The General Electric Company v. Lines
(Mass. Super. Suffolk County August 3, 2009)
Plaintiff incurred liability for environmental contamination, and plaintiff’s insurer refused to defend and indemnify it for that liability. Plaintiff and its insurer reached a settlement, and the insurer filed a reinsurance claim, which was rejected. After the insurers entered into arbitration on the reinsurance claim, the liability insurer redomesticated to Bermuda. Plaintiff filed an action against the joint liquidators, and the reinsurer’s successor intervened to interpose defenses to plaintiff’s claims on behalf of the liability insurer. One of these defenses was that plaintiff breached its fiduciary duty to the liability insurer as its sole corporate and dominant policyholder and by the liability insurer’s redomestication from Massachusetts to Bermuda.
The court dismissed the reinsurer’s claims, holding that there was no breach of a fiduciary duty because the redomestication did not harm either of the insurers. In fact, they were benefited because the appointment of joint liquidators brought hundreds of millions of dollars into the liability insurer’s estate. Additionally, the liability insurer was complicit in deceiving the Massachusetts Commissioner of Insurance and Bermuda authorities about its solvency in connection with the redomestication, and should not be allowed to pursue a breach of fiduciary duty claim against plaintiff on this issue.
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Toni L. Frain and Richard J. Cohen