Ferguson v. Hannover

Full title: ROBERT D. FERGUSON, in his capacity as the appointed Shareholders…

Court: United States District Court, S.D. New York

Date published: Aug 20, 2007

04 Civ. 9254 (PKL) (S.D.N.Y. Aug. 20, 2007)

Opinion

04 Civ. 9254 (PKL).

August 20, 2007

WILLKIE FARR GALLAGHER, New York, New York, Francis J. Menton, Jr., Esq., Attorneys for Plaintiffs

CLIFFORD CHANCE US LLP, New York, New York, Steven C. Schwartz, Esq., Thomas Teige Carroll, Esq., Maryana Kodner, Esq., Attorneys for Defendants.

OPINION AND ORDER

PETER LEISURE, District JudgePage 2

Plaintiff Robert D. Ferguson, the appointed representative of the former shareholders (the "Shareholders") of Lion Holdings, Inc. ("Lion"), brings this action for declaratory and injunctive relief for breach of contract against Hannover Ruckversicherungs-Aktiengesellschaft ("Hannover"), a German reinsurance company. From December 4, 2006 through December 13, 2006, this Court conducted a bench trial to determine whether the Court should grant plaintiff's request for relief. Having considered the parties' post-trial submissions and the evidence presented at trial, the Court sets forth herein its findings of fact and conclusions of law, pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

Findings of Fact ¹

1 The Court bases its findings of fact on the testimony at the seven-day bench trial ("Tr.") along with the exhibits admitted into evidence during the trial ("Ex."). In cases where both parties submitted the same document into evidence, the Court will here refer only to Plaintiff's copy.

I. Introduction

The present dispute arises out of Hannover's purchase of Lion from the Shareholders for approximately $475 million (the "Transaction"), through an Amended and Restated Stock Purchase Agreement (the "SPA") dated February 16, 1999. (Ex. 4.) Pursuant to the terms of the SPA, the Shareholders agreed to indemnify Hannover for certain losses related to the participation by a subsidiary of Lion in a certain personal accident reinsurance scheme called London Market Personal Accident Excess of Loss (the "LMX Program" or "LMX Business"). (Ex. 4, § 7.1.C.) In order to secure their indemnification obligation, the selling shareholders agreed to place $50MM in an escrow account (the "LMX Escrow"), and further agreed in a written contract (the "LMX Escrow Agreement") that the proceeds of that account would be used to pay any indemnification obligations to Hannover with respect to claims in connection with the LMX Business. (Ex. 6.)

Plaintiff alleges that the Shareholders have adequately performed their indemnification obligation in such a way so as to trigger one particular section — Section 5(b) — of the LMX Escrow Agreement under which the LMX indemnity obligation would be terminated and the remaining LMX Escrow Account should be released to the Shareholders. Plaintiff thus asks the Court to (1) declare that Section 5(b) of the LMX Escrow Agreement applies as its requirements have been met, (2) identify and approve the amount for which the Shareholders must indemnify Hannover, and (3) order payment of that amount from the LMX Escrow to Hannover and release to the Shareholders the funds remaining in the LMX Escrow. Defendant denies that the Shareholders have satisfied the requirements of this particular section of the LMX Escrow Agreement and contends, therefore, that it would be inappropriate to terminate the indemnity obligations and release the LMX Escrow funds at this time.

Because the key dispute here is whether the Shareholders have met the conditions of Section 5(b) of the LMX Escrow Agreement, the Court's findings of facts focus on those facts most relevant to the Court's consideration of whether those conditions have been met.

This case was originally filed in New York Supreme Court, Kings County, and then removed to the Eastern District of New York before Judge Weinstein. The case was transferred to this Court on the grounds that it is related to two other actions pending before the Court that involve the same parties and arise from the same underlying stock purchase transaction.

II. The Parties

Plaintiff Mr. Ferguson is a resident of Florida and one of the Shareholders. (Tr. 320.) He was appointed by the Shareholders as their Shareholders' Representative, and he is authorized to act on their behalf with regard to, among other things, satisfying and enforcing the terms and conditions of the SPA, the LMX Escrow Agreement, and various other agreements related to the Transaction. (Ex. 68.)

Prior to its acquisition by defendant, Lion was a Delaware corporation and a holding company which, though its subsidiaries, owned all the stock of, and controlled Clarendon Insurance Group, Inc. ("Clarendon"), a group of several property and casualty insurance companies (the "Clarendon companies"). (Tr. 78-79; Ex. 4.) Mr. Ferguson was also the Chief Operating Officer and President of Lion for all relevant periods. (Tr. 76.) Ralph Milo was the Chief Executive Officer of Lion for all relevant periods. (Tr. 76.) Joseph Jacobs, Esq. was at all relevant times outside counsel to Clarendon. (Tr. 73.)

Defendant Hannover is a German insurance and reinsurance company, with its principal place of business in Hannover, Germany. (Ex. 4.) For all relevant periods Wilhelm Zeller was the Chief Executive Officer of Hannover. (Tr. 88; Ex. 3.) For all relevant periods, Herbert Haas was the Chief Financial Officer. (Tr. 329; Ex. 3.) Robert Redpath, Esq. is currently general counsel and secretary of Clarendon, and, for all periods relevant to this trial, was counsel in the legal department at Hannover and then senior counsel at Clarendon. (Tr. 407-09.)

III. Some Findings as to Credibility

IV. The LMX Programs

A tight spiral involves a reinsurance structure in which only a relatively small number of reinsurers would mutually reinsure one another. (Tr. 117-18.) In such a spiral,

A would reinsure B who would reinsure C who would reinsure D and then A would reinsure D. So what would happen is the claim would come into A, who wrote the first reinsurance to the so-called feeders, and that claim would be paid by A and it would bear its retention, that is, what it agreed under its contract to keep for itself. It would cede it to B. B would keep a retention. Then to C, who would keep a retention and D who would keep a retention. These retentions in the '94 spiral were $5,000 apiece. Which means then that once everyone bore a $5,000 retention the claim that had come in, whether it is for $50,000 or a million dollars, would keep staying, circulating among these four. . . .

(Tr. 118.) In effect, though A had initially received that claim as a $50,000 claim, when it was passed around the spiral and back to A, A would then have "seen" $100,000 in claims on that one incident. (See Tr. 119.) Thus the claim would continue to be passed around the spiral, and the size of the claim any given Bottom End Participant had "seen" had grown quite a bit larger than the original claim submitted from the feeder.

The problem with this spiral structure, however, was that A, B, C, and D, also called Bottom End Participants here, had reinsurance coverage for these claims, typically for situations in which losses under those claims exceeded $3 million per occurrence. (Tr. 119.) The providers of this reinsurance coverage are called Top End Participants. The Top End Participants issued policies based on the idea that "[o]nly catastrophic personal accident events — bus plunges, big name celebrity deaths, only that kinds of stuff is going to trigger a payment by [a Top End Participant] because every claim under $3 million is being paid by someone else." (Tr. 119.) As a result, the reinsurance policies for these claims that may exceed $3 million were priced accordingly. (Tr. 119.) However, in the LMX Program's tight spiral, as the original claims continued to be passed around between the Bottom End Participants, a Bottom End Participant could eventually "see" in excess of $3 million on a given claim. (Tr. 119.) Thus, a Top End Participant could find itself receiving a claim from a Bottom End Participant in a situation in which it would not normally have expected to pay. (Tr. 119.)

A. Clarendon's Involvement in the LMX Business

It is undisputed that Clarendon is a Bottom End Participant in the LMX Business for both the 1994 and 1995 issuing years (the "1994 LMX Program" and the "1995 LMX Program").

Clarendon's involvement in the LMX Business as a Bottom End Participant became an issue for the parties just prior to the closing of the original transaction in December 1998. (Tr. 86-87.) At that time, Hannover's counsel informed the Shareholders' counsel, Mr. Jacobs, that it could not close the original agreement because it believed "there may be breaches of the Shareholders' representations and warranties in the Stock Purchase agreement" related to the LMX Program. (Ex. 53; Tr. 87.) Immediately upon receipt of this information, Mr. Jacobs requested a meeting with Hannover. (Tr. 87.) He and Mr. Ferguson attended a meeting in Hannover soon thereafter. (Tr. 88.) At that meeting, the parties discussed Hannover's concerns regarding the LMX Program and Clarendon's potential exposure should the Top End Participants attempt to cancel their treaties with Clarendon. (Tr. at 89-90.) Hannover also expressed concerns about the potential for Clarendon to be "hit with a RICO lawsuit and pay treble damages." (Tr. 90.) Hannover proposed that the Shareholders "place 100% of the purchase price in escrow and receive no cash at closing." (Tr. 90.) Finding this to be an unacceptable solution, Mr. Jacobs and Mr. Ferguson "literally walked out" of the meeting. (Tr. 90.)

Following this contentious exchange between the parties, a period of renegotiation of the Transaction ensued. (Tr. 91.) During this renegotiation, the Shareholders, in a letter from Mr. Ferguson to Mr. Zeller and Mr. Haas explained that the circumstances regarding the LMX Business had not changed, that the LMX Business had been disclosed and discussed during the due diligence phase of the original negotiations, and that the risk to Hannover from the LMX Business had been disclosed in Schedule 3.9 of the original stock purchase agreement. (Ex. 3.)

Two months later, on February 25, 1999, after extensive negotiations by both parties, the amended SPA was duly executed by the parties, and the Transaction closed. (Tr. 91.)

