Id. at 18:15-19:11. In Ms. Barber’s opinion, the August Spreadsheet failed to provide the information necessary to value each claim listed in the document, ie., it did not “indicate which of the claims that Munich Re believes are likely to impact the reinsurance that American National provided.” Id. at 19:19-22. Ms. Baber expressed no opinion on whether the document constituted a bordereau report.
I find that the August Spreadsheet did not include sufficient information that would have allowed IOA Re to make a determination on the likelihood that a claim arising under the Retrocession Agreements would breach ANICO’s retrocessional retention layer. This finding is supported by Mr. Frantz’s own admission that Munich made no definitive determination in this regard, and Ms. Washburn’s email requesting additional information. I also find not credible Mr. Schmidt’s testimony at trial that his response “I agree” to Ms. Washburn’s email was limited to agreeing that he would provide additional information, as opposed to agreeing with her assessment that the August Spreadsheet did not constitute adequate Article XVI notice. This testimony is also contradicted by the fact that in at least one prior instance, IOA Re had asked Munich to provide all information on claims that Everest had ceded to Munich. See Def.’s 42 (email from Charney to Giacobbe requesting all claims).
Moreover, I give little weight to Ms. Mack’s conclusion that the August Spreadsheet suffices for notice purposes, regardless of whether the August Spreadsheet was intended to be a bordereau report. Ms. Mack’s conclusion is undermined by her concession that the document contains no information regarding the nature of the claimant’s injury. Indeed, this lack of information supports Ms. Barber’s conclusion that the August Spreadsheet failed to provide the information necessary to determine which claims Munich believed likely to impact ANICO’s retrocessional layer. Finally, I find Ms. Charney’s testimony that Article XVI requires reporting of “particulars and estimates,” or other similar detailed information as required by Article X, to be not credible, nor supported by the record, because it fails to make any distinction between the initial notice reporting for Sunset purposes and reporting for payment of claims. Rather, I find that Ms. Mack credibly and convincingly explained that reporting for Sunset purposes is based on providing the reinsurer, or here, retrocessionaire, with adequate notice of the cedent’s existing claims. However, as I stated above, the August Spreadsheet faded to provide such ade *731 quate notice of Munich’s claims covered by the Retroeessional Agreements. 64
*732 III. DISCUSSION
A. In Limine Motions
Two motions in limine remain undecided from trial. First, Munich sought to introduce, and ultimately rely on, two summary exhibits, Pl.’s 6 & 7, containing the claims ceded by Munich to ANICO, the date of Munich’s payment demands for each ceded claim, and the amount of payment demanded. ANICO objected to the admissibility of the summary exhibits on several grounds. Initially, ANICO challenged the authenticity of the documents underlying the summary exhibits on the basis that the addresses listed on those records were different than the addresses on the original records. At trial, Munich’s witness explained that the system in which these records are kept does not have an archival function, and thus when the billing address on a file is updated, the previous address is no longer listed on the record and is not otherwise accessible in the system. See 6/18/13 Tr. at 6:6-7:6, 81:5-16 (Mauch). No other information is altered, however, when this billing address is updated. Id. Based on this testimony, which I found credible, I find that the change of address does not give rise to a question of authenticity.
Next, ANICO argued that some of the underlying records pertained to Castle-wood, not ANICO. However, each of the records used for the summary exhibits show a Bates stamp relating to IOA Re— in other words, the records have all been received by IOA Re, even if they were initially sent first to Castlewood. See 6/17/13 Tr. at 22:7-25. That said, absent from these underlying documents is the date that IOA Re actually received the notices. Id. Accordingly, I find that while the Castlewood records were received by IOA Re, the dates in the summary exhibits relating to when these Castlewood records were received by IOA Re are unreliable. In that regard, counsel for Munich conceded that the summary exhibits would not be offered for the purposes of notice. Id. at 24:19-24.
