Allstate v. Administratia Asigurarilor De Stat, 86 Civ. 2365 (DNE).

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: Edelstein
• Citation: Allstate v. Administratia Asigurarilor De Stat, 948 F.Supp. 285 (S.D. N.Y. 1996)
• Decision Date: 11 December 1996
• Docket Number: 86 Civ. 2365 (DNE).
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff, v. ADMINISTRATIA ASIGURARILOR DE STAT; Asigurarea Romaneasca S.A.; Astra S.A.; Carom S.A.; Reaseguradora Albatros; Allami Biztosito Banco De Seguros Del Estado; Caisse Nationale De Reassurance; Ceska Statni Pojistovna; Eastern Marine & Fire Insurance Co., Ltd.; Instituto Nacional De Reaseguros; Kuwait Insurance Co., S.A.K.; Compania Mercantil De Mundial De Panama, S.A.; Pan Korea Insurance Co.; Philippine Reinsurance Corp.; Pozavarovalna Skupnost Sava; Societe D'Assurance Syrienne S.A.; P.T. Reasuransi Umum Indonesia; Universal Guarantee Insurance Co. of Auckland; Halvanon Insurance Co., Ltd.; Korean Reinsurance Corp.; Milli Reassurans, T.A.S.; Milli Reassurans, R.C.D.; Societe Centrale De Reassurance; Seguros La Territorial, S.A.; Caja Nacional De Ahorro Y Seguro; International Fire & Marine Insurance Co., Ltd.; Grupo Universal De Reaseguros P.T. Asuransi Antar Malayan Bali; Eastern General Reinsurance Corp.; P.T. Asuransi Kredit Indonesia; Aseguradora Mundial, S.A.; Seguros Progreso, S.A.; Mutuelle Centrale Marocaine D'Assurance; Groupe Kleber, Defendants.

948 F.Supp. 285

ALLSTATE INSURANCE COMPANY, Plaintiff, v. ADMINISTRATIA ASIGURARILOR DE STAT; Asigurarea Romaneasca S.A.; Astra S.A.; Carom S.A.; Reaseguradora Albatros; Allami Biztosito Banco De Seguros Del Estado; Caisse Nationale De Reassurance; Ceska Statni Pojistovna; Eastern Marine & Fire Insurance Co., Ltd.; Instituto Nacional De Reaseguros; Kuwait Insurance Co., S.A.K.; Compania Mercantil De Mundial De Panama, S.A.; Pan Korea Insurance Co.; Philippine Reinsurance Corp.; Pozavarovalna Skupnost Sava; Societe D'Assurance Syrienne S.A.; P.T. Reasuransi Umum Indonesia; Universal Guarantee Insurance Co. of Auckland; Halvanon Insurance Co., Ltd.; Korean Reinsurance Corp.; Milli Reassurans, T.A.S.; Milli Reassurans, R.C.D.; Societe Centrale De Reassurance; Seguros La Territorial, S.A.; Caja Nacional De Ahorro Y Seguro; International Fire & Marine Insurance Co., Ltd.; Grupo Universal De Reaseguros P.T. Asuransi Antar Malayan Bali; Eastern General Reinsurance Corp.; P.T. Asuransi Kredit Indonesia; Aseguradora Mundial, S.A.; Seguros Progreso, S.A.; Mutuelle Centrale Marocaine D'Assurance; Groupe Kleber, Defendants.

86 Civ. 2365 (DNE).

United States District Court, S.D. New York.

December 11, 1996.

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Saiber Schlesinger Satz & Goldstein, Newark, NJ (David J. D'Aloia, of counsel), for Allstate Insurance Company.

Rosenman & Colin, New York City (Harry P. Cohen, of counsel), for Groupe Kleber.

OPINION & ORDER

EDELSTEIN, Senior District Judge:

Currently before this Court is a motion for summary judgment brought by defendant Groupe Kleber ("GK" or "defendant"). For the following reasons, defendant's motion for summary judgment is granted in part and denied in part.

