G-I HOLDINGS V. RELIANCE INSURANCE COMPANY ET AL
(CIVIL ACTION NO 07-2510 OCTOBER 26, 2009)
This action involves the plaintiff asserting that Reliance Insurance Co. (“Reliance”) and Hartford Fire Insurance Co. (“Hartford”) are directly liable due to the respective insurance and reinsurance policies executed by the parties. The plaintiff obtained several director and officers policies from Reliance between 1999 through 2002. Shortly after the policy was issued, Reliance informed the plaintiff that it was encountering financial difficulties. As such, in 2000, Hartford, through a series of agreements, took over Reliance’s claim responsibilities and reinsured some of its liabilities as well.
In order to protect itself, plaintiff entered into a contract with Hartford to provide coverage from 2000 to 2002. The original risk under the policy from 1999 to 2000 remained under the original Reliance Insurance Policy. Four lawsuits were subsequently filed claiming that plaintiff’s CEO made fraudulent conveyances. Given that the alleged fraudulent conveyances occurred in 1999, the original Reliance Policy applied. Nevertheless, the plaintiff asserted that Hartfordthrough its agreements with Reliance which, in part, became Reliance’s reinsurer was responsible for the loss. Specifically, the plaintiff asserts that by reason of the close relationship between Hartford and Reliance, Hartford, as the reinsurer, should be directly liable to the plaintiff. Plaintiff cites Venetsanos v. Zucker, Facher & Zucker 271 N.J. Supp (N.J Super. Ct.App. Div. 1994) which declared that a reinsurer can be directly liable to an insured because of its close relationship with the insurer.
Third Circuit disagreed with the plaintiff’s assessment. First, it stated that the various agreements between Reliance and Hartford did not create direct liability for Hartford. Moreover, the Court declared that for a reinsurer to be directly liable to the insured via a close relationship between its insurer, the plaintiff must establish that: (1) the reinsurer had the entire exposure for “policy liability”; (2) the reinsurer had final decision-making authority over whether to pay; (3) the reinsurer conducted the insurance investigation; (4) the reinsurer was responsible for negotiation and settlement; and (5) the reinsurer acted as the agent for the insured. Unlike Venetsanos, the Third Circuit found no of those elements present between Reliance and Hartford. As such, the Third Circuit affirmed Hartford’s motion for summary judgment.
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Jeffrey Kingsley and Dan Gerber
https://www.goldbergsegalla.com/attorneys/Kingsley.html
https://www.goldbergsegalla.com/attorneys/Gerber.html