Global Reinsurance Corporation. v. Equitas Ltd. et.al. (New York Appellate Division, First Department, January 11, 2011)
This reinsurance dispute arises from claims that the Equitas defendants where at the center of a conspiracy to violate New York’s Anti-Trust law (General Business Law §340, the Donnelly Act) by eliminating claims service competition as to pre-1993 non-life retrocessional reinsurance coverage (i.e., the reinsurers that provide coverage to the insurers or cedents, that provide coverage to the underlying policyholders). The trial court granted defendants motion to dismiss and the retrocedent appealed.
Specifically, the complaint alleged that the conspiracy originated in 1996 when the Lloyds’ syndicate was faced with financial ruin because of potentially crippling losses stemming from unexpectedly large claims on certain pre-1993 non-life lines of business (i.e., long-tail asbestos and environmental coverage). Plaintiff alleged that cost savings from the elimination of claims service competition with respect to the pre-1993 business were realized over the ensuing years at its expense and that of retrocedents, generally. According to plaintiff, Equitas engaged in claims payment behavior that retrocessionaires subject to competitive constraints could not have engaged in (i.e., denying claims, and, when not denied, were paying less and later), causing plaintiff to suffer millions of dollars in damages as a result.
The Appellate Court held that it was error to dismiss the complaint where it properly alleged defendants’ conduct in the handling of its claims service business and the competitive restraints it was subject to, as well as resulting damages. The court held that plaintiff sustained anti-trust injury because the quality of what it purchased, retrocessional coverage with the attendant claim-handling service, was adversely affected by an agreement eliminating competition over claims-handling.
In addition, the court held that it was improper to dismiss the complaint because the trial court did not discuss if the retrocedent adequately alleged a worldwide market. Also, the Foreign Trade Antitrust Improvements Act, 15 USCS §6a did not deprive New York courts of subject matter jurisdiction over the retrocedent’s antirust claims because the retrocedent did not claim anticompetitive conduct affected competition over “new” retrocession business, and the retrocedent’s allegations of injury in New York sufficiently supported the adverse competition effects.
Based on the foregoing, the trial court’s decision was reversed and the complaint reinstated.
For a copy of the decision click here
Paul Steck and Jeffrey Kingsley