B. The SPA's LMX Indemnity Provisions

In the SPA, the parties agreed that Hannover would acquire all of the stock of Lion for approximately $475 million plus or minus specified subsequent adjustments. (Tr. 93, 98; Ex. 4 § 2.1.) This SPA included special provisions dealing with the risk of losses to Hannover from Clarendon's participation in the LMX program. (Tr. 93; Ex. 4.) Specifically, in Section 7.1(C)(i) the Shareholders agreed to indemnify and hold Hannover and certain of its affiliates harmless with respect to "Claims² (including, without limitation, the loss of any reinsurance recoverables) sustained or suffered by [Hannover or certain Hannover Affiliates] in connection with the 1994-1995 LMX Business." (Ex. 4 § 7.3(C).) The Shareholders further agreed in Section 7.1(C)(ii) to hold Hannover harmless against "[a]ll costs and expenses (including reasonable attorney's, accountants' and other professional fees and expenses) incurred . . . in connection with any matter indemnified against in accordance with Section 7.1(C)(i)." (Ex. 4 § 7.3(C).)

2 Section 7.1.A.i defines Claims as "[a]ny damages, losses, expenses, obligations, liabilities, claims actions or causes of action, whether or not fixed, contingent or liquidated." (Ex. 4 § 7.1.A).

Section 2.2 of the SPA sets forth the creation of the LMX Escrow Account with $50 million from the overall purchase price to be paid by Hannover. (Ex. 4 § 2.2.) Section 7.4(D) then provides that if indemnification is required for an LMX Claim, the Shareholders would "satisfy such obligation solely from the balance" of the LMX Escrow Account. (Ex. 4 § 7.4(D).) Section 7.4(D) further places a cap on the total possible indemnification of "Fifty Million Dollars ($50,000,000) in aggregate payments of indemnification claims." (Ex. 4 § 7.4(D).)

Finally, the Shareholders also agreed that, as to those claims they were required to indemnify, they would "assume and control defense and settlement of Litigation relating to the 1994-1995 LMX Business." (Tr. 99; Ex. 4 § 7.3(C).) For any settlement reached by the Shareholders as to indemnifiable claims, the Shareholders would consult with Hannover regarding such settlement and Hannover's consent "shall not be unreasonably withheld." (Tr. 99; see also Ex. 4 § 7.3(C).)

C. The LMX Escrow Agreement

In order to give effect to the indemnity obligations set forth in the SPA, and in particular to establish the LMX Escrow Account, the parties entered into the LMX Escrow Agreement on February 25, 1999. (Ex. 6; see also Ex. 4 § 2.2.) The LMX Escrow Agreement is incorporated into the SPA by Section 10.8 of the SPA, which states that certain exhibits and schedules "are hereby incorporated into and made part of this Agreement." (Ex. 4.) The LMX Escrow Agreement is one of those exhibits to which Section 10.8 of the SPA refers.

In addition to setting the terms for establishing the LMX Escrow Account, this agreement also set forth three specific and independent bases for "Release of the Escrowed Funds." (Tr. 108-09; Ex. 6 § 5.) Sections 5(a) and 5(c) both involve the possible release of the remaining funds in the LMX Escrow on certain dates. (Tr. 109-10; Ex. 6 § 5.) Section 5(a) calls for a release on January 1, 2005 of an amount "equal to (x) the Company's maximum potential liabilities if all reinsurance agreements with Key Players (as defined) relating to the 1994-1995 LMX Business were rescinded . . ." unless "there is a litigation, arbitration or alternative dispute resolution proceeding relating to the 1994-1995 LMX Business threatened in writing or pending." (Ex. 6 § 5(a).) The calculation of the maximum potential liabilities Clarendon might be faced with was to be based on the "loss model to be prepared by the financial advisor to the applicable working group relating to the 1994-1995 LMX Business." (Ex. 6 § 5(a).) The Key Players are then defined as, for the 1994 LMX program, "Lincoln National Life Insurance Company ("Lincoln"), Crown Life Insurance Company ("Crown"), Manufacturers Life Insurance Company ("Manulife"), North American Life Insurance Company ("NA Life"), and Sun Life Assurance Company of Canada ("Sun Life") and their respective affiliates. (Ex. 6 § 5(a).) For the 1995 LMX program, the Key Players are "Lincoln, Crown, and American Reliable Insurance Company and their respective affiliates." (Ex. 6 § 5(c).) Of these Key Players, Lincoln, Crown, and Manulife are Top End Participants, while the remainder are Bottom End Participants like Clarendon. (Ex. HH; Tr. 124.)

Section 5(c) provides for payment of the funds remaining in the LMX Escrow Account and termination of the LMX Escrow Agreement on the tenth anniversary of Hannover's acquisition of Clarendon, which will be in February 25, 2009. (Tr. 110; Ex. 6 § 5(c).) However, this section also has an exception, such that the release will not take place "if there is any litigation, arbitration or alternative dispute resolution proceeding relating to the 1994-1995 LMX Business threatened in writing (which writing shall be no older than one year) or pending," in which case the funds will only be released after the disposition of those Claims. (Tr. 110; Ex. 6 § 5(c).)

Section 5(b), however, is the section of the LMX Escrow Agreement at issue here. It bases the termination of the LMX Escrow Agreement and the release of the LMX Escrow funds on the Shareholders' indemnification obligation being fully satisfied because of resolution of the "problems that gave rise to the LMX dispute" by the LMX participants. (Tr. 109.) According to the LMX Escrow Agreement, the Shareholders' obligation will be satisfied when two criteria are met:

"(i) the execution and delivery of releases or final judgments with respect to all actual and potential claims held by the Key Players relating to the 1994-1995 LMX Business"; and

"(ii) the payment from the Escrowed Funds of an amount equal to the amount of the Shareholders' indemnity obligations therefor."

(Ex. 6 § 5(b).) The Key Players noted in Section 5(b)(i) are defined in Section 5(a), and are listed above.

D. The March 5, 1999 Letter

On March 5, 1999 the parties to the SPA entered into a letter agreement ("March Letter Agreement") that made certain changes to the SPA. (Ex. 8.) Thus, the March Letter Agreement, "together with other documents, form a seamless whole" of the agreement between the parties. (Tr. 101.) This letter was where the "quid pro quos that came back to the Shareholders" were largely contained, while "the give-ups [by the Shareholders] are largely in the SPA." (Tr. 102.)

Of relevance to this particular matter is Section 3 of the March Letter Agreement, which states that "Section 3.7(D) is the Shareholders' representation and warranty concerning loss reserves. We have agreed to eliminate Section 3.7(D). This means (in part) that the Shareholders are making no representation or warranty regarding loss reserves and will not be obligated to indemnify Hannover Re in the event that loss reserves prove to be inadequate in any respect." (Ex. 8.) The eliminated Section 3.7(D) was originally part of Article 3 of the SPA, which generally covers Representations and Warranties of the Shareholders. (Ex. 4.) The preamble to the Article notes that, [n]otwithstanding anything to the contrary in this Article 3, the Shareholders are not making any representations or warranties with respect to the 1994-1995 LMX Business. . . . For purposes of clarification, matters related to the 1994-1995 LMX Business are covered by Section 7.1(C)." (Ex. 4.) Section 3.7(D) then went on to say that "[t]he aggregate loss reserves recorded on the Statutory Statements were determined in accordance with generally accepted actuarial standards consistently applied (except as otherwise noted therein), are adequate, and satisfy all applicable Laws." (Ex. 4.)

V. The 1994 and 1995 LMX Working Groups and Attempts to Settle the LMX Business

Certain of the parties to the LMX Business began in 1998 to attempt to work together to resolve the problems related to the LMX Business. (Tr. 121-22.) According to Mr. Jacobs, the parties acknowledged that the problem was "market-wide" and that "rather than engaging in a lot of arbitrations, which could produce inconsistent results and cost everyone a lot of money, let's get all the industry players . . . as many as we can into the same room, and see whether we can hammer out some solution." (Tr. 121-22.) Separate working groups were established for the 1994 LMX Business and for the 1995 LMX Business. (Tr. 121-22.)

For each working group, Ernst Young's London-based actuarial group ("E Y") was retained in an effort to identify the total industry exposure based on the LMX Business. (Ex. 19, 28; Tr. 134-36.) E Y reported to the working group as a whole, and was compensated by the group as a whole as well, in a per capita payment. (Tr. 125-26.) E Y's role was to gather data regarding the overall LMX Program, and use that data to "build a picture" of the entire spiral. (Tr. 126.) They also identified the present value of each participant's obligations under the reinsurance contracts that had created the spiral, and estimated the losses that would come into the spiral. (Tr. 127.) The work they did was considered impartial, as they were working neither for the Top End nor the Bottom End participants. (Tr. 136.)

For each of the working groups, E Y created documents to be used in the negotiations. (Tr. 137.) Specifically, for each meeting of a working group, "E Y would pass out a thick book that would be its current analysis of the spiral." (Tr. 137.) Included in that analysis was a page that identified the "distribution of the losses among all the participants, together with E Y's estimate of what the total ultimate loss [from the LMX Business] will be." (Tr. 138.) This summary page was sometimes called the E Y loss model, and a separate loss model was created for the 1994 LMX Business and the 1995 LMX Business. (Tr. 111-12.) The loss model took into account the claims that had already arisen from the policies in the LMX Program (Tr. 131), some of which had already been paid by the parties to the spiral (Tr. 127-28), and also the outstanding claims (Tr. 131-32). The calculation of outstanding claims included both "case reserves, which are estimates that a claims person somewhere has made as to what remains to be paid on a particular case," as well as IBNR, which stands for "incurred but not reported losses" and includes losses anticipated and remaining to be paid, but not yet actually claimed. (Tr. 132.)

