CT Investment Management Co. LLC v. Chartis Specialty Insurance Co.
New York State Supreme Court, New York County
CT Investment Management Co. LLC (CT) brought action in New York State Supreme Court, New York County against Chartis Specialty Insurance Co. (Chartis), claiming that Chartis failed to meet its obligations under a political risk policy for damages suffered by CT.
The lawsuit pertains to a $103 million loan made by LaSalle Bank NA to various Mexican hotel operators. In conjunction with the loan, LaSalle purchased a political risk insurance policy from Chartis. According to the opinion, CT is the successor in interest to this loan. Sometime after the loan was funded, some of the Mexican hotel operators filed for bankruptcy. A Mexican court ultimately ruled that the bankrupt businesses did not have to make payments on the outstanding loan, and granted injunctive relief to the companies which prevented CT from accessing the assets of the bankrupt entities. Chartis ultimately denied coverage under the policy.
CT brought the instant action seeking (1) declaratory relief as to its rights under the policy, (2) breach of contract based upon an expropriatory claim, and (3) breach of contract based upon a currency claim. Chartis moved to dismiss the complaint.
Judge Shirley Werner Kornreich found that CT’s expropriatory claim was based on the theory that the court altered Mexican law by issuing an injunction that went beyond the scope of the court’s jurisdiction. Judge Kornreich dismissed the claim, without prejudice, finding that an adverse ruling did not represent a changing of law, and that under CT’s theory, every judicial decision would be subject to an expropriatory claim on the basis that it alters the law in some way. Judge Kornreich noted that “Political risk insurance is usually understood to cover actions by a foreign legislative body (such as passing a new law) or executive figure (such as nationalizing a private company). Unfavorable judicial decisions are a different sort of risk.” The judge noted that “If the parties had desired to insure against this broad risk the policy would have expressly provided so.”
Judge Kornreich found that CT sufficiently alleged the elements of a currency claim, which was based on the Mexican court’s decision to prevent money transfers, and denied Chartis’ motion to dismiss that claim without prejudice.
Judge Kornreich further ruled that the proceedings should be stayed and directed the parties to investigate the status of court proceedings in Mexico that may have an impact on the New York court dispute.