Trenwick America Reinsurance Corporation v. W.R. Berkley Corporation
The 1925 Connecticut Supreme Court in Rockwell v. New Departure Manufacturing Company held that "when the parties to a written contract stand on an equal footing as to means of knowledge of their contract obligations, money paid by one to the other, in part performance of the contract, in response to a claim made in good faith and based upon a permissible but erroneous construction of the contract, cannot be recovered back as money paid under a mistake of law." The plaintiff, Trenwick America Reinsurance Corporation, entered into reinsurance agreements with the defendant, W.R. Berkley Corporation and its subsidiary insurance companies including an agreement called Special Casualty and Accident Reinsurance Facility or SCARF II. Thereafter, the plaintiff and defendant entered into a commutation and release agreement to "settle, commute and extinguish all [the parties]…obligations and liabilities…arising out of…the [r]einsurance [a]greements…." Nevertheless, the plaintiff continued to make payments pursuant to SCARF II and the defendant continued to make premium payments to the plaintiff for approximately four years. The plaintiff instituted an action seeking a declaration that the commutation agreement commuted SCARF II and sought the return of funds erroneously paid alleging unjust enrichment. Following a bench trial, the court held that the commutation agreement did commute SCARF II but that restitution was barred by the voluntary payment doctrine. The plaintiff's motion for attorneys' fees was denied as no breach of the commutation agreement was found. Both parties appealed. The Appellate Court affirmed the judgment. The defendant's claim was rejected that the trial court improperly determined that there was no mutual mistake regarding the inclusion of SCARF II in the commutation agreement. The trial court's finding regarding the intent or understanding of the parties was not clearly erroneous and the commutation agreement was not ambiguous. On cross appeal, the plaintiff unsuccessfully claimed that the trial court improperly concluded that the plaintiff was not entitled to restitution or attorneys' fees. Based on Rockwell and the 1849 Connecticut Supreme Court case of Northrop v. Graves, restitution premised on unjust enrichment was not appropriate here. For four years, the parties erroneously, but in good faith, believed that the obligations of SCARF II remained in effect notwithstanding the commutation agreement. There was no evidentiary foundation for a finding of unjust enrichment.