The case is pending in a federal district court in New York, and involves three allegedly interconnected contracts purportedly “designed to circumvent [state] insurance laws,” including the laws of New York. The three contracts include: (1) a workers’ compensation insurance contract between a licensed insurer and an insured; (2) a reinsurance contract between the licensed insurer and an affiliated reinsurer; and (3) a “reinsurance and profit sharing” contract between the reinsurer and the insured. The plaintiffs (insured employers) allege that the “reinsurance and profit sharing” contract was an illegal contract of insurance that modified the workers’ compensation insurance contract issued by the licensed insurer. The plaintiffs also claim that the “reinsurance and profit sharing” contract was materially misleading, and misled insureds to assume liability for a portion of the losses they believed they had insured. Additional claims asserted by the plaintiffs include breach of contract, rescission, violation of New York law prohibiting deceptive trade practices, and unjust enrichment. The defendants (various alleged members of the Berkshire Hathaway Group) moved to dismiss the complaint for failure to state a claim.
In a lengthy opinion, the court granted in part and denied in part the motion to dismiss. Regarding claims for rescission based on alleged violations of the New York Insurance Laws governing workers’ compensation insurance, the court granted dismissal, reasoning that enforcement of those laws rests with the Superintendent of Insurance and that no private right of action exists. The court permitted claims for rescissory damages to proceed however, as reimbursement of amounts charged and paid over and above the filed rates of the policies is contemplated by New York law and “promotes the legislative purpose of the NYIL to ensure that parties adhere to filed rates.” The court also held that the claims for breach of contract (based on plaintiffs’ contention that the reinsurance and profit sharing contract modified the workers’ compensation insurance policies) and unjust enrichment, should survive dismissal. As to the claims for deceptive trade practices, the court held that for certain named plaintiffs, the claims were time-barred, but for other plaintiffs, the claims could proceed. , Case No. 15-cv-07063 (USDC S.D.N.Y. Mar. 9, 2017).