Dinallo v. Dunav Ins. Co.
(U.S. Dist. S.D.N.Y. November 19, 2009)
The Superintendant of Insurance of the State of New York, in his capacity as the liquidator of the insolvent Midland Insurance Company, filed suit against a Serbian reinsurance company. The Superintendant alleges that, between November 1978 and October 1980, Midland and the defendant entered into four separate reinsurance treaties pertaining to certain insurance policies written by Midland. Midland incurred various losses from claims on these policies that the Superintendant alleges were covered under its reinsurance treaties with the defendant.
The Superintendant filed the lawsuit in New York Supreme Court, New York County, seeking payment by the defendant of $ 840,801.18 plus interest. The defendant removed this action to federal court based on the existence of diversity jurisdiction, because the Superintendant is a New York citizen and the defendant is a citizen of a foreign state. The Superintendant sought to remand the action back to state court on the ground that the defendant consented in its reinsurance treatises to submit to the jurisdiction of any competent court.
The Service of Suit clause in the reinsurance treatises provided as follows:
ARTICLE XVIII
SERVICE OF SUIT
(Applies only to those Reinsurers who are domiciled outside the United States of America)
In the event of the failure of the Reinsurer hereon to pay any amount claimed to be due hereunder, the Reinsurer hereon, at the request of the Company, will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court.
The federal district court held that the service of suit clause is unambiguous and operates as a waiver of the defendant’s right to remove the lawsuit to federal court. The court reasoned that by removing this case from state court, the defendant is acting inconsistently with its contractual obligation to “comply with all requirements necessary to give [the New York Supreme] Court jurisdiction” and frustrating that court's ability to render a final decision.
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Bryan Richmond and Thomas Segalla