The District Court Judge in the Insurance Brokerage Antitrust Litigation MDL action has again dismissed the RICO and Sherman Act claims asserted by the Plaintiffs. Separate opinions were issued with respect to the antitrust claims and the RICO claims. Both types of claims have been dismissed, before, and in both of the recent opinions, the Court stated that it would give the Plaintiffs “one final opportunity” to amend their claims. In re Insurance Brokerage Antitrust Litigation, MDL Docket No. 1663 (USDC D.N.J. April 5, 2007). There are prior posts to this blog with respect to this action, dated September 14, 2006 and October 16, 2006.
Arbitration / Court Decisions
PRIVILEGE DISPUTES CONTINUE IN “RENT-A-CAPTIVE” CASE
Diane Koken, the Pennsylvania Insurance Commissioner, is the Statutory Liquidator for Legion Insurance Company and Villanova Insurance Company. In this case, Koken, as Liquidator, sought to recover more than $4 million in premiums and commissions allegedly due to the insurance companies pursuant to a Limited Agency Agreement between Legion and American Patriot Insurance Agency (“Patriot”). Patriot denied liability, alleging Legion perpetrated a fraud upon Patriot in relation to a “Rent-a-Captive” workers’ compensation program. During depositions of two of Legion’s former executives, Defendants’ counsel attempted to inquire into this fraud issue, but counsel for the Liquidator objected on the basis of attorney-client privilege. Defendants filed a motion to overrule the Liquidator’s claim of privilege pursuant to the crime/fraud exception, which the court denied in May 2006. That decision was affirmed in December 2006.
The defendants recently asked the court to overrule the Liquidator’s claim of privilege as to conversations between Legion’s Executive Vice President, Glenn Partridge, and Legion’s General Counsel, Andrew Walsh. While the court agreed that conversations with Mr. Walsh were not per se privileged, the court stated it was not in a position to determine whether the privilege applied because Mr. Partridge has not been deposed. The court agreed to postpone Mr. Partridge’s deposition pending a ruling on the Liquidator’s motion for summary judgment. Koken v. American Patriot Ins. Agency, Inc., Case No. 05-C-1049 (N.D.Ill. March 23, 2007).
SOCIETY OF LLOYDS’ ACTION FOR RECOGNITION OF FOREIGN COUNTRY JUDGMENT SURVIVES MOTION TO DISMISS
In September 2006, the Society of Lloyds filed an Amended Complaint in a Florida District Court seeking recognition and enforcement of a foreign country judgment under Florida Statutes. The Defendant, Robert Sumerel, moved to dismiss the case as barred by the statute of limitations, asserting that the Amended Complaint is a common law civil action, not a statutory cause of action. The court disagreed, finding that the Amended Complaint did plead a statutory cause of action, and therefore the statute of limitations argument failed. Society of Lloyds v. Robert Sumerel, Case No. 2:06-cv-329-FtM-29DNF (USDC M.D. Fla. April 10, 2007).
Court refuses to find fiduciary duty in reinsurance relationship
Employers Reinsurance Corporation (“ERC”) filed suit in Missouri federal court against its reinsured, Massachusetts Mutual Life Insurance Company (“MassMutual”) alleging that MassMutual breached the parties’ reinsurance agreement. MassMutual filed various counterclaims alleging that ERC breached the contract by failing to reimburse it for covered claims under the contract. ERC sought dismissal of MassMutual’s counterclaims for vexatious refusal under Missouri and Kansas law and breach of fiduciary duty.
In dismissing both vexatious refusal claims, the court did not reach the substantive issue of whether the Missouri and Kansas statutes apply to a reinsurance contract, but rather dismissed on the ground that Connecticut law, and not Missouri or Kansas law, applied to the parties’ reinsurance contract. Applying Connecticut law, the court also dismissed MassMutual’s claim for breach of fiduciary duty, concluding that the “defendant has failed to plead sufficient facts in its counterclaim supporting a fiduciary relationship between plaintiff and defendant.” Specifically, the defendants failed “to allege facts that there was a unique degree of trust and confidence between the parties or that plaintiff had superior knowledge, skill, or expertise.” The court added that “[c]considering that Connecticut courts have deemed that there is no fiduciary relationship between an individual policy holder and a sophisticated insurance company, they are not likely to imply one in a reinsurance relationship between two sophisticated insurance companies.” Employers Reinsurance Corp. v. Massachusetts Mutual Life Ins. Co., Case No. 06-0188-CV-W-FJG (W.D.Mo. April 10, 2007).
PETITION TO APPOINT UMPIRE DENIED PENDING MOTION FOR DISQUALIFICATION OF COUNSEL IN OTHER COURT
Munich Reinsurance Company (“Munich Re”) initiated arbitration against its reinsurer, Ace Property and Casualty (“Ace”), to recover claims under a reinsurance contract. Ace contended that the amount of the claims was excessive. Each party appointed an arbitrator, and the two party-appointed arbitrators agreed on a pool of names from which an umpire would be selected. Ace then demanded that Munich Re’s counsel, Saul Ewing, voluntarily withdraw from the representing Munich Re in the arbitration, because he had previously represented Ace and possessed potentially prejudicial information. Saul Ewing refused and Ace filed an action in Pennsylvania’s Court of Common Pleas to disqualify him.
Munich Re then filed a Petition for the Appointment of an Umpire in United States District Court. Ace argued that such an appointment would be improper at this time in light of the civil action in Pennsylvania seeking to disqualify Munich Re’s counsel. The District Court stated that “[t][he central issue before me is whether the appointment of an umpire by the Court would move the matter forward despite the pending Pennsylvania action.” Finding that the issue of disqualification was properly before the Pennsylvania court, the Court denied Munich Re's Petition, stating that “although it is clearly within my power to grant a stay [pending the disposition of the Pennsylvania action], there is no articulable benefit to do so since the Pennsylvania court will soon decide the conflict issue” before it. Munich Reinsurance America v. Ace Property & Casualty Ins. Co., Case No. M-82 (HB) (S.D.N.Y. April 10, 2007).