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Wednesday, January 16, 2008
Ind. Decisions - 7th Circuit decides one Indiana case today
In Indiana Lumbermens Mutual v. Reinsurance Results (SD Ind., Judge McKinney), a 12-page opinion, Judge Posner writes:
The defendant in this diversity suit for breach of contract governed by Indiana law appeals from the grant of summary judgment in favor of the plaintiff. The case turns on the interpretation of a contract between an insurance company, Lumbermens Mutual, the plaintiff, and Reinsurance Results, the defendant, which reviews an insurance company’s claims against its reinsurers to make sure the insurance company receives the benefits to which its reinsurance contracts entitle it. We’ll sometimes call Lumbermens the “insurance company” and we’ll call Reinsurance Results the “service company.”The contract is very short and its key language shorter still. The service company undertakes to review the insurance company’s claims and to report any “premium and/or claims identified during the course of the review that have not been processed in accordance with the reinsurance contract terms and conditions.” The fee for this service is 33 percent of the “ ’Net Funds’ collected from [the insurance company’s] reinsurers as a result of this review.” The service company claims that it obtained net funds of $2.2 million for its client and thus is owed 33 percent of that amount. The insurance company, disagreeing, brought this declaratory judgment action, contending that it owes the service company nothing, and won.
Reinsurance is a dauntingly complex, esoteric field of business and the briefs in this case are correspondingly complex and esoteric. But the facts relevant to the appeal are actually rather simple, and the forbidding jargon of reinsurance (“ceded unearned premium,” “aggregate excess of loss,” “under-ceded reinsurance loss,” “reinsurance treaty,” and the rest) can be dispensed with. * * *
The service company did not render a service pursuant to an unenforceable contract; it rendered a service outside the contract, as we have seen. When parties have a valid contract, there is no bargaining failure that would justify a court’s awarding a party more than he had contracted for. As we noted in Industrial Dredging & Engineering Corp. v. Southern Indiana Gas & Electric Co., 840 F.2d 523, 525 (7th Cir. 1988) (citations omitted), “Indiana appellate courts have uniformly held that ‘the existence of a valid express contract for services . . . precludes implication of a contract covering the same subject matter. The rights of the parties are controlled by the contract and under such circumstances recovery cannot be had on the theory of quantum meruit.’ ” See, e.g., Milwaukee Guardian Ins., Inc. v. Reichhart, 479 N.E.2d 1340, 1343-44 (Ind. App. 1985); see also Goldstick v. ICM Realty, 788 F.2d 456, 466-67 (7th Cir. 1986). * * *
A note, finally, on advocacy in this court. The lawyers’ oral arguments were excellent. But their briefs, although well written and professionally competent, were difficult for us judges to understand because of the density of the reinsurance jargon in them. There is nothing wrong with a specialized vocabulary—for use by specialists. Federal district and circuit judges, however, with the partial exception of the judges of the court of appeals for the Federal Circuit (which is semi-specialized), are generalists. We hear very few cases involving reinsurance, and cannot possibly achieve expertise in reinsurance practices except by the happenstance of having practiced in that area before becoming a judge, as none of us has. Lawyers should understand the judges’ limited knowledge of specialized fields and choose their vocabulary accordingly. Every esoteric term used by the reinsurance industry has a counterpart in ordinary English, as we hope this opinion has demonstrated. The able lawyers who briefed and argued this case could have saved us some work and presented their positions more effectively had they done the translations from reinsurancese into everyday English themselves. AFFIRMED.
Posted by Marcia Oddi on January 16, 2008 01:30 PM
Posted to Indiana Decisions