The second undecided motion relates to ANICO’s request for an adverse inference based on Munich’s failure to produce a specific statistical study of the Everest program, which is referenced in Munich’s internal underwriting files. See Def.’s 81 (internal Munich memo referencing July 31, 2000 statistical study showing Munich’s past loss ratios). Specifically, ANICO argues that “ANICO is entitled to the inference that the statistical study would have revealed that the loss experience and factors utilized in conjunction with the statistical study were not provided to IOA Re and this information was different from the loss experience which was provided to IOA Re.” See Dkt. No. 123, at 1. I reserved decision on whether ANICO could show its entitlement to an *733 adverse inference, which I determined was premised on a claim of spoliation, dependent upon the proofs at trial. See 6/17/13 Tr. at 13.
An adverse inference is one type of sanction available for a spoliation claim. Scott v. IBM Corp., 196 F.R.D. 233, 248 (D.N.J.2000). Crucial to such a claim, the party seeking the adverse inference must prove “that there has been an actual suppression or withholding of the evidence. No unfavorable inference arises when the circumstances indicate that the document or article in question has been lost or accidentally destroyed, or where the failure to produce it is otherwise properly accounted for.” Brewer v. Quaker State Oil Ref. Corp., 72 F.3d 326, 334 (3d Cir.1995). Having reviewed the trial evidence, I find that ANICO has not shown that Munich’s failure to disclose this July 31, 2000 statistical study was the result of “actual suppression or withholding of evidence.” Id. Accordingly, I find that ANI-CO has not shown that an adverse inference is proper in this regard. 65
B. Munich’s Case in Chief
Munich’s case in chief is premised on ANICO’s breach of contract of the Retrocession Agreements for failure to acknowledge, and/or pay amounts currently due and owing on, certain claims submitted to ANICO, via IOA Re. 66 Specifically, Munich argues that ANICO has breached its obligations under the Retrocession Agreements by failing to pay the claims that are due, or to acknowledge as properly ceded those claims that have not yet breached ANICO’s retrocessional coverage layer, and to which ANICO has raised no claim-specific defense to payment (collectively, the “Ceded Claims”). In addition to the Ceded Claims, Munich also contends that ANICO breached its obligations under the Retrocession Agreements by failing to acknowledge and pay claims that ANICO has categorized as arising from roofer injuries or from policies issued by Everest Re. Lastly, Munich argues that it timely provided notice of certain claims in advance of the Sunset Provision deadline, and thus ANICO has improperly denied these claims. In total, there are 65 Ceded Claims, to which ANICO has raised no specific defense, 2 roofer claims, 3 Everest Re claims, one of which is also a roofer claim, and 11 Sunset Provision claims, one of which is also an Everest Re claim, for a total of 79 claims at issue in this litigation. 67
*735 Munich contends that all of these claims are properly ceded to ANICO under the Retrocession Agreements, and that ANI-CO has no basis for nonpayment of those claims if and when they breach ANICO’s layer of coverage. It bears noting that the only claims at issue in this litigation that have actually been denied by ANCIO are the Article XVI claims' — ANICO has not issued any denial of the other claims, it merely has not paid them. Moreover, AN-ICO has not disputed that Munich has correctly calculated the dollar amount of payments due on claims that have been billed to ANICO, only whether these claims are actually payable under the Retrocession Agreements.
ANICO contends that it owes no obligation to Munich for any claims because there is a basis on which to rescind the Retrocession Agreements. 68 Alternatively, ANICO also argues that if rescission is not proper, Munich nonetheless is not entitled to payment on the claims because it acted in bad faith in reporting claims to IOA Re. Lastly, ANICO argues that even if the contracts are enforceable, it has no obligation to pay on the roofer claims, the Everest Re claims, or those claims not timely reported ahead of the Sunset Provision deadline.