BACKGROUND

This action arises out of a complex series of insurance transactions involving Allstate Insurance Company ("Allstate" or "plaintiff") and thirty-five defendant reinsurance companies. Although Allstate originally named all thirty-five companies as defendants, due to several stipulated dismissals, this litigation presently is left with only thirty defendant reinsurance companies ("defendants").

This Court previously described the facts underlying this litigation in Allstate Ins. Co. v. Administratia Asigurarilor De Stat, 875 F.Supp. 1022, 1023-25 (S.D.N.Y.1995) (the "1995 Opinion"). Nevertheless, because the instant opinion resolves issues raised by just one of this case's numerous defendants, GK, it is necessary to review the facts of this case with a specific focus on GK's alleged role in the relevant insurance transactions.

Allstate is an Illinois corporation "engaged in the business of insurance," headquartered in Northbrook, Illinois. (First Amended Complaint, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Complaint") at 2 (April 26, 1995).) GK "is a Societe Anonyme registered with the Tribunal de Commerce de Paris." (Affidavit of Paul-Alain Plenet de Badts, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Plenet Aff.") ¶ 2 (Dec. 16, 1996).) GK's "principal activity is as a reinsurance underwriting agency," and is located in Paris, France. Id.

Before outlining the facts of this case, it is helpful to define a number of relevant insurance terms. "Reinsurance" is a form of insurance provided by one insurance company, "the reinsurer," to another insurance company, "the reinsured." Reinsurance 661-62 (Robert W. Strain ed. 1980). The objective of reinsurance is to indemnify the reinsured for losses it sustains under insurance policies that the reinsured has issued to the general public. Id. at 6-7. Reinsurance contracts typically fall into two categories. Delta Holdings, Inc. v. National Distillers & Chem. Corp., 945 F.2d 1226, 1229 (2d Cir. 1991). A "facultative contract" is an agreement "under which a reinsurer assumes specific risks instead of an entire class of risks." Id. A "treaty" is an agreement "under which a reinsurer accepts a percentage participation in all risks of a certain type or class underwritten by the primary insurer (or another reinsurer) during a specified period of time." Id. A "proportional reinsurance treaty" is a specific type of reinsurance treaty, pursuant to which a "reinsurer participates in specific risks on a percentage basis." Graydon S. Staring, The Law of Reinsurance § 2:4, at 5 (1993).

A "retrocession is a form of reinsurance provided by one reinsurance company, the "retrocessionaire," to another reinsurance company, the "retrocedent." Reinsurance at 662. The goal of retrocession is to indemnify the retrocedent for losses that the retrocedent sustains under the reinsurance policies that it has issued to insurance companies. Id. at 587-88. Finally, a "pool" is:

Any joint underwriting operation of insurance or reinsurance in which the participants assume a predetermined and fixed interest in all business written. Pools are often independently managed by professionals with expertise in the classes of business undertaken, and the members share equally in the premiums, losses, expenses and profits.

Reinsurance at 659.

In 1976 and 1977, Allstate's former whollyowned subsidiary, Northbrook Excess and Surplus Insurance Company ("NESCO"), "provided umbrella liability and excess liability insurance coverage on a layered basis to a large number of commercial insureds (the "NESCO risks")." (Complaint at 8.) In accordance with its customary practice, NESCO covered a portion of its liability under the policies it had issued by purchasing reinsurance from a number of reinsurance carriers. (Affidavit of Daniel W. Kummer in Support of Plaintiff's Motion to Compel Pre-Filing Security, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Kummer Aff.") ¶ 5 (Oct. 9, 1992).) One of the reinsurance carriers from which NESCO purchased reinsurance was Seguras La Republica ("SLR"), a Mexican insurance and reinsurance company. Id.; (Memorandum of Law on Behalf of Allstate Insurance Company in Opposition to Groupe Kleber's Motion for Summary Judgment, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Pltf.'s Opp. Memo") at 5 (June 17, 1994).)