As a result of the work conducted by E Y and the parties to these working groups, some agreements were reached as to the 1994-1995 LMX Business.

A. The 1994 LMX Working Group Agreements

Sometime in 1998, Clarendon was invited by parties to the 1994 LMX Working Group to participate in that group. (Tr. 122.) There were eight participants of the working group that "persisted all the way through" until certain agreements were reached. (Tr. 123-24.) Among these eight participants were "representatives of Chubb, Hancock, Phoenix, Clarendon, the Owen syndicate, Lloyds Syndicate 718," all of whom were Bottom End Participants to the spiral, and "Lincoln, National, Crown, and Manulife," who were Top End Participants. (Tr. 124.)

1. The 1994 Eight Party Agreement

Clarendon joined with four other Bottom End Participants — Chubb, Owen, Hancock, and Phoenix — as well as three Top End Participants — Lincoln, Crown and Manulife — in an agreement resolving the claims for the 1994 LMX Business as between the Top End and Bottom End Participants (the "1994 Eight Party Agreement" or "Parallel Agreement"). (Ex. 20; Tr. 152-53.) This agreement was dated October 16, 2000. (Ex. 20.) Among other things, it (1) identified the amount that the three Top End Participants would contribute for any 1994 LMX liabilities, either already paid or outstanding; (2) determined the economic value of the 1994 LMX claims that had already been paid by the three Top End Participants; and (3) identified the amount that the Bottom End Participants would refund to the Top End Participants. (Ex. 20.) The Eight Party Agreement also identified the respective share each of the Bottom End Participants would pay of that refund. (Ex. 20.)

Most importantly, the parties to the 1994 Eight Party Agreement agreed to cancel their reinsurance contracts relating to the 1994 LMX Program so that the remaining losses from the LMX Business would not be ceded back into the insurance market (Tr. 154), and the Top End Participants agreed to release and discharge the Bottom End Participants "from any and all past, present and future claims, demands, causes of action, debts, obligations or liabilities . . . of any kind or nature . . ." related to the 1994 LMX Program. (Ex. 20.) Thus, the contracts between the Top End and Bottom End Participants were canceled and "there are complete mutual releases given . . . with respect to all the reinsurance agreements." (Tr. 154.)

The three Top End Participants involved in this agreement are three of the four Key Players listed for the 1994 LMX Program in the LMX Escrow Agreement. The other Key Player identified in the LMX Escrow Agreement for the 1994 LMX Program, Sun Life, was not a party to the 1994 Eight Party Agreement. (Tr. 152-53; Ex. 20.)

2. The 1994 Five Party Agreement

Also on October 16, 2000, the five Bottom End Participants who were parties to the 1994 Eight Party Agreement entered into a separate agreement (the "1994 Five Party Agreement"). (Ex. 19.) Under this new agreement, these Bottom End Participants apportioned liability for all outstanding 1994 LMX claims, with Clarendon's liability accounting for 20%. (Ex. 19; Tr. 158-59.) The apportionment was based on the loss model created by E Y for the 1994 LMX working group. (Ex. 19; Tr. 161.)

In addition, the 1994 Five Party Agreement set up a process by which the parties to it would, on a yearly basis, conduct a "true-up" procedure to ensure that each had only paid its proportional share of the losses for that year. (Ex. 19, Tr. 159-61.) Under the true-up procedure, the parties to the 1994 Five Party Agreement agreed that "during the year each party would pay whatever claims were coming in from its feeder. . . . Then at the conclusion of the year, everyone would get together and true up the total payments." (Tr. 160.) The result was that those who had paid more than their agreed-upon portion would be entitled to a refund, and those who paid less would be required to pay the difference. (Ex. 19.) There was no end date by which the true-up procedure would be completed or would cease to exist. (Ex. 19.) Unless the outstanding claims for the LMX Business were commuted, the true-up process "could go on for years and years, decades." (Tr. 214.)

Subject to "the terms of this Agreement," including this true-up procedure, the signatories to the 1994 Five Party Agreement agreed to

release and discharge each other, their predecessors, parents, affiliates, subsidiaries, and current for former officers, directors and employees from any and all past, present and future claims, demands, causes of action, debts, obligations or liabilities (including IBNR) of any kind or nature, whether known or unknown, and whether fixed, contingent, liquidated or unliquidated that arise out of or relate in any way, directly or indirectly

to certain 1994 LMX reinsurance contracts. (Ex. 19.) Specifically, this agreement involved releases as to contracts of reinsurance with each other, with the three Top End Participants that had parties to the 1994 Eight Party Agreement, and with certain other reinsurance companies. (Ex. 19.) The actual contracts at issue were in a Schedule A to the 1994 Five Party Agreement. (Ex. 19.)

As with the 1994 Eight Party Agreement, Sun Life, the other Key Player identified in the LMX Escrow Agreement for the 1994 LMX Program was not a party to the 1994 Five Party Agreement (Tr. 152-53; Ex. 19)

3. The Owen Reinsurance Agreement

The five signatories to the 1994 Five Party Agreement also entered into an additional agreement (the "Owen Reinsurance Agreement"). (Ex. 19; Tr. 236-38.) The Owen Reinsurance Agreement came about because Owen³, one of the Bottom End Participants of the 1994 LMX spiral, "claimed that it was then unable or unwilling to hold, you know, to bear the risk of these losses without ceding them to somebody else." (Tr. 236-37.) While the other parties to the 1994 Five Party Agreement had agreed to take on the liability for outstanding losses from the feeders in the 1994 LMX Program and agreed not to cede those losses back into the insurance market, Owen "said under the rules of Lloyd's, this is an impossibility to us, we have to be able to get reinsurance for this and they wanted out. They wanted finality." (Tr. 236-37.)

3 Owen actually refers to Colin M. Owen, who was a party to the 1994 Eight Party Agreement and the 1994 Five Party Agreement "on his own behalf and on behalf of all members of Lloyd's Syndicate 718 for the 1994 year of account of Lloyd's of London." (Ex. 19.)

As a result, a separate deal was negotiated with Owen, in which the other four Bottom End Participants to the 1994 LMX Program — Clarendon, Chubb, Hancock, and Phoenix — essentially took on "what would have been Owen's shares of the obligations had they signed [the 1994 Five Party Agreement]" in return for payment from Owen. (Tr. 238.) Thus, unlike the remaining four Bottom End Participants party to the 1994 Five Party Agreement, Owen "achieved finality." (Tr. 237-38.)

4. The February 24, 2000 Letter Agreement

In connection with the settlement discussions among the members of the 1994 LMX working group, but in advance of any actual settlement related to the 1994 LMX Program, the Shareholders and Hannover entered into an agreement dated February 24, 2000 (the "February 2000 Agreement"). (Ex. 16.) The February 2000 Agreement provided that, for reasons related to optimizing Clarendon's financial statements (Tr. 174, 343), the Shareholders would pay one of the Clarendon companies $17.183 million from the LMX Escrow. (Ex. 16.) This payment included (i) $15.714 million, which was the nominal (or "book") value⁴ of Clarendon's 1994 LMX reinsurance recoverable as of September 30, 1999, as reflected on its financial statements prepared in accordance with GAAP; (ii) $1.013 million⁵ to strengthen carried reserves for 1994 LMX losses; and (iii) $438,000, representing 1994 LMX losses for the period February 16, 1999 through September 30, 1999. (Ex. 16; Tr. 171-72.)

4 The parties disagreed as to whether the indemnification obligation for 1994 LMX losses was intended to cover the full $15.714 million nominal (or "book") value of the reinsurance recoverable, or the discounted present value of those losses, which the parties agreed was $11.273. (Ex. 16; Tr. 168.) The Shareholders claimed the losses should be counted at the discounted present value rather than the nominal value. The issue was resolved in arbitration in October 2003. (Ex. 52.) The Arbitrator, in a written award, ruled in favor of the Shareholders, and ordered Hannover to reimburse the LMX Escrow for $4.441 million plus interest on the overpayment. (Ex. 52.)

5 This number was agreed upon in error, due to a typographical mistake. The correct amount should have been $1.031 million. (Tr. 171.)

The impetus for the February 2000 Agreement was the fact that Mr. Ferguson, in his capacity as Clarendon's president and the Shareholders' Representative at that time, "wanted the best financial statement [he] could honestly put forward to the state insurance departments and to the people that [he] did business with." (Tr. 343.) There was some urgency in coming to a determination as to the amount the parties would agree should be released from the LMX Escrow Account because the 1999 statutory statements had to be finalized by the end of February 2000. (Tr. 162-63, 342-43.) Moreover, there was some disagreement between the parties as to the overall scope of the LMX indemnity obligations. However, the parties attempted to "proceed as best [they] could with different understandings." (Tr. 243.) Thus, the agreement eventually reached by the parties included specific language stating that the February 2000 Agreement was "a preliminary agreement" and that "the parties will endeavor to reach a final settlement as soon as possible after the resolution of the 1994 LMX dispute." (Ex. 16 § 1(d).) No further discussions regarding this final settlement were conducted. (Tr. 180-84.)

