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The Law of Custom and Usage Evidence in Insurance and Reinsurance Contracts
Reinsurance and insurance contracts would be thousands of pages long if they explicitly defined every possible term, however mundane, or if they anticipated every possible contingency, however remote. Fortunately, (or perhaps unfortunately) for the drafters of these contracts, the U.S. legal system typically employs a more streamlined model. That is, parties commit to an agreement with the understanding that courts and other adjudicatory bodies may play a role in filling in contractual “gaps” and giving meaning to indefinite or indeterminate contractual terms. Cf. Phelps Dodge Corp. v. Schumacher Elec. Corp., 2005 U.S. App. LEXIS 14318 (7th Cir. 2005). Although there are a number of methods by which a court can interpret a contract, the importation of custom and usage evidence plays a special role in illuminating insurance and reinsurance contracts. This article explores whether and when courts will admit such evidence, and it divides into three sections: First, the article explains the rules that courts will employ when they determine whether and when to admit custom and usage evidence; second, it considers the effect of integration clauses on the possible importation of custom and usage evidence; and, third, it provides several practical suggestions for a party seeking to import custom and usage evidence.
Admissibility of Custom and Usage Evidence ' The General Rule
In this article, the phrase “custom and usage” refers to any industry usage, custom or practice that has “such regularity of observance” that it justifies an expectation that it will be observed in the transaction at issue. See, e.g., U.C.C. '1-205(2); William Hoffman, On the Use and Abuse of Custom and Usage in Reinsurance Contracts, 33 Tort & Ins. L.J. 1 (1997) [hereinafter Hoffman] (providing a detailed discussion as to the difference between “custom,” “usage” and “practice”). Generally speaking, there are two views on when custom and usage evidence is admissible to interpret an insurance or reinsurance contract. A minority of states will apply the parol evidence rule ' ie, the rule establishing a writing as the exclusive expression of an agreement ' to bar the admission of custom and usage evidence when the contract is unambiguous. See 12 Williston on Contracts '34:7 (Richard A. Lord, 4th ed. 2004). Under this “restrictive” rule ' which was promoted by Williston and incorporated into the First Restatement of Contracts ' a court must, at the outset, make a determination as to whether the contract is ambiguous “on its four corners.” If the contract is unambiguous, the court's inquiry is over, and it must apply the terms of the contract regardless of the custom and usage evidence. On the other hand, if the contract is ambiguous then the court may consider extrinsic evidence including custom and usage evidence to ascertain the intent of the contracting parties. Carey Canada, Inc. v. Columbia Cas. Co., 940 F.2d 1548, 1555-56 (D.C. Cir. 1991); Employers Reinsurance Corp. v. Mid-Continent Cas. Co., 358 F.3d 757, 764 (10th Cir. 2004); Young v. Liberty Mut. Ins. Co., 1999 U.S. Dist. LEXIS 6987 (D. Conn. 1999); Morgan Stanley Group v. New England Ins. Co., 7 F. Supp. 2d 297, 301-02 (S.D.N.Y. 1998).
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
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The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.