NESCO obtained this reinsurance through its reinsurance intermediary, Interbroker, S.A. ("Interbroker"), which placed the reinsurance with CJV Associates, Inc. ("CJV"), a reinsurance intermediary located in New York City that had represented itself as acting on behalf of SLR. (Kummer Aff. ¶ 6); (Pltf.'s Opp. Memo at 5-6); (Certification of James Kirkland, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Kirkland Cert.") ¶ 4 (May 12, 1987).) Allstate alleges that CJV "acted as the agent of defendants in the development, underwriting and servicing of reinsurance and retrocession business for defendants." (Complaint at 9.) The reinsurance SLR provided to NESCO through CJV "is evidenced by four `reinsurance treaties' or contracts for reinsurance," (the "NESCO Treaties"). (Pltf.'s Opp. Memo at 6); (Kummer Aff. ¶ 7 & Exh. B.) NESCO and SLR entered into two of these reinsurance contracts in each of the years 1976 (the "1976 NESCO Treaties") and 1977 (the "1977 NESCO Treaties"), thereby creating four reinsurance treaties. (Complaint at 9.)

SLR, in turn, entered into retrocession agreements with defendants, whereby defendants agreed to be SLR's retrocessionaire. Allstate, 875 F.Supp. at 1024. SLR's retrocession arrangement with defendants was facilitated by CJV, because "[u]nbeknownst to Allstate at the time, CJV was part of a group of affiliated and related companies known as the POSA Group." (Pltf.'s Opp. Memo at 6); (Kummer Aff. ¶ 8.) The POSA Group was the managing agent of a reinsurance pool referred to as the "POSA Pool." (Pltf.'s Opp. Memo at 6.) The POSA Pool's "members consisted of a number of small third world insurance and reinsurance carriers" and was "formed for the purpose of combining or `pooling' the financial resources of its members in order to compete for reinsurance business in the international market." (Kirkland Cert. ¶ 3.) Defendants are all alleged to have been members of the POSA Pool. (Complaint at 9.)

The POSA Pool "authorized the POSA Group to obtain and place reinsurance business, including retrocession insurance, on [the POSA Pool's] behalf." (Pltf.'s Opp. Memo at 6); (Kirkland Cert. ¶¶ 5, 7.) Allstate also contends that the POSA Pool members "authorized the POSA Group to service the reinsurance business placed in the POSA Pool, including the handling and reporting of claims, [and] the accounting, receipt, and remission of premiums on the business written." (Pltf.'s Opp. Memo at 6); (Kirkland Cert. ¶¶ 5, 7.) CJV, as part of the POSA Group, "placed NESCO business into the POSA Pool and each of the member reinsurers was assigned a specific percentage participation in the NESCO reinsurance." (Pltf.'s Opp. Memo at 7); (Kummer Aff. ¶ 8.)

Allstate alleges that, between 1976 and 1980, NESCO paid $9,770,000 in premiums to its reinsurance intermediary, Interbroker, for reinsurance coverage. (Complaint at 11); (Pltf.'s Opp. Memo at 7); (Kummer Aff. ¶ 9.) Interbroker, in turn, paid these premiums to CJV at its offices in New York City. (Pltf.'s Opp. Memo at 7); (Kummer Aff. ¶ 9.) Each member of the POSA Pool received a portion of NESCO's premiums according to its respective percentage participation of assumed risk of NESCO's claims. (Pltf.'s Opp. Memo at 7); (Kummer Aff. ¶ 8.)

Allstate also contends that, between 1976 and 1980, NESCO received payment on claims under the NESCO Treaties which were submitted to CJV. (Kummer Aff. ¶ 10.) Because the NESCO Treaties provided excess coverage, claims volume was not heavy during this time period and, therefore, the amount of the claims submitted under the NESCO Treaties was small in comparison to the premiums which NESCO paid. Id. Allstate maintains that NESCO received approximately $575,000 in reinsurance from defendants. Id.; (Complaint at...