The essential elements of a cause of action to recover damages for breach of contract are: the existence of a contract, the plaintiffs performance under the contract, the defendant’s breach of that contract, and resulting damages. See, e.g., JP Morgan Chase v. J.H. Elec, of N.Y., Inc., 69 A.D.3d 802 , 893 N.Y.S.2d 237 , 239 (2010). In that connection, the Retrocession Agreements provide that:
[ANICO] agrees to pay [Munich Re] on demand, [ANICO]’s proportion of all losses and/or loss expenses paid by [Munich Re] arising from the Underlying Agreement, including any and all expenses incurred directly by [Munich Re] in the litigation, defense and settlement of claims made against [Munich Re] by the Original Ceding Company under the Underlying Agreement, excluding, however, all office expenses of [Munich Re] and the salaries and expenses of its employee.
PL’s 1-2 (Art. X).
As the ensuing analysis makes clear, for the Ceded Claims — which are not specifi *736 cally contested by ANICO — there is no dispute that Munich ceded these claims to ANICO, and thus they are payable under the Retrocession Agreements unless ANI-CO prevails on its rescission claim. 69 Thus, for the Ceded Claims, ANICO will be liable to Munich if ANICO’s rescission counterclaims fail. With respect to those claims for which ANICO has asserted a specific defense to non-payment, Munich will only be entitled to payment if (i) ANI-CO’s rescission counterclaims fail, (ii) Munich proves that the claims are covered by the Retrocession Agreements, and (in) ANICO fails to prove that the relevant coverage exclusion applies. See Sylvan Beach v. Travelers Ins. Co., 55 F.3d 114, 115-16 (2d Cir.1995). I address ANICO’s rescission counterclaims first, for if rescission is proper it would dispose of this matter in its entirety.
C. ANICO’s Rescission Claims
ANICO has raised two counterclaims for rescission of the Retrocession Agreements based upon Munich’s breach of the duty of utmost good faith during (1) the underwriting process associated with the formation of the Retrocession Agreements, and (2) Munich’s performance of the Retrocession Agreements due to Munich’s failure to timely and properly submit claims to IOA Re.
Under New York law, 70 in order to for ANICO to succeed on a rescission claim, it must prove:
(a) [a] lawful right to rescind; (b) due notice of an intention to rescind; and (c) the restoration of benefits received by the party attempting to rescind, so that the other party may be placed in status quo. Even if the most complete right of rescission exists it cannot be exercised without a return or an offer to return such benefits.
In re Domestic Fuel Corp., 79 B.R. 184, 193 (Bankr.S.D.N.Y.1987) (citing Cox v. Stokes, 156 N.Y. 491 , 51 N.E. 316 (1898), Lee v. The Vacuum Oil Co., 126 N.Y. 579 , 27 N.E. 1018 (1891)). Here, as noted, ANICO’s “right to rescind” is premised on breaches of the duty of utmost good faith between an insured and reinsured.
1. Utmost Good Faith 71
“The relationship between a reinsurer and a reinsured is one of utmost good faith, requiring the reinsured to disclose to the reinsurer all facts that materially affect the risk of which it is aware and of which the reinsurer itself has no reason to be aware.” Christiania Gen. Ins. Corp. of N.Y. v. Great Am. Ins. Co., 979 F.2d 268, 278 (2d Cir.1992) (citing Sumitomo Marine & Fire Ins. Co., Ltd.