5. Sun Life

Sun Life was designated by the parties to this lawsuit as a Key Player for the 1994 LMX Program in the LMX Escrow Agreement. (Ex. 6 § 5(a).) While three of the four Key Players for the 1994 LMX Program participated in the 1994 LMX working group, the fourth Key Player, Sun Life, did not participate in the 1994 LMX working group. (See Ex. 19, 20; Tr. 140-41, 265-66, 747-48.) According to the Shareholders in a memorandum authored by their attorney, Mr. Jacobs, to Clarendon's CEO, Mr. Kunze, those "top-end members having relatively small positions" would perhaps "elect not to join in the settlement." (Ex. 11.) In that case, "the bottom end pool will continue to carry reinsurance recoverables from these participants until resolution can be reached." (Ex. 11.) Sun Life was a Top End Player in the 1994 LMX Program, and it had a relatively small position, with a 20.13% share of an excess of loss treaty with Clarendon that provided reinsurance coverage of up to $7 million in excess of a $5 million retention. (Ex. 45.)

At the time this trial occurred, Sun Life had not entered into a release with Clarendon. (Tr. 748-49.)

B. The 1995 LMX Working Group Agreements

Early in 1999, Clarendon became involved in a working group related to the 1995 LMX Program. (Tr. 187.) Again, there were eight "main" participants of the working group. (Tr. 187.) Among these eight participants were Clarendon, Phoenix, Hancock, American Reliable, and Lincoln all of whom were Bottom End Participants, and "Lincoln, Manulife, and Crown," who were Top End Participants. (Tr. 187.) In this working group, Lincoln participated both as a Top End and a Bottom End Participant. (Tr. 187.)

1. The 1995 Manulife and Crown Agreement

On December 3, 2003, five Bottom End Participants in the 1995 LMX Program — Clarendon, Phoenix, Hancock, American Reliable, and Lincoln — agreed along with two Top End Participants — Crown and Manulife — to a settlement very similar to the 1994 Eight Party Agreement (the "1995 Manulife and Crown Agreement"). (Ex. 41.) Among other things, in the 1995 Manulife and Crown Agreement, the parties agreed that (1) the Top End Participants would bear a specific amount of the losses for the 1995 LMX Program, and that those Participants would pay a lump sum cash contribution to the Bottom End Participants; (2) the reinsurance treaties between the Top End and Bottom End Participants would be cancelled; (3) the Bottom End Participants would release the Top End Participants from "any and all past, present and future claims, demands, causes of action, debts, obligations or liabilities . . . of any kind or nature . . ." that arise out of the 1995 LMX business; and (4) the Top End Participants would release and discharge the Bottom End Participants from "any and all past, present and future claims, demands, causes of action, debts, obligations or liabilities . . . of any kind or nature . . ." that arise out of the 1995 LMX business. (Ex. 41; Tr. 196-98.)

One of the Top End Participants, Crown, was a Key Player for the 1995 LMX Program, as that term was defined in Section 5(a) of the LMX Escrow Agreement. (Ex. 6.)

2. The 1995 Five Party Agreement

On that same day, the five Bottom End Participants who had been parties to the 1995 Manulife and Crown Agreement — Clarendon, Phoenix, Hancock, American, and Lincoln — entered into a separate settlement agreement (the "1995 Five Party Agreement"). (Ex. 28.) This Agreement was very similar in form to the 1994 Five Party Agreement. (Tr. 189, 195.) Specifically, the parties to this Agreement agreed, inter alia, to apportion liability for outstanding 1995 LMX Program losses, with Clarendon's share of the liability being set at 16%. (Ex. 28.) The apportionment was based on the loss model created by E Y for the 1995 LMX working group. (Ex. 28; Tr. 190.) Clarendon also, because its net payment on 1995 LMX claims had been slightly lower than those of the group as a whole, agreed to pay $432,000 to the parties to bring all of the parties to an equal footing with regard to claims already paid. (Ex. 28.)

The 1995 Five Party Agreement included a yearly true-up procedure like the one present in the 1994 Five Party Agreement. (Ex. 28, Tr. 195-96.) As in the 1994 Five Party Agreement, the 1995 Five Party Agreement does not contain an end date by which the true-up procedure would be completed or would cease to exist. (Ex. 28.) And again, unless the outstanding claims for the LMX Business were commuted, the true-up process "could go on for years and years, decades." (Tr. 214.)

The parties also agreed that they would release one another from "any and all past, present and future claims, demands, causes of action, debts, obligations or liabilities . . . of any kind or nature . . ." that arise out of the contracts noted in the Agreement in Schedule A. (Ex. 28.) This release was "subject to the terms of" the 1995 Five Party Agreement, which created an ongoing obligation between the parties with regard to "continuing information, cooperation requirements. There is the requirement to go in and dismiss proceedings that are already underway, dismiss arbitrations. And there is, of course, the true-up, how the true-up is going to work. There is a confidentiality provision. There are a bunch of provisions in there." (Tr. 194-95; Ex. 28.)

Of the parties to the 1995 Five Party Agreement, both Lincoln and American Reliable are Key Players for the 1995 LMX Program, as that term is defined in Section 5(a) of the LMX Escrow Agreement. (Ex. 6.)

3. Hannover's Approval of the 1995 LMX Settlement Agreements

With Hannover's consent, Mr. Jacobs attended the 1995 LMX working group meetings, and occasionally Mr. Redpath, Clarendon's in-house counsel, also attended the working group meetings. (Tr. 198-99.) Mr. Jacobs kept Hannover personnel informed about the 1995 LMX working group's progress, and about the terms of the settlement agreements. Both of the two primary settlement agreements for the 1995 LMX working group participants — the 1995 Manulife and Crown Agreement and the 1995 Five Party Agreement — were executed by Mr. Redpath on behalf of Clarendon. (Exs. 28, 41.) The 1995 Manulife and Crown Agreement and 1995 Five Party Agreement were also both "acknowledged and agreed" to by the Shareholder's Representative. (Exs. 28, 41.) Since the 1995 LMX settlement agreements were closed, Mr. Jacobs' role with respect to ongoing work with the LMX participants ended, and he has not been involved in the true-up process since that time. (Tr. 202; 453.) He testified that he believes "Mr. Redpath is doing that on behalf of Clarendon," and that he has been kept "reasonably informed" given the existence of several litigations between the parties here. (Tr. 202-03.)

4. The Chubb Agreement

In April 2005, Clarendon and three other Bottom End Participants to the 1995 LMX Program — Hancock, Lincoln, and Phoenix — entered into a separate settlement agreement with Chubb Insurance Company of Europe (the "Chubb Agreement"). (Ex. 34; Tr. 200.) For the 1995 LMX Program, Chubb no longer acted as a Bottom End Participant as it did in the 1994 LMX Program, and instead acted as a Feeder. (Tr. 200.) As a result of this settlement, Chubb agreed to discount by 15% "all of the claims that it put into the spiral from the beginning of time to the end of time, and that became known as the Chubb haircut." (Ex. 34; Tr. 200.) The result of this Chub haircut was that E Y's estimate of the total outstanding losses that would be borne by the Bottom End Participants decreased by approximately $10 million. (Tr. 201.)

VI. The Parties' Positions

Throughout the course of the litigation the parties have presented a variety of issues to the Court, many of which involve a complicated reading of the various agreements at issue, as well as complex economic modeling. Following is a brief recitation of the parties' positions as to those considerations that the Court addresses in this decision, based on the testimony and evidence presented at the trial as well as the parties' pre — and post-trial submissions.

First, both parties agree that, at bottom, the core issue before the Court is whether Section 5(b) of the LMX Escrow Agreement has been triggered, and thus whether both of its conditions have been met. (Tr. 595 ("What is before us is Section 5(b) of the LMX Escrow Agreement and the conditions for termination of that."); Pl.'s Post-Trial Br. at 28; Def.'s Post-Trial Br. at 1, 5.)

Plaintiff asks the Court to rule that the LMX Escrow Agreement be terminated and the funds released pursuant to Section 5(b). Plaintiff argues that the Court should do so because both prongs of Section 5(b) have been met. First, plaintiff claims it has met the requirements of Section 5(b)(i) "because the 1994 and 1995 LMX Disputes have been settled" (Pl.'s Post-Trial Br. at 4), and that the Key Players in both the 1994 LMX Program and the 1995 LMX Program have provided releases (Pl.'s Post-Trial Br. at 28, 43). Plaintiff further argues that it has effectively met the requirements of Section 5(b)(ii) because it has settled with Hannover as to payment for the 1994 LMX indemnity obligations, and it has identified the appropriate amount of indemnification for the 1995 LMX Business. (Pl.'s Post-Trial Br. at 48-59, 59-64; Def.'s Post-Trial Br. at 26.) Plaintiff requests that this Court order defendant to instruct the LMX Escrow agent to release plaintiff's proposed amount intended to satisfy its 1995 LMX indemnity obligation — $5.125 million — thereby meeting the requirements of Section 5(b)(ii) that payment of the Shareholders' indemnity obligation be completed. (Pl.'s Post-Trial Br. at 65.)

Defendant, on the other hand, provides numerous arguments as to why it believes the Court should find that neither condition of Section 5(b) of the LMX Escrow Agreement has been satisfied. It thus argues that the release of the LMX Escrow is therefore inappropriate at this time. (Def.'s Post-Trial Br. at 1, 5-6.) Of particular relevance here, defendant believes the Court should find that Sun Life did not provide a release, as is required by the terms of Section 5(b)(i). (Def.'s Post-Trial Br. at 6.) Defendant also argues that the terms of Section 5(b)(ii) have not been met, as the amount plaintiff has identified as its indemnity obligation is an estimate, and estimates are barred by the language of Section 5(b). (Def's Post-Trial Br. at 26-29.)

