The D.C. Circuit recently affirmed a judgment in favor of reinsurers in a suit brought by an insured after concluding that the insured could not assert breach of contract and related claims against the reinsurers because the insured had no direct relationship with the reinsurers.
Vantage Commodities Financial Services I LLC hired Equifin Risk Solutions LLC to create a captive insurance entity (Assured Risk Transfer PCC LLC (ART)) to manage risk associated with its business of financing retail energy companies. Equifin found several reinsurers to reinsure ART. One of the companies to which Vantage loaned money (Glacial Energy Holdings) defaulted. Vantage submitted a claim to ART. An arbitrator ruled in Vantage’s favor, but ART could not cover the loss. The reinsurers then informed ART that any claim would be denied because ART had failed to notify them of Vantage’s claims or provide proof of Vantage’s losses within the time limit required in the reinsurance agreements.
Vantage then filed suit against ART, the reinsurers, and companies involved with the formation and management of ART (“Willis Defendants”). Vantage asserted claims for breach of contract and sought a declaratory judgment regarding the reinsurers’ duties and further asserted claims for breach of implied contract, promissory estoppel, and unjust enrichment.
The district court dismissed Vantage’s breach of contract claim and request for declaratory relief against the reinsurers and then granted summary judgment to the reinsurers on the remaining claims.
The D.C. Circuit affirmed. With respect to Vantage’s breach of contract and declaratory judgment claims, the court held that “Vantage failed to plead facts sufficient to show a contractual relationship with the Reinsurers.” The court noted that reinsurers generally do “not have a direct contractual relationship with the original insured unless the terms of the reinsurance agreement create such a relationship,” and the agreements in this case created no such relationship. There were “no allegations that the Reinsurers dealt directly with Vantage or otherwise treated Vantage as if it were directly insured by them.” Turning to Vantage’s remaining claims, the court explained that there was “no record evidence of any consideration to support [Vantage’s] alleged implied contract with the Reinsurers.” The consideration had been between ART and the reinsurers. Vantage’s promissory estoppel and unjust enrichment claims meanwhile suffered “from the absence of any evidentiary support.” The claims “depend[ed] on the existence of an agency relationship between the Reinsurers and either ART or the Willis Defendants,” but “Vantage point[ed] to no evidence of statements or conduct by the Reinsurers that authorized ART or the Willis Defendants to act on their behalf.” The reinsurance binders meanwhile “merely disclose[d] the existence and terms of a reinsurance agreement between ART and the Reinsurers.” Finally, Vantage’s claims against the Willis Defendants for negligence were barred by the “economic loss doctrine” because Vantage sought “to recover purely economic losses” and no exception applied.
Vantage Commodities Financial Services I, LLC v. Assured Risk Transfer PCC, LLC, No. 21-7033 (D.C. Cir. Apr. 22, 2022).