-U.S. Branch v. Cologne Reinsurance Co. of Am., 75 N.Y.2d 295, 303 , 552 N.Y.S.2d 891 , 552 *737 N.E.2d 139 (1990)); Home Ins. Co. of Ill. (N.H.) v. Spectrum Info. Tech., Inc., 930 F.Supp. 825 , 836 (E.D.N.Y.1996) (utmost good faith defined as “absolute and perfect candor or openness and honesty” (quoting Black’s Law Dictionary 1520 (6th ed. 1990))); see also Matter of Union Indem. Ins. Co. of N.Y., 89 N.Y.2d 94, 106 , 651 N.Y.S.2d 383 , 674 N.E.2d 313 (1996) (characterizing the duty of utmost good faith as “the core duty accompanying reinsurance contracts”). The reinsured is not required to act solely in the reinsurer’s interest; however, to satisfy this duty, the reinsured cannot place its own interests above those of the reinsurer. See Christiania, 979 F.2d at 281 (citing, inter alia, St. Paul Fire & Marine Ins. Co. v. U.S. Fidelity & Guar. Co., 43 N.Y.2d 977, 978-79 , 404 N.Y.S.2d 552 , 375 N.E.2d 733 (1978); see also Hartford Accident & Indem. Co. v. Mich. Mut. Ins. Co., 93 A.D.2d 337, 342 , 462 N.Y.S.2d 175 (N.Y.App.Div.1983) (duty to proceed in good faith and in the exercise of honest discretion violated where primary insurer placed its own interests above those of excess insurer)). In sum, under the duty of utmost good faith, the cedent is obligated “to place the underwriter in the same position as himself [and] to give to him the same means and opportunity of judging of the value of the risks.” Christiania, 979 F.2d at 280 (citing Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485, 510 , 1 S.Ct. 582 , 27 L.Ed. 337 (1883)); see also Home Ins. Co. of Ill. (N.H.), 930 F.Supp. at 836 (noting that duty of utmost good faith is meant to create a level playing field between the reinsurer and the reinsured (quoting Unigard Sec. Ins. Co., Inc. v. N. River Ins. Co., 4 F.3d 1049, 1066 (2d Cir.1993))).
Relevant here, the duty of utmost good faith requires the reinsured— Munich — “to disclose to potential reinsurers all ‘material facts’ regarding the original risk of loss, and failure to do so renders a reinsurance agreement voidable or rescindable.” 72 Matter of Union Indem., 89 N.Y.2d at 106 , 651 N.Y.S.2d 383 , 674 N.E.2d 313 (internal citations omitted); see also Sumitomo, 75 N.Y.2d at 303 , 552 N.Y.S.2d 891 , 552 N.E.2d 139 (citation omitted); Gerling Global Reinsurance Co.U.S. Branch v. Ace Prop. & Cas. Ins. Co., 42 Fed.Appx. 522, 524 (2d Cir.2002). In that connection:
A fact is material so as to void ab initio an insurance contract if, had it been revealed, the insurer or reinsurer would either not have issued the policy or would have only at a higher premium .... The issue [then] is whether, [armed with undisclosed information], [the retrocessionaire] would have acted differently, and, if so, whether [the reinsured] should have been aware that such listing would have affected [the retrocessionaire’s] decision.
Christiania, 979 F.2d at 278 ; see also Matter of Union Indem., 89 N.Y.2d at 95-96 , 651 N.Y.S.2d 383 , 674 N.E.2d 313 (“[Material facts are] those likely to influence the decisions of underwriters; facts which, had they been revealed by the reinsured, would have either prevented a rein-surer from issuing a policy or prompted a reinsurer to issue it at a higher premium .... ”). Moreover, a fact is material only if “a reasonable insured should have believed the fact was something the insurer would consider material ... as of the time the contract was entered into.” Christiania, 979 F.2d at 278-79 . Thus, *738 the standard for determining materiality is an objective one; a court may not rely merely on statements by representatives of the insurer that it would not have issued the policy but for the representation. First Fin. Ins. Co. v. Allstate Interior Demolition Corp., 193 F.3d 109, 119 (2d Cir.1999) (citing Feldman, 241 A.D.2d at 433, 661 N.Y.S.2d at 9).