In addition to the evidence presented and the arguments made at trial regarding the conditions of Section 5(b) of the LMX Escrow Agreement, the parties devoted a large portion of argument and evidence at trial as well as the post-trial papers to discussion of the "crucial question" of "the scope of the Shareholders' indemnity obligation for the 'claims relating to the 1994-1995 LMX Business' under the SPA and the LMX Escrow Agreement." (Pl.'s Post-Trial Br. at 4.) Plaintiff raises this issue because it believes further evaluation of the scope of the Shareholders' indemnity obligation for the 1994-1995 LMX Business is important to the way in which the Court interprets the requirements of Section 5(b) of the LMX Escrow Agreement. (Pl.'s Post-Trial Br. at 4.) Thus, for example, plaintiff qualifies its claims that releases were obtained for all Key Players for the 1994 LMX Program by noting that releases were provided by "Key Players with claims for which the Shareholders are obligated to indemnify defendant" (Pl.'s Post-Trial Br. at 28), rather than by "all Key Players" as they claim for the 1995 LMX Program (Pl.'s Post-Trial Br. at 43).

Because the Court is able to interpret Section 5(b) and resolve whether plaintiff has met its obligations therein without discussion of the these larger questions of the scope of the Shareholders' indemnity obligation under the SPA, the Court declines to provide a more thorough explanation of the various additional arguments presented by the parties as to the scope of the Shareholders overall indemnity obligation for the 1994-1995 LMX Business, and does not discuss that issue in its analysis of the claims before it.

Conclusions of Law

Jurisdiction here is based in diversity, pursuant to 28 U.S.C. § 1332(a)(2). Jurisdiction is not disputed, (Joint Pre-Trial Order, § A), and the necessary elements for diversity jurisdiction under 28 U.S.C. § 1332(a) are met.

As both parties stated in their summations at trial, the core of this dispute is whether the terms of Section 5(b) of the LMX Escrow Agreement have been met. (See Tr. 764, 799.) Specifically, that clause requires that two conditions have been met: (1) "releases or final judgments with respect to all actual and potential claims held by the Key Players relating to the 1994-1995 LMX Business" have been executed or delivered; and (2) there has been "payment from the [LMX Escrow Account] of an amount equal to the amount of the Shareholders' indemnity obligations therefor. . . ." (Ex. 6, § 5(b).)

As a result, this Court finds itself with, despite a lengthy trial and introduction into evidence of a variety of contracts and documents, with a relatively straightforward case of contract interpretation. Accordingly, the additional contracts and agreements discussed by the witnesses at trial will be discussed only where necessary to assist the Court in its evaluation of whether the conditions of section 5(b) of the LMX Escrow Agreement have been met. Plaintiff has the burden of proving its claims by a preponderance of the evidence.

I. Breach of Contract Legal Standards

The elements of a breach of contract claim in New York⁶ are (1) the existence of a contract, (2) plaintiff's performance, (3) breach by the defendant, and (4) damages. AIM International Trading, L.L.C. v. Valcucine S.P.A., 2003 WL 21203503, at *8 (S.D.N.Y. May 22, 2003) (Leisure, J.) (citing cases); Republic Corp. v. Procedyne Corp., 401 F. Supp. 1061, 1068 (S.D.N.Y. 1975) ("The elements of an action for breach of contract are (1) formation of a contract between plaintiff and defendant; (2) performance by plaintiff of any dependent conditions or conditions precedent; (3) defendant's failure to perform; and (4) resulting damage to plaintiff.").

6 The Parties have agreed in the documents governing the Transaction that New York law applies to this case. (Ex. 6, § 12; Ex. 4, § 10.9.)

Under New York law "the initial interpretation of a contract is a matter of law for the court to decide." Alexander Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's, 136 F.3d 82, 86 (2d Cir. 1998). Where there is ambiguity or where the parties' intent is not clear from the writing, courts may consider extrinsic evidence of intent. Commander Oil Corp. v. Advance Food Service Equipment, 991 F.2d 49, 51-52 (2d Cir. 1993); Slatt v. Slatt, 64 N.Y.2d 966, 967 (1985). Ambiguity exists where there is absence of "definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion." Hunt, Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989) (Kearse, J.) (quoting Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355 (1978)).

However, where there is no reasonable basis for differing meanings of contractual language when viewing the contract as a whole, the contract will be considered unambiguous. See Brass v. American Film Tech., Inc., 987 F.2d 142, 149 (2d Cir 1993). "In such cases, courts may not consider extrinsic evidence of the parties' intent." Faulkner v. Nat'l Geographic Soc'y, No. 97 Civ. 9361, 2006 WL 2666308, at *3 (S.D.N.Y. Sept. 18, 2006). Instead, the meaning of the contract should be gleaned based on "the terms expressed in the instrument itself." Id. at *3 (quoting Metro. Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990)). This is especially the case when dealing with "sophisticated, counseled business people negotiating at arm's length." See Vt. Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004); see also Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355 (1978); Alexander Alexander, 136 F.3d at 86 ("If the court finds that the contract is not ambiguous it should assign the plain and ordinary meaning to each term and interpret the contract without the aid of extrinsic evidence.").

Further, "[a] written contract 'will be read as a whole, and every part will be interpreted with reference to the whole; and if possible it will be so interpreted as to give effect to its general purpose.'" Empire Props. Corp. v. Manufacturers Trust Co., 288 N.Y. 242, 248-49 (1942) (quoting 3 Williston on The Law of Contracts, § 618). Chief Judge Lehman went on to write for theEmpire Props. Court that "[t]he meaning of a writing may be distorted where undue force is given to single words or phrases. We read the writing as a whole. We seek to give each clause its intended purpose in the promotion of the primary and dominant purpose of the contract." Empire Props., 288 N.Y. at 248-49.

Courts will not interpret a contract or a provision of a contract so as to leave the contract or provision "'without force and effect.'" Corhill Corp. v. S.D. Plants, Inc., 9 N.Y.2d 595, 599 (1961) (quoting Muzak Corp. v. Hotel Taft Corp., 1 N.Y.2d 42 (1956)). Furthermore, "it is a familiar principle of legal construction that the specific provisions of a contract are to be given preference over the general provisions, and if there is a conflict between the two any reconciliation should give full effect to the more specific." Tishman Lipp, Inc. v. Delta Airlines, 275 F. Supp. 471, 480 (S.D.N.Y. 1967) (Pollack, J.).

II. The LMX Escrow Agreement

The LMX Escrow Agreement is, as the parties concede, a duly executed contract between the parties. In its interpretation of the LMX Escrow agreement, then, and specifically Section 5(b), the first question this Court must answer is whether that agreement was unambiguous, and thus whether the Court will interpret the meaning of the contract based on "the terms expressed in the instrument itself" rather than with the aid of extrinsic evidence as to the parties' intent in drafting the agreement at issue. Faulkner, 2006 WL 2666308, at *3 (quotingMetro. Life Ins. Co., 906 F.2d at 889); see also Alexander Alexander, 136 F.3d at 86 ("If the court finds that the contract is not ambiguous it should assign the plain and ordinary meaning to each term and interpret the contract without the aid of extrinsic evidence."). A court will find unambiguous a contract that has "definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion." Hunt, Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989) (Kearse, J.) (quoting Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355 (1978)).

Here, neither party argues that the LMX Escrow Agreement was ambiguous such that the Court should consider extrinsic evidence in its evaluation of whether its terms have been met. Further, the terms of the LMX Escrow Agreement — and in particular Section 5 — are straightforward. When taken together the three separate sub-sections of Section 5 provide for three separate ways in which the funds in the LMX Escrow will be released, thereby ending the indemnity by the Shareholders for the LMX Business.

The Court has no reason to believe that there is any reasonable basis for differing meanings of the LMX Escrow Agreement as a whole. See Brass, 987 F.2d at 149. Thus, the Court finds that the LMX Escrow Agreement is unambiguous, and turns to identifying the meaning of the contract based on "the terms expressed in the instrument itself," Faulkner, 2006 WL 2666308, at *3 (quotingMetro. Life Ins. Co., 906 F.2d at 889), with the intent of giving "each clause its intended purpose in the promotion of the primary and dominant purpose of the contract." Empire Props., 288 N.Y. at 248-49.

III. Section 5

The bulk of the LMX Agreement "is devoted to the standard boilerplate one sees in escrows, that is, long exculpations of the escrow agent, what they can invest in, mostly items only of passing interest." (Tr. at 108.) Section 5, however, was included in the LMX Escrow Agreement in order to provide some limits on the overall indemnity granted to Hannover by the Shareholders in Section 7.1(C) of the SPA. (See, e.g., Ex. 4 § 7.1(C); Tr. at 99-101 ("[T]he only source for that indemnification, will be the funds of the LMX Escrow, thereby putting a limitation on breadth of 7.1(c)."), 108-09 (Section 5 governs "when the LMX escrow will terminate, . . . [which] "extinguishes any liability that may be imposed by Section 7.1(C)" of the SPA), 444-45 ("There is a $50 million limit" on the indemnity obligations of the Shareholders for the LMX 1994-1995 Business, and thus it is not "absolute or unlimited.").)

