Excess Risk Underwriters v. Lafayette Life Ins.

Decision Date03 May 2004
Docket NumberNo. 01-4111-CIV.,01-4111-CIV.
Citation328 F.Supp.2d 1319
PartiesEXCESS RISK UNDERWRITERS, INC. a Florida corporation, Plaintiff, v. LAFAYETTE LIFE INSURANCE COMPANY, an Indiana corporation, Defendant.
CourtU.S. District Court — Southern District of Florida

George Wentz, Esq. & Matthew Kish, Esq., Coral Gables, FL, for Plaintiff.

Richard C. Smith, Esq., & Stephen Darmody, Esq., Miami, FL, for Lafayette Life Ins.

AMENDED SUMMARY JUDGMENT ORDER

GOLD, District Judge.

THIS CAUSE is before the Court upon the following motions for partial summary judgment filed by the parties in this matter: Defendant Lafayette Life Insurance Company's ("LLIC") motion for partial summary judgment upon Counts Ten and Twelve of Third Amended Complaint [DE 225], filed September 19, 2003; LLIC's motion for partial summary judgment on Count Five [DE 223], filed September 18, 2003; Plaintiff Excess Risk Underwriters, Inc.'s ("ERU") motion for partial summary judgment as to Count Four [DE 226], filed September 19, 2003; ERU's motion for partial summary judgment as to Count Seven [DE 227], filed September 19, 2003; and ERU's motion for partial summary judgment as to Count Six [DE 217], filed September 10, 2003. This cause is also before the Court upon ERU's Motion to Strike, for Protective Order, and for Fees and Costs [DE 244], filed October 10, 2003.

The Court held oral argument on these motions on January 16, 2004. Upon a review of the parties' arguments, the record, and the relevant case law, the Court concludes as follows: Defendant LLIC's motion for partial summary judgment as to Count Five is GRANTED; LLIC's motion for partial summary judgment as to Counts Ten and Twelve is GRANTED IN PART AND DENIED IN PART. Plaintiff ERU's motion for partial summary judgment as to Count Four is DENIED; ERU's motion for partial summary judgment as to Count Six is GRANTED; ERU'S motion for partial summary judgment as to Count Seven is DENIED.

FACTS1

This case concerns a dispute between two insurance companies-one company that primarily administers insurance policies and one company that primarily writes insurance policies. Plaintiff Excess Risk Underwriters, Inc. ("ERU") is a Florida corporation licensed and authorized to do business in the State of Florida; ERU is primarily an administrator of insurance. (Third Amnd. Cmpt. ¶ 2). Insurance administrators handle all of the paperwork associated with the issuance of insurance policies and claims made under those policies. (Third Amnd. Cmpt. ¶ 7). Defendant Lafayette Life Insurance Company ("LLIC") is an Indiana corporation that primarily writes and carries insurance policies, meaning that LLIC assesses the risk and covers at least a percentage if not all of the risk on an insurance policy. (Third Amnd. Cmpt. ¶ 3).

The dispute between ERU and LLIC began when American Bankers Life Assurance Company of Florida ("ABLAC"), a life insurance company in the business of issuing insurance policies, determined that it no longer desired to issue a certain type of group life insurance policy. ABLAC contacted ERU to take over administration of certain ABLAC insurance policies, and ABLAC contacted Swiss Re Life Insurance Company ("Swiss Re") to act as reinsurer while ABLAC sought a replacement insurer. Generally speaking, a reinsurer is a party that agrees to cover and pay some percentage of the risk, apportioned between the reinsurer and the insurer. Eventually, LLIC was selected as ABLAC's replacement insurer and certain of ABLAC's policies were transferred to LLIC. The terms under which these policies were transferred and the subsequent administration of these and other policies, in part, constitute the subject of this lawsuit.

The Governing Agreement between ABLAC, ERU, and Swiss Re

ABLAC, ERU, and Swiss Re entered into a contract which became effective on January 1, 1997 and which was entitled the "Governing Agreement" between the parties. (SJ Count 5, Def's 7.5 Stat. ¶ 1). The stated purpose of the Governing Agreement was to document ABLAC's retention of ERU as an administrator for certain of ABLAC's group insurance policies which would be reinsured by Swiss Re, and to authorize ERU to locate a replacement insurer to take over the policies. (SJ Count 5, Def's 7.5 Stat. ¶ 6). ABLAC had the unconditional right to decline renewal or to cancel the insurance policies beginning in 1998. (SJ Count 5, Def's 7.5 Stat. ¶ 6). The Governing Agreement's Addendum Number 1 provides that ERU was authorized to contract with one or more life insurance carriers in order for ERU to continue to write new insurance business for new and existing groups after September 30, 1997. (SJ Count 5, Def"s 7.5 Stat. ¶ 18). It states that "replacement of risks identified herein shall be contingent upon and subject to the provisions of this Agreement...." (SJ Count 5, Plaintiff's 7.5 Stat. ¶ 8). The Governing Agreement also contains a broad form, mandatory arbitration clause. (SJ Count 5, Def's 7.5 Stat. ¶ 20).

