Royal Indemnity Company v. Kaiser Aluminum and Chemical Corporation

This appeal arises from a suit brought by a New York insurance company (“Royal”) against its insured (Kaiser Aluminum, a Delaware corporation having its principal place of business in California). The District Court’s jurisdiction rested upon diverse citizenship and the requisite amount in controversy. Royal provided “Boiler and Machinery” insurance coverage for Kaiser’s domestic and foreign plants which became effective November 15, 1964, and continued until the policy was cancelled by Royal, effective March 25, 1966.

On September 19, 1965, four Kaiser plants near New Orleans, Louisiana, were struck and damaged by a hurricane called “Betsy”, and Kaiser was paid $3,832,954.00 by Royal for Kaiser’s losses. Royal then instituted suit against Kaiser to recover additional premiums related to the domestic coverage, and Kaiser counterclaimed for a refund of deposit premiums paid to Royal under the insurance contract. Royal subsequently amended its complaint to include claims for reformation or, in the alternative, rescission of the insurance contract on grounds that Kaiser had made false representations to induce Royal to extend coverage at an unduly low rate. After hearing…