A. Section 5(b)(i)

Section 5(b)(i) of the LMX Escrow Agreement, as has been noted previously, requires the "execution and delivery of releases or final judgments with respect to all actual and potential claims held by the Key Players relating to the 1994-1995 LMX Business." (Ex. 6 § 5(b)(i).) There are a total of seven Key Players relating to the 1994-1995 LMX Business for which, in order for this condition to have been satisfied, releases or final judgments as to all actual and potential claims must have been obtained. (See Ex. 6 § 5(a).)

B. The 1994 Key Players: Lincoln, Crown and Manulife

There is no dispute that releases have been obtained as to Lincoln, Crown, and Manulife for the 1994 LMX Program, as those parties entered into the 1994 Eight Party Agreement with Clarendon, and in doing so, executed a complete "release and discharge" to Clarendon and other of the Bottom End Participants in the 1994 LMX Program of "any and all past, present and future claims, demands, causes of action, debts, obligations or liabilities (including IBNR) of any kind or nature, whether known or unknown and whether fixed, contingent or liquidated, that arise out of or relate in any way, directly or indirectly" to the 1994 LMX reinsurance contracts. (Ex. 20 § 12.) This release means that the contracts between the Top End and Bottom End Participants were canceled and "there are complete mutual releases given . . . with respect to all the reinsurance agreements" between the parties to that agreement. (Tr. 154.)

Because the language of the 1994 Eight Party Agreement is clear and unequivocal in its release of the Bottom End Participants for the 1994 LMX Program, the Court agrees that this Agreement does, in fact, constitute a release for purposes of Section 5(b)(i) of the LMX Escrow Agreement. See Golden Pacific, 273 F.3d at 515 (giving effect to a release only where "it contains an 'explicit, unequivocal statement of a present promise to release [a party] from liability'" (quoting Gillaizeau, 766 F.2d at 713)); L K Holding Corp., 596 N.Y.S.2d at 469 (favoring the making of releases, and enforcing them where the release "is clear and unambiguous on its face and knowingly and voluntarily entered into").

C. The 1994 Key Players: Sun Life

However, one of the Key Players for the 1994 LMX Program, Sun Life, did not participate in that 1994 Eight Party Agreement, and thus did not provide a release to Clarendon. (See Ex. 19, 20; Tr. 140-41, 265-66, 747-49.) Plaintiff, presented evidence to the Court in an attempt prove it still has met the requirement of Section 5(b)(i) that releases from all Key Players be obtained despite this missing release. Specifically, plaintiff provided two arguments to the Court in support of its position: (1) at this time a formal release from Sun Life "is not relevant to the application of Section 5(b)(i) because even if it had any potential claims 'relating to the 1994-1995 LMX Business,' the applicable statute of limitations had long expired" (Pl.'s Post-Trial Br. at 28 (quoting Ex. 6 § 5(b)(i))); and (2) that Hannover breached an obligation under the SPA that required it to assist the Shareholders in obtaining this release from Sun Life, and thus "the Court should not permit Hannover to tie up the funds in the LMX Escrow through its bad faith conduct with regard to the Sun Life issue" (Pl.'s Post-Trial Br. at 28).

In evaluating plaintiff's arguments, the Court looks first to the plain language of Section 5(b)(i). See Faulkner, 2006 WL 2666308, at *3; Empire Props., 288 N.Y. at 248-49 (unambiguous contracts should be interpreted so as to give "each clause its intended purpose in the promotion of the primary and dominant purpose of the contract"). This is particularly important here, where the contract language at issue was drafted and agreed upon by "sophisticated, counseled business people negotiating at arm's length." Vt. Teddy Bear Co., 1 N.Y.3d at 475.

As the Court has noted, the overall purpose of the LMX Escrow Agreement was to establish the "ground rules" for the implementation of the indemnity provisions relating to the LMX Program as set forth in Section 7.1(C) of the SPA. Thus, the "primary and dominant purpose of the contract" was to govern the establishment and maintenance of the LMX Escrow Account. The LMX Escrow Agreement also, however, acted to both allow Hannover to feel that it was adequately protected against certain liabilities related to the 1994-1995 LMX Business, while also placing limits on the amount of money and the overall time for which the Shareholders would be responsible for those possible liabilities. In that sense, there was certainly a give and take by both sides.

Thus, Section 5(b) provides only one of the ways in which the Shareholders' liability to Hannover could be extinguished, with the other ways being based on the time passed since the signing of the SPA and the LMX Escrow Agreement. Specifically, Section 5(c) provides a "drop dead provision" (Tr. 110), whereby the funds would be released on the tenth anniversary of the signing of the SPA and the LMX Escrow Agreement.⁷ (Ex. 6 § 5(c).) In addition, Section 5(a) provides a somewhat more restrictive date-based scenario in which the LMX Escrow could be released and the indemnity obligation terminated. While it is the most complicated of the three Release provisions, it generally provides that the escrowed funds could be released as of January 1, 2005 so long as there was no active or pending dispute regarding the LMX Business. (See Ex. 6 § 5(a).) It further provided that, if no such disputes were in existence, the total amount of the indemnity obligations by the Shareholders could be determined based on "the Company's maximum potential liabilities if all reinsurance agreements with the Key Players (as defined) relating to the 1994-1995 LMX Business were rescinded as calculated pursuant to the loss model to be prepared by the financial advisor to the applicable working group. . . ." (Ex. 6 § 5(a).) Given the existence of these deadline-based scenarios for release of the funds remaining in the LMX Escrow Account, the Court reads section 5(b) as providing a conditional and relatively narrow means by which those funds would be released, coming into play only if it becomes clear to the parties that the LMX Business had been completely resolved for an amount that is identified and certain, and that, therefore, the LMX Escrow Account was no longer needed.

7 It is worth noting that Section 5(c) does contemplate keeping the funds in the LMX Escrow Account beyond the tenth anniversary of the original agreement if there is threatened or pending litigation regarding the LMX Business. (Ex. 6 § 5(c).)

It is within this context that the Court looks more closely at plaintiff's claims under Section 5(b)(i). It is worth noting, however, that there is no disagreement between the parties that Section 5(b)(i) does require that, in order for 5(b) to be triggered, a release or final judgment for "any actual or potential claims" related to the 1994-1995 LMX Business be obtained from each Key Player identified in Section 5(a). (Ex. 6 § 5(b)(i).) There is also no dispute that Sun Life has not provided a release for the 1994 LMX Program, even though it is identified as a Key Player for that year. (Ex. 6 § 5(a); Tr. 747-48.)

i. Actual or Potential Claims

Plaintiff first argues that, even without an actual release from Sun Life, Section 5(b)(i) is still triggered. This argument is based largely on plaintiff's view of the phrase "any actual or potential claims." Plaintiff believes that no release is needed because Sun Life has no "potential" claims against Clarendon, as the statute of limitations has run on any possible claim Clarendon might have.

The parties do spend a considerable amount of their post-trial papers summarizing the general law regarding the applicable statute of limitations under English Law, which is applied here.⁸ According to the parties, the potential claims by Sun Life involve tort or rescission claims based on fraud or non-disclosure of the tight spiral in the LMX program. (Pl.'s Post-Trial Br. at 28; Def.'s Post-Trial Br. at 7; Exs. 98, FF.) Under English Law, the applicable statute of limitations would be six years from the time Sun Life discovered the fraud or non-disclosure or when Sun Life "could with reasonable diligence have discovered it." (Ex. 49 (Limitation Act, 1989, c. 58, Pt. I, §§ 2, 5; Pt. II, § 32(1)); Ex. FF ¶ 19.) Thus, some time was spent at trial presenting evidence as to whether Sun Life "could with reasonable diligence" have discovered the existence of the LMX working group (see, e.g., Tr. 114, 143, 163, 184-87; see also Tr. 769-72, 804-07; Ex. 75), whether Sun Life knew about the LMX Business generally (see, e.g., Tr. 141, 163, 184-87, 265-69; see also Tr. 769-72, 804-07; Ex. FF ¶ 25), and whether, then, such knowledge triggered the statute of limitations (see Tr. 769-72, 804-07).

8 The parties agree that English Law governs any action that might be brought by Sun Life as against Clarendon, based on the language of Sun Life's reinsurance treaty with Clarendon. (Ex. 46, Art. 21; Ex. FF ¶ 7.)
It is also worth noting that plaintiff has clearly met the requirements of Rule 44.1 of the Federal Rules of Civil Procedure, under which a party must give notice if it "intends to raise an issue concerning the law for a foreign country." Fed.R.Civ.P. 44.1. Under Rule 44.1, the Court, in determining foreign law, "may consider any relevant material or source." Id. Thus, a court faced with a question of foreign law has quite a bit of flexibility in its approach to analyzing that question; it "is not limited by material presented by the parties; it may engage in its own research and consider any relevant material thus found." Fed.R.Civ.P. 44.1 advisory committee's note; Bartsch v. Metro-Goldwyn-Mayer, Inc., 391 F.2d 150, 155 (2d Cir. 1968) ("[C]ourts may, in their discretion, examine foreign legal sources independently, [however Rule 44.1] does not require them to do so."). In addition, "[a] court may seek the aid of expert witnesses in interpreting the law of a foreign state or of international law." U.S. v. Jurado-Rodriguez, 907 F.Supp. 568, 574 (E.D.N.Y. 1995) (Weinstein, J.).

