In my recent article on sources of uncertain meaning in contracts (here) I discuss “contract-reference ambiguity.” That involves fights over the meaning of hereunder, herein, and the like.
So it’s appropriate that thanks to this post by Larry P. Schiffer on the Insurance and Reinsurance Disputes Blog (my thanks to @zhadu for the tip), we have word of another dispute involving hereunder. [Updated 22 Dec. 2021: The blog post is gone; the case is Yosemite Insurance Co. v. Nationwide Mutual Insurance Co., No. 16 CIV. 5290 (PAE), 2016 WL 6684246 (S.D.N.Y. 10 Nov. 2016).] It came before the U.S. District Court for the Southern District of New York. I’ll let you read Larry’s post for an overview; if you’re a glutton for punishment, you can read the opinion here. I’ll limit myself to the minimum. At issue was a reinsurance contract. Here’s the relevant provision:
If the insured’s main operations are not excluded hereunder, exclusions listed in paragraph B above shall not apply, provided such operations or perils are incidental to the insured’s main operations.
The arbitration panel in the dispute held that hereunder referred not to the entire reinsurance contract but instead to the two articles below the provision in question. The insurance company at the wrong end of that decision sued to have the decision vacated; the court declined the insurance company’s petition.
As usual, who had the better argument isn’t of interest to me. Instead, all that’s relevant is that some drafter thought it a good idea to use hereunder. As we’ve seen, using any here– word other than hereby in language of performance (as discussed in this post) is to invite confusion.
In the other fights over hereunder that I’ve written about (here and here), what was in dispute was whether hereunder referred to the entire contract or a smaller part containing the provision in question. By contrast, in this dispute the arbitration panel in effect decided that the –under in hereunder meant not by operation of but instead meant below. As a result, they decided that this hereunder referred not to the part of the contract containing the provision at issue, but another part entirely. Interesting.
Like 93%—my favorite percentage for bogus statistics (see this post)—of all people called on to ponder confusing contract language, the arbitrators in this dispute probably had no discernible credentials in semantic acuity. When it comes to fights over stuff like hereunder, you’re rolling the dice.
4 thoughts on “More “Hereunder” Confusion”
We should be grateful for decisions like this (meaning here, the arbitration panel’s; the court’s hands were largely tied under the Arbitration Act). It brings to mind Mark Twain’s (or somebody’s) dictum that the best way to get rid of a bad law is to enforce it rigorously. Best way to get rid of bad usages is to apply them brainlessly.
As a fan of ‘under’ in place of many wordier formulations like ‘by operation of’ and ‘in accordance with’, I was initially alarmed that ‘under’ was lexically ambiguous in a way that had slipped by me, but the ambiguity seems to arise only in ‘hereunder’, never in ‘under [this] section 1.2’, ‘under this agreement’, ‘under the Master Agreement’, and the like.
Ken, do not read the following:
The belt-and-braces impulse tempts one to a quick anti-definition: ‘In this agreement, “under” never means “below”‘. –Wright
When the definition says below, let no man rend as under.
After two days of groaning, I got back to thinking about the topic of the post, and have the following additional comments:
As usual, there’s a stupid way and a smart way to read contract interpretation cases.
In this case, it would be stupid to use ‘exclusions hereunder’ to mean ‘exclusions under Article II (1) (B)’. The unwise drafter reasons that it has been ‘judicially tested’ to mean that and not to mean ‘all exclusions under the Treaty’.
The wise drafter, not just in this case but generally, notices and remembers how the parties and the court express the different meanings fought for. The formulations might be useful one day.
As for ‘hereby’ in language of performance, such as ‘Widgetco hereby grants Acme a licence’, it differs from other ‘here-‘ words. It’s not a contract reference but a signal that what follows is indeed language of performance and not a statement about Widgetco’s habitual behaviour. –Wright