Additionally, as a general principle, the duty of utmost good faith has been described as covering the entire relationship between the parties to a reinsurance contract, not only the contracting stage. GRAYDON S. STARING, LAW OF REINSURANCE, § 8.1 (2013). In that sense, the duty of utmost good faith is seen as imposing mutual duties on both the reinsured and reinsurer. Id., § 8.2; see also Unigard Sec. Ins. Co., Inc. v. N. River Ins. Co., 4 F.3d 1049, 1054 (2d Cir.1993) (“Unigard II”) (“The reinsurance relationship is often characterized as one of ‘utmost good faith.’ This utmost good faith may be viewed as a legal rule but also as a tradition honored by ceding insurers and reinsurers in their ongoing commercial relationships.” (Emphasis added.)); cf. New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318 , 639 N.Y.S.2d 283 , 662 N.E.2d 763 (1995) (“[IJmplicit in every contract is a covenant of good faith and fair dealing which encompasses any promises that a reasonable promisee would understand to be included. Certainly, a reasonable insured would understand that the insurer promises to investigate in good faith and pay covered claims.”); N. Am. Foreign Trading Corp. v. Mitsui Sumitomo Ins. USA, Inc., 499 F.Supp.2d 361, 377 (S.D.N.Y.2007) on reconsideration in part, Civ. No. 05 CIV. 4807(SAS), 2007 WL 2873926 (S.D.N.Y. May 15, 2007) rev’d in part and ajfd in part, 292 Fed.Appx. 73 (2d Cir.2008) (“In New York, all contracts imply a covenant of good faith and fair dealing in the course of performance. This covenant embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” (Internal quotation marks omitted.)).
ANICO’s rescission counterclaims that are premised on the breach of the duty of utmost good faith arise from two separate sets of facts: the first from Munich’s alleged failure to disclose information material to the underwriting of the Retrocession Agreements, and the second from Munich’s alleged improper claims handling in performing under the Retrocession Agreements. I analyze ANICO’s latter argument first.
2. Rescission Based on Claims Handling
ANICO contends that Munich breached its duty of utmost good faith by failing to properly perform its duties under the Retrocession Agreements. Specifically, ANI-CO argues that Munich failed to (i) ensure that claims submitted to IOA Re were correctly ceded to and payable by ANICO, (ii) provide adequate and timely notices of these claims, and (iii) maintain or make available records related to the Everest program. See Dkt. No. 117 (Final Pretrial Order), § XII, ¶ 3. In that connection, AN-ICO points to the Retrocession Agreements’ requirement that Munich provide prompt notice of all claims, with “such estimates and particulars,” as well as immediate notice of certain categories of claims. See Pl.’s 1 & 2 (Art. X). ANICO contends that Munich’s failure to abide by these terms constitutes a breach of the duty of utmost good faith, and thus supports ANICO’s claim for rescission.
ANICO has not provided this Court with any case law supporting the proposition that New York courts recognize, as an independent cause of action, breach of the duty of utmost good faith based on a party’s failure to perform un *739 der the terms of the contract. 73 Indeed, this Court has found no case applying New York law in which rescission was granted, or at least contemplated, for breach of the duty of utmost good faith on any basis other than material misrepresentation at the time of contract formation. This is not to say that in New York, the duty of utmost good faith terminates after the reinsurance agreement has been formed. Rather, it appears that the duty of utmost good faith is treated as concomitant with the duty of good faith implicit in all contracts. See, e.g., Unigard II, 4 F.3d at 1069 ; Folksamerica Reins. Co. v. Republic Ins. Co., Civ. No. 03 CIV. 0402(HB), 2004 WL 936760 (S.D.N.Y. Apr. 29, 2004); see also Fasolino Foods Co., Inc. v. Banca Nazionale del Lavoro, 961 F.2d 1052, 1056 (2d Cir.1992) (noting that all New York contracts carry with them implied covenant of good faith and fair dealing). In that connection, the Christiania court held that a claim of breach of duty of utmost good faith based on a reinsured’s failure to provide timely and accurate information to the reinsurer is instead governed by the New York rule that a reinsurer must prove prejudice as a result of late notice. Christiania, 979 F.2d at 281 (“At most, a reinsured’s failure to provide prompt notice may entitle the reinsurer to relief without showing prejudice if the reinsured acted in bad faith.”).