The Governing Agreement was signed by Sandy Neubarth for ABLAC, Steve Cullen for ERU, and Paul Whalen for Swiss Re. (SJ Count 5, Def's 7.5 Stat. ¶ 2). LLIC was not a party to and did not sign the Governing Agreement. (SJ Count 5, Def's 7.5 Stat. ¶¶ 4, 5).

ERU contends that LLIC was made aware of the existence of the Governing Agreement and its general contents by Swiss Re prior to LLIC contacting ERU in October 1997 to discuss LLIC becoming the replacement carrier of the ABLAC block. (SJ Count 5, Plaintiff's 7.5 Stat. ¶ 1). Specifically, ERU contends that Robert Dube, head of group insurance for LLIC in November 1997, reviewed the Governing Agreement with Martin Cullen of ERU prior to executing an agreement between ERU and LLIC on November 13, 1997 (the "ERU-LLIC Agreement" or the "ERU-LLIC Agreement of November 1997"). (SJ Count 5, Plaintiff's 7.5 Stat. ¶ 2; Def's 7.5 Stat. ¶ 14). LLIC contends that it was never asked to sign the Governing Agreement, nor was LLIC shown the Governing Agreement prior to November 1997. (SJ Count 5, Def's 7.5 Stat. ¶ 15). According to Dube and LLIC, Dube was told that ERU had an agreement with ABLAC to be able to transfer the ABLAC policies to LLIC, but was not given a copy of the Governing Agreement. (SJ Count 5, Def's 7.5 Stat. ¶ 16). It is undisputed that when LLIC asked to inspect the Governing Agreement sometime in 1999 or 2000, ERU initially refused to provide it, on grounds of confidentiality. (SJ Count 5, Def's 7.5 Stat. ¶ 17). LLIC contends that it was finally given a copy of the Governing Agreement in late 2000, but still never joined, signed, executed or ratified the Governing Agreement. (SJ Count 5, Def's 7.5 Stat. ¶ 17).

In 2000, ERU filed an arbitration claim against ABLAC, which raised a dispute over some of the ABLAC business involved in the Governing Agreement and alleged that ABLAC had breached that Agreement. (SJ Count 5, Def's 7.5 Stat. ¶ 21). In October 2000, ERU explicitly released ABLAC from the terms of the Governing Agreement in a formal Modification Agreement. (SJ Count 5, Def's Reply Exh. D).

The ERU-LLIC Agreement

It is undisputed that ERU was authorized under the Governing Agreement to select the replacement insurer for the ABLAC block of business. ERU sought to transfer that business to LLIC. On November 13, 1997, LLIC entered into an agreement with ERU (the "ERU-LLIC Agreement"). The ERU-LLIC Agreement states: "ERU has been contractually authorized by American Bankers Life Assurance Company (ABLAC) to replace existing group policies as specified in the agreement between ABLAC, Swiss Re, and ERU with a new group insurance carrier." (SJ Count 5, Def's 7.5 Stat. ¶ 22). Under the ERU-LLIC Agreement, ERU was to act as the sole administrator for LLIC for certain blocks of business mutually agreed to by the parties. (SJ Count 4, Plaintiff's 7.5 ¶ 1; SJ Counts 10/12, Def's 7.5 Stat. ¶ 12). LLIC agreed not to transfer the administration of that business to any other entity, including itself, during the terms of the agreement. (SJ Count 4, Def's 7.5 ¶ 1). The business that LLIC transferred to ERU for administration under this agreement included the business that ERU had previously administered for ABLAC, if ERU was able to get that business transferred to LLIC, as well as any new business brought to LLIC by ERU producers. (SJ Count 4, Def's 7.5 ¶ 2). The Agreement also provided that other business or products may be included by mutual consent. (SJ Count 4, Def's 7.5 ¶ 3).

The Reinsurance Treaty Summary

Subsequent to the signing of the ERU-LLIC Agreement, LLIC entered into discussions with Swiss Re in order to develop and structure a reinsurance treaty with Swiss Re for the ABLAC block of business. (SJ Count 7, Plaintiff's 7.5 ¶ 4). After a fairly lengthy period of time, Swiss Re and LLIC had still not completed a final reinsurance treaty for the ABLAC block of business. Instead, the parties executed a Reinsurance Treaty Summary, outlining the basic points for inclusion in the reinsurance treaty they would eventually sign. (SJ Count 7, Plaintiff's 7.5 ¶ 5). The Reinsurance Treaty Summary was signed by Bob Dube of LLIC on November 16, 1997 and by David Nussbaum of Swiss Re on December 1, 1997. (Third Amnd. Cmpt., Exh. Q at 3). Both Mary Ellen Jankunis of Swiss Re and Bob Dube of ERU agree that the Reinsurance Treaty Summary is a binding agreement. (SJ Count 7, Plaintiff's 7.5 ¶¶ 8, 9).

The Treaty Summary is a series of bullet-pointed items. (Third Amnd. Cmpt., Exh. Q). The Treaty Summary states that the "Business Reinsured" under the Treaty is "All Group Life, Group Accidental Death and Dismemberment and Short Term Disability Insurance underwritten and administered by Excess Risk Underwriters (ERU)." (Third Amnd. Cmpt., Exh. Q at 2). The Treaty Summary further states: "Administration: Monthly. To be administered by ERU." (Third Amnd. Cmpt., Exh. Q at 2).

ERU and LLIC dispute what...

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