This difference of opinion as to the actual or reasonable knowledge supposedly held by Sun Life, however, misses the point. Even if the only potential claims Sun Life could bring are barred by a statute of limitations, it is clear that under English law, the statute of limitations in this type of situation, which is found in the Limitation Act 1980, is simply an affirmative defense. (See Exs. 98 ¶ 25; FF ¶ 20.) It is not a condition precedent, and thus may be raised as a defense to a claim, but will not preclude the claim as a matter of law. Gehling v. St. George University School of Medicine, Ltd., 698 F. Supp. 419, 425 (E.D.N.Y. 1988) (citing Williams v. Jones, (1811) 104 Eng. Rep. 441; Harris v. Quine, (1869) 4 L.R.Q.B. 653, 658; Black-Clawson Int'l Ltd. v. Papierwerke Waldhoff-Aschaffenburg A.G., (1975) A.C. 591, 630); Dicey Morris, Conflict of Laws 1103-1104 (9th ed. 1973) (English law generally regards limitation periods as procedural)). The Second Circuit has similarly held in cases in which it applies English Law that failure to bring a contract action within the appropriate limitation period would be a defense under English law. See Siegelman v. Cunard White Star Ltd., 221 F.2d 189, 194 (2d Cir. 1955); Greenwald v. Cunard Steam-Ship Co., 162 F. Supp. 250, 252 (S.D.N.Y. 1958); Mulvihill v. Furness, Withy Co., 136 F. Supp. 201, 206 (S.D.N.Y. 1955) ("failure to commence suit within the limitation period specified by the contract would constitute a defense under English law.") Even plaintiff's expert affidavit concedes that "[s]trictly speaking, the Limitation Act 1980 does not extinguish the plaintiff's cause of action; it merely imposes a time limit on when the action should be brought. However, this procedural bar is effective to prevent a plaintiff obtaining a judgment and remedy." (Ex. 98 ¶ 25.)

Taking the words of this agreement literally, and looking at Section 5(b)(i) both in isolation and within the "overall manifest purpose of the parties' agreement," Barrow v. Lawrence United Corp., N.Y.S.2d 363, 365, 146 A.D.2d 15, 18, 538 (N.Y.App.Div. 3d Dept. 1989), the Court cannot find that the statute of limitations extinguishes the requirement that a release be obtained by each Key Player.

First, plaintiff asks the Court to basically treat the statute of limitations as a release. However, reading the contract language "so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed,"Morse/Diesel, Inc. v. Trinity Industries, Inc., 67 F.3d 435, 439 (2d Cir. 1995) (quoting Cruden v. Bank of New York, 957 F.2d 961, 976 (2d Cir. 1992)), it is clear that the language of the agreement requires a release or final judgment. A release will not be given effect unless it contains an "explicit, unequivocal statement of a present promise to release [a party] from liability." Golden Pacific Bancorp, 273 F.3d at 515 (quoting Gillaizeau, 766 F.2d at 713). Thus, the running of the statute of limitations cannot be considered a release, as it does not involve any promise between Clarendon and Sun Life.

Furthermore, when looking at the "overall manifest purpose" of the LMX Escrow Agreement, and being mindful that "the entire contract must be considered, and all parts of it reconciled, if possible, in order to avoid an inconsistency," Morse/Diesel, Inc., 67 F.3d at 439 (quoting Cruden, 957 F.2d at 976); see also Robshaw v. Health Mgt., 470 N.Y.S.2d 226 (4th Dep't 1983), it is clear that the Agreement was intended to protect Hannover from both the liability it may have in paying reinsurance contracts arising out of the LMX Business, but also from the associated costs and fees that may come with that liability. (Ex. 4 § 7.1(C)(ii).) Thus, even if the statute of limitations were to prove effective at preventing any actual liability as against Clarendon, it would not protect against all claims, which is what the terms of Section 5(b)(i) indicate that that section is meant to ensure.

Plaintiff provides excuses for why Sun Life has not provided a release, such as the fact that "the term 'Key Player' is a misnomer when it is applied to Sun Life because it was a relatively minor player in the 1994 LMX program." (Pl.'s Post-Trial Br. at 35.) It further points to Mr. Jacob's testimony that "Sun Life didn't think it was material enough to participate in the 1994 working group" (Tr. 748) even though Mr. Jacobs later conceded that "I don't believe I have ever met anyone from Sun Life" (Tr. 266). Plaintiff fails to explain, however, why, given Sun Life's minor role, it then agreed to include Sun Life in the list of Key Players in the first place. Plaintiff further fails to explain why it did not later attempt to remove Sun Life from being considered a Key Player. Thus, the Court cannot interpret Section 5(b)(i) to require, as plaintiff would like it to, that a release be obtained from all Key Players except for this one Key Player plaintiff no longer believes is correctly so designated, and who has not behaved in the same way as the other Key Players. Such an interpretation is plainly contrary to the language of the LMX Escrow Agreement.

ii. The Cooperation Clause

Plaintiff provides two other related explanations for why this Court should ignore the fact that no release has been obtained from Sun Life, both of which center around the interpretation of Section 7.3(C) of the SPA. Section 7.3(C) of the SPA generally provides that "[t]he Shareholders shall assume and control defense and settlement of Litigation relating to the 1994-1995 LMX Business brought or threatened against [Clarendon or its affiliates]. . . ." (Ex. 4 § 7.3(C).) Within that framework, it then also provides a Cooperation Clause, which states that

[Hannover] shall, subject to reasonable confidentiality requirements, make available to the Shareholders and their representatives all records and other materials reasonably required by them and in the possession or in the control of [Hannover], for the use of the Shareholders and their representatives in any such Litigation, and shall in other respects give reasonable cooperation in such Litigation.

(Id.) For purposes of the SPA, the term 'Litigation' is broadly defined as "any action, suit, arbitration proceeding, investigation, inquiry, review or claim, whether civil, criminal or administrative." (Ex. 4 § 10.1.)

Plaintiff argued at trial and in its post-trial papers that Hannover has breached this Cooperation Clause by, after being asked by Mr. Jacobs to do so, failing to reach out to Sun Life in an attempt to secure a release regarding the LMX Business. (Pl.'s Post-Trial Br. at 38-39; Def.'s Post-Trial Br. at 9-10; see also Tr. 747.) Thus, plaintiff's first argument is that this breach constitutes a violation of Hannover's duty of good faith and fair dealing, thereby constituting a waiver of the release requirement in Section 5(b)(i) of the LMX Escrow Agreement. Plaintiff also argues that, even if no breach of the Cooperation Clause is found, Hannover has violated the doctrine of prevention because Mr. Redpath's failure to assist the Shareholders in obtaining a release from Sun Life improperly prevented the Shareholders from meeting the condition precedent in Section 5(b) of the LMX Escrow Agreement.

In support of these arguments, Mr. Jacobs testified that he read the Cooperation Clause to require Hannover or Clarendon to secure the release from Sun Life because "[i]t made sense. It is in the routine business for somebody of Clarendon to say give me a release from this ancient treaty. That is ordinary course." (Tr. 749.) Defendant, however, argues that plaintiff's "argument is absurd on its face." (Def.'s Post-Trial Br. at 10.) Specifically, defendant claims that the Cooperation Clause only requires Hannover to "provide information and other 'reasonable cooperation' to aid the Shareholders in their conduct of LMX litigation." (Def.'s Post-Trial Br. at 10 (emphasis in original).)

Because the Cooperation Clause is part of the SPA, the Court first turns to that agreement. The SPA is an unambiguous agreement between these two parties regarding the sale of a reinsurance company by its Shareholders.⁹ Thus, the Court turns to identifying the meaning of this section of the contract based on "the terms expressed in the instrument itself," Faulkner, 2006 WL 2666308, at *3 (quoting Metro. Life Ins. Co., 906 F.2d at 889), with the intent of giving "each clause its intended purpose in the promotion of the primary and dominant purpose of the contract." Empire Props., 288 N.Y. at 248-49.

9 There are certainly parts of the SPA about which that the parties disagree as to meaning, however for purposes of this analysis here, it is unnecessary for the Court to reach those arguments and also unnecessary for the Court to interpret those particular clauses.

The Court simply cannot agree that the scope of this Cooperation Clause is as broad as plaintiff suggests. The Cooperation Clause is included here in a section devoted entirely to indemnification. (Ex. 4.) Section 7.3(C), which is the sub-section that includes the Cooperation Clause, is entitled "Claims Relating to 1994-1995 LMX Business." (Ex. 4 § 7.3(C).) It is clear from the plain language of Section 7.3(C) that its primary and dominant purpose was to establish that "[t]he Shareholders shall assume and control defense and settlement of Litigation relating to the 1994-1995 LMX Business" either brought or threatened against Clarendon, or initiated by Clarendon. (Ex. 4 § 7.3(C).) Furthermore, the Cooperation Clause specifically states the provision of information and materials by Hannover is "for use of the Shareholders and their Representatives in any such Litigation" (Ex. 4 § 7.3(C).) It further states that "other reasonable cooperation" is to be given "in such Litigation." (Ex. 4 § 7.3(C).)

Applying a straightforward reading of the phrase "such Litigation," then, and looking at it within the context of the overall Section 7.3(C), the scope of the Cooperation Clause involves activity the Shareholders had already engaged in related to their attempts to resolve the LMX Business, such as attempts to settle with fellow participants as was the case with the LMX working groups. While the term 'litigation' is broadly defined in the SPA, it still refers only to activity already commenced — "any action, suit, arbitration proceeding, investigation, inquiry, review or claim, whether civil, criminal or administrative" — rather than possible. (See Ex. 4 § 10.1.) Moreover, the cooperation reasonably envisioned by this Cooperation Clause is cooperation by Hannover in providing information and materials along with "other reasonable cooperation" as the Shareholders attempted to resolve various claims and proceedings related to the 1994-1995 LMX Business.