In other words, a claim based on breach of the duty of utmost good faith premised on improper claims handling in the reinsurance context is no different than a claim based on breach of the duty of good faith attendant to any other contract under New York law. Unfortunately for ANICO, New York law is clear that no independent cause of action exists for a breach of the duty of good faith; rather, such a claim is merely a claim for breach of contract. Verzani v. Costco Wholesale Corp., 641 F.Supp.2d 291, 300 (S.D.N.Y.2009) aff 'd, 387 Fed.Appx. 50 (2d Cir.2010) (“[B]reach of good faith and fair dealing does not state an independent cause of action....”); O’Hearn v. Bodyonics, Ltd., 22 F.Supp.2d 7, 11 (E.D.N.Y.1998) (“[U]nder New York Law, ... a claim for breach of an implied covenant of good faith and fair dealing does not provide a cause of action separate from a breach of contract claim; these claims must be dismissed, as a matter of law, as redundant. ‘[P]arties to an express contract are bound by an implied duty of good faith, but breach of that duty is merely a breach of the underlying contract.’ ” (Quoting Fasolino Foods Co., 961 F.2d at 1056 .)); Silvester v. Time Warner, Inc., 1 Misc.3d 250 , 763 N.Y.S.2d 912, 918 (Sup.Ct.2003) aff'd sub nom. Silvester v. Time-Warner, Inc., 14 A.D.3d 430 , 787 N.Y.S.2d 870 (2005). Thus, ANI-CO’s claim for rescission based on Munich’s claims handling is no more than a claim for rescission based on breach of the Retrocession Agreements.
New York courts grant rescission, which is considered an “extraordinary remedy,” “only when a breach may be said to go to the root of the agreement between the parties.” Septembertide Pub., B.V. v. Stein & Day, Inc., 884 F.2d 675, 678 (2d Cir.1989) (citing Canfield v. Reynolds, 631 F.2d 169, 178 (2d Cir.1980)). “[B]efore rescission will be permitted the breach must be ‘material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract.’ ” Id. (emphasis added) (quoting Callanan v. Powers, 199 N.Y. 268 , 284, 92 N.E. 747 (1910)); Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d 284, 289 (2d Cir.1997) (“A party’s obligation to perform under a contract is only excused where the other party’s breach of the contract is so substantial *740 that it defeats the object of the parties in making the contract.”). In general, courts applying New York law have been reluctant to rescind a contract based on breach where the totality of the circumstances show substantial compliance with the contract, that “the injured party can be adequately compensated for its loss, and the good faith of the breaching party.” Id. (citing Restatement (Second) of Contracts § 24); Babylon Associates v. Suffolk Cnty., 101 A.D.2d 207 , 475 N.Y.S.2d 869, 874 (1984) (same); cf. U.S. Postal Serv. v. Phelps Dodge Refining Corp., 950 F.Supp. 504 (E.D.N.Y.1997) (finding rescission appropriate where party had failed to perform at all under the contract and showed no intention of performing in the future).
As made clearer infra in connection with my analysis of whether Munich acted in bad faith in performing, or failing to perform, its obligations under the Retrocession Agreements, the facts here do not support rescission of the contracts based on Munich’s claims handling. There is no evidence that Munich willfully violated its obligations of prompt and/or immediate reporting of claims. Moreover, Munich’s untimely claims reporting and other technical errors are not material as they does not go to the “root” of the Retrocession Agreements; indeed, as I have already found as a matter of law in my Opinion dated September 28, 2012, and which I reaffirmed in my Opinion dated March 28, 2013, ANICO has failed to present sufficient evidence that it was prejudiced by Munich’s late notice under Article X of the Retrocession Agreements.
Finally, even assuming arguendo that rescission is proper for Munich’s claims handling errors, I conclude that ANICO waived any such claim by failing to bring it in a timely manner. The record is clear that as early as 2003, IOA Re had questions about Munich’s claims handling under the Retrocession Agreements, as evidenced by the email Ms. Hoekstra sent Mr. Giacobbe noting that he was reporting claims after they had exceeded the retention and

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8714958. Public record. Not legal advice.