Here, there were no active claims or proceedings involving Sun Life at the time the requests from Mr. Jacobs to Hannover for assistance were made. Indeed, based on the testimony of witnesses for both parties at trial, it is clear that no release from Sun Life had ever even been discussed prior to the onset of the case before this Court now. (See Ex. 6 § 5(a); Tr. 443-44, 468, 698, 747-48.) Instead, Mr. Redpath testified that he believed the request from Mr. Jacobs to "be to assist the plaintiffs in this trial." (Tr. 468.) Furthermore, Mr. Jacobs conceded that Section 5(b) of the LMX Escrow Agreement required a release from all Key Players, that no release had been obtained from Sun Life, and thus the reason he and the Shareholders contemplated attempting to get a release from Sun Life at the time they did was "to eliminate that issue from the case" (Tr. 747), rather than being related to any dealings actually relating to the LMX Business. While Mr. Jacobs also testified that he requested the assistance of Mr. Redpath in initiating contact with Sun Life because Mr. Jacobs did not know anyone at Sun Life, and because he believed that Clarendon did have contacts at Sun Life (Tr. 698-99), this does not provide any evidence of any active "Litigation" within the meaning of that term for purposes of the Cooperation Clause in Section 7.3(C) of the SPA.

Mr. Jacobs further stated that he believed it would have harmed Hannover had he been the one to contact Sun Life: "it is difficult to make a cold call to a large sophisticated insurance company. What am I going to do? Hi, I'm Joe Jacobs. Would you give me a release on an old treaty to a company I don't represent?" (Tr. 748.) Mr. Jacobs believed that for him to contact Sun Life "makes no sense," and that it would be "an invitation for them to demand a bag of money." (Tr. 748-49.) However, given that any award or payment from Clarendon to Sun Life related to the LMX Business would come from the LMX Escrow Account (up to the $50 million limit), this request for "a bag of money" would actually have primarily hurt the Shareholders in terms of their ability to recoup any amount of the LMX Escrow.

Thus, even though plaintiff's key witness at trial admitted that the reason for involving defendant in the attempt to obtain a release was in order to succeed at this trial, plaintiff now claims that defendant's failure to do so is a breach of the Cooperation Clause. The Court simply cannot find that defendant's actions here constituted a breach of the Cooperation Clause, as the Court does not believe that the Cooperation Clause applied to the situation at hand. Therefore, Plaintiff's claim that Hannover's breach of the Cooperation Clause constituted a violation of the duty of good faith and fair dealing need not be addressed, as there was no breach. See Don King Productions, Inc. v. Douglas, 742 F. Supp. 741, 767 (S.D.N.Y. 1990) (Sweet, J.) ("The implied covenant does not, however, operate to create new contractual rights; it simply 'ensures that parties to a contract perform the substantive, bargained-for terms of their agreement' and that parties are not unfairly denied 'express, explicitly bargained-for benefits.'" (quoting Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 716 F. Supp. 1504, 1516 n. 20, 1517 (S.D.N.Y. 1989))); Murphy v. American Home Products Corp., 58 N.Y.2d 293 (1983) ("No obligation can be implied, however, which would be inconsistent with other terms of the contractual relationship.").

Plaintiff further argues, however, that the Court should apply the doctrine of prevention, claiming that Mr. Redpath's failure to assist the Shareholders in obtaining a release from Sun Life improperly prevented the Shareholders from meeting the condition precedent in Section 5(b) of the LMX Escrow Agreement. The doctrine of "prevention" stands for the general proposition that "a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition." Kooleraire Serv. Installation Corp. v. Bd. of Educ. of the City of N.Y., 28 N.Y.2d 101, 106-07 (1971); see also Corbin on Contracts § 947 ("To one who is sued for nonperformance of his promise it is a defense if he can prove that his performance was prevented or substantially hindered by the plaintiff."); Richard A. Lord, Williston on Contracts § 63:26 (4th ed. 2006) ("[T]here is generally in a contract subject to either an express or an implied condition an implied promise not to prevent or hinder performance of the contract."). The New York Court of Appeals has described prevention as follows:

A condition precedent is linked to the implied obligation of a party not to "do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Thus, it is a "well-settled and salutary rule that a party cannot insist upon a condition precedent, when its non-performance has been caused by himself."

A.H.A. Gen. Constr., Inc. v. N.Y. City Housing Auth., 92 N.Y.2d 20, 31 (1998) (Kaye, C.J.) (quoting Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 87 (1933); Young v. Hunter, 6 N.Y. 203, 207 (1852)); accord Spanos v. Skouras Theatres Corp., 364 F.2d 161, 169 (2d Cir. 1966) (en banc) (Friendly, J.) ("'One who unjustly prevents the performance or the happening of a condition of his own promissory duty thereby eliminates it as such a condition. He will not be permitted to take advantage of his own wrong, and to escape from liability for not rendering his promised performance by preventing the happening of the condition on which it was promised.'" (quoting 3A Corbin, Contracts § 767, at 540 (1960))).

To prove violation of the doctrine of prevention, some intent must be proved. The Second Circuit has recently reaffirmed that in cases involving prevention, "[w]here a promisor has no duty to bring about the condition precedent to his promise, only active conduct by the promisor to frustrate the occurrence of the condition precedent constitutes waiver of that condition precedent." In re Bankers Trust Co., 450 F.3d 121, 128 (2d Cir. 2006) (per curiam) (emphasis added). A promisor's "passive acquiescence," alone, will not constitute an actionable prevention or hindrance to the promisee's ability to satisfy its condition precedent. Id.

In evaluating this claim of prevention, then, the Court must first determine if Mr. Redpath's refusal to instigate the discussions with Sun Life may have violated its obligation not to "do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract" or if Mr. Redpath caused the non-performance of the condition precedent. A.H.A. Gen. Constr., Inc., 92 N.Y.2d at 31 (quoting Kirke La Shelle Co., 263 N.Y. at 87).

As the Court has found already, the Cooperation Clause did not obligate Clarendon, Hannover, or Mr. Redpath to initiate communications with Sun Life. Moreover, even though plaintiff claims that it believes it did not make sense for Mr. Jacobs to contact Sun Life directly, nothing Hannover has done actually prevented him from doing so. There is simply no evidence on the record that Hannover engaged in any "active conduct . . . to frustrate the occurrence of the condition precedent" at issue here, In re Bankers Trust Co., 450 F.3d at 128, namely the Shareholders' obligation to obtain a release from all Key Players if it wanted to terminate the LMX Escrow Account pursuant to Section 5(b) of the LMX Escrow Agreement. Indeed, according to the evidence at trial, the Shareholders did not attempt to resolve the issue of their failure to meet Section 5(b)(i)'s condition of requiring a release from Sun Life until after they had already brought this case claiming they had met the requirements of Section 5(b) of the LMX Escrow Agreement, and then realized the failure to obtain a release from Sun Life could be problematic for them in making their case. (See Tr. 265-66, 747-48 ("I think our team saw that this could be a reason that Hannover would advance for not paying.").) Even though plaintiff's counsel at trial informed the Court that it believes the Sun Life "issue is really a red herring designed to tie everything up" (Tr. 806), without some indication of an active role in frustrating the Shareholders' attempts to obtain a release from Sun Life, the Court cannot find that Hannover has violated the doctrine of prevention.

iii. Waiver of the Terms of Section 5(b) (i)

Finally, the Shareholders argue that they need not meet this requirement in Section 5(b)(i) of the LMX Escrow Agreement because they believe "Hannover gave the OK to the 1994 industry settlement without insisting on a Sun Life release." (Tr. 807.) The Court need not determine at this time whether Hannover did, in fact, approve the 1994 industry settlement — an assertion about which the parties vehemently disagree. Regardless of whether Hannover did or did not approve the 1994 industry settlement, it did not specifically waive the requirement that releases be obtained from the Key Players. It is well established that waiver "is an intentional abandonment or relinquishment of a known right or advantage," Champion Spark Plug Co. v. Automobile Sundries Co., 273 F. 74, 79 (2d Cir. 1921), and that it requires a "'clear manifestation of an intent by plaintiff to relinquish her known right,'" Beth Israel Medical Center v. Horizon Blue Cross and Blue Shield of New Jersey, Inc., 448 F.3d 573, 585 (2d Cir. 2006) (quotingCourtney-Clarke v. Rizzoli Intern. Publications, Inc., 251 A.D.2d 13, 676 N.Y.S.2d 529 (1st Dep't 1998). Moreover, "'mere silence' will not support a finding of waiver." Id. Here, there is absolutely no indication that Hannover in any way waived the requirement found in Section 5(b)(i) of the LMX Escrow Agreement that a release must be obtained from each Key Player in order for the LMX Escrow to be terminated. Thus this argument fails.

Plaintiff's failure to obtain "releases or final judgments with respect to all actual and potential claims" from Sun Life means it has not met the requirements of Section 5(b)(i), and plaintiff's claim here fails. Furthermore, because this failure to meet the requirement of Section 5(b)(i) is dispositive as to the overall question before the Court, the Court need not reach plaintiff's claims regarding the appropriate amount for the 1995 indemnity obligation under Section 5(b)(ii), or the various other issues raised by the parties.

Conclusion

As set forth in its findings of fact and conclusions of law above, the Court finds that plaintiff has not met the requirements of Section 5(b) of the LMX Escrow Agreement. The funds remaining in the LMX Escrow Account therefore need not be released at this time.

SO ORDERED.