Vantage Commodities Fin. Servs. I, LLC v. Assured Risk Transfer PCC, LLC

• Decision Date: 22 April 2022
• Docket Number: 21-7033
• Citation: 31 F.4th 800
• Parties: VANTAGE COMMODITIES FINANCIAL SERVICES I, LLC, Appellant v. ASSURED RISK TRANSFER PCC, LLC, et al., Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

31 F.4th 800

VANTAGE COMMODITIES FINANCIAL SERVICES I, LLC, Appellant

v.ASSURED RISK TRANSFER PCC, LLC, et al., Appellees

No. 21-7033

United States Court of Appeals, District of Columbia Circuit.

Argued January 31, 2022

Decided April 22, 2022

John Gibbons argued the cause for appellant. With him on the briefs was Steven J. Roman.

G. Richard Dodge, Jr. argued the cause for Reinsurer appellees. With him on the brief were Alanna Clair, Mary Ann D'Amato, and William Davis.

Christopher J. St. Jeanos argued the cause for Willis appellees. With him on the brief was Elizabeth J. Bower.

Before: Henderson and Tatel, Circuit Judges, and Ginsburg, Senior Circuit Judge.

Tatel, Circuit Judge:

In this insurance coverage dispute, an insured company seeks to sidestep its insurer by collecting a $22 million claim from ten reinsurers and insurance brokers. The district court concluded that these entities are not liable for the insured company's losses. We agree.

I.

This case involves a complex network of insurance and reinsurance agreements between several companies. Appellant Vantage Commodities Financial Services I, LLC ("Vantage"), a company that finances retail energy companies, entered into a loan agreement extending credit to Glacial Energy Holdings ("Glacial"). Seeking to mitigate the risk of Glacial defaulting on its loan, Vantage retained Equifin Risk Solutions LLC ("Equifin") to create and manage Assured Risk Transfer PCC LLC ("ART"), a special purpose "captive" insurance entity backed by reinsurance. Equifin in turn retained Willis Towers Watson Management (Vermont) Ltd. ("Willis Vermont") to assist in the formation, licensing, and management of ART.

After forming ART, Equifin President Paul Palmer began looking for reinsurers. In December 2012, reinsurers Hannover Ruckversicherung AG ("Hannover Re") and Partner Reinsurance Europe plc ("Partner Re") committed to reinsure ART for a portion of insurance payments made to Vantage under the primary insurance policy, confirming their commitments in signed reinsurance placement slips. Willis Vermont, on behalf of ART, then issued a Credit Insurance Binder ("2012 Binder") which confirmed that Vantage's credit insurance had been bound with ART, noted that ART had secured reinsurance coverage, and outlined the general terms of the insurance and reinsurance agreements. Am. Compl. Ex. 5. Two weeks later, ART issued a formal Credit Insurance Policy, insuring Vantage for up to $22 million for one year against any nonpayment or losses from lending to an energy service company, such as Glacial. Am. Compl. Ex. 1. The policy made no mention of reinsurance.

In the months following the issuance of the Credit Insurance Policy, ART entered into a formal reinsurance contract with Hannover Re and Partner Re whereby each reinsurer agreed to cover a share of ART's limit of liability in insuring Vantage. Am. Compl. Ex. 8. ART also entered into a reinsurance agreement with five additional reinsurers ("Panel Reinsurance Agreement"). Am. Compl. Ex. 7. The two reinsurance agreements (collectively, "Reinsurance Agreements") covered about 90 percent of the $22 million limit of liability in ART's Credit Insurance Policy with Vantage. Both Reinsurance Agreements stated that they were "solely between [ART] and the Reinsurer[s], and nothing contained in th[ese] Agreement[s] shall create any obligations or establish any rights against the Reinsurer[s] in favor of any person or entity not a party hereto." Am. Compl. Ex. 7 at 2, Ex. 8 at 4.

Thereafter, Vantage requested that Palmer send another copy of the 2012 Binder. In response, Palmer sent Vantage an updated version of the binder ("2013 Binder"), which included an updated list of reinsurers and stated that the "revised Binder is being issued for review/illustrative purposes only." Am. Compl. Ex. 6.

When Glacial defaulted on its loan, Vantage submitted a claim to ART seeking over $19 million in payment. Vantage and ART disputed the claim in arbitration, and the arbitration panel held that Vantage was entitled to recover over $25 million, consisting of $22 million under the Credit Insurance Policy plus interest and costs. ART had insufficient funds to pay the arbitration award itself. Before it submitted a claim under the Reinsurance Agreements, however, the seven reinsurers (collectively, "Reinsurers") notified ART that any future claim would be denied because ART had failed to comply with the terms of the Reinsurance Agreements. In particular, ART failed to notify the Reinsurers of Vantage's claims or provide the Reinsurers with proof of Vantage's losses within the time limit provided by the Reinsurance Agreements.

After the Reinsurers notified ART that they would deny any claims for reinsurance, Vantage filed suit in the U.S. District Court for the District of Columbia against ART, Willis Vermont, and the Reinsurers. Am. Compl. ¶¶ 5–6, 9–15. Vantage also named as defendants Willis Limited and Willis Re Inc., reinsurance intermediaries that share the same parent company as Willis Vermont. Id. ¶¶ 7–8 & Ex. 7 at 3. Vantage raised claims against the Willis Defendants for negligence, professional negligence, negligent undertaking, and negligent misrepresentation. Id. ¶¶ 173–81, 186–197. As for the Reinsurers, Vantage alleged claims for breach of contract, breach of implied contract, promissory estoppel, and unjust enrichment. Id. ¶¶ 161–64, 198–214. Vantage also sought a declaration of "the obligations of [the Reinsurers] under the contractual agreements to pay" for Vantage's losses. Id. ¶¶ 165–72.

The district court dismissed Vantage's claims for breach of contract and declaratory judgment. Vantage Commodities Financial Services I, LLC v. Assured Risk Transfer PCC, LLC , 321 F. Supp. 3d 49, 61–63 (D.D.C. 2018) ( Vantage I ). After discovery, the court granted summary judgment for the Reinsurers and the Willis Defendants as to the remaining claims against them. Vantage Commodities Financial Services I, LLC v. Willis Ltd. , 531 F. Supp. 3d 153, 166–79 (D.D.C. 2021) ( Vantage II ). Vantage appealed. We review de novo the district court's rulings on the defendants’ motions to dismiss and motions for summary judgment. Physicians for Social Responsibility v. Wheeler , 956 F.3d 634, 642 (D.C. Cir. 2020) (for dismissal); Arrington v. United States , 473 F.3d 329, 333 (D.C. Cir. 2006) (for summary judgment).

II.

We affirm the district court's dismissal of Vantage's breach of contract and declaratory judgment claims because, as the district court concluded, Vantage failed to plead facts sufficient to show a contractual relationship with the Reinsurers. Vantage alleged that the Reinsurers "created a direct contractual relationship when Willis and ART ..., acting on behalf of [the Reinsurers] as their agents, provided the Credit Insurance Binders to Vantage." Am. Compl. ¶ 65. But the binders’ disclosures of a reinsurance policy and description of that policy did not create a direct contractual relationship between Vantage and the Reinsurers. As the district court explained, a reinsurer generally "does not have a direct contractual relationship with the original insured unless the terms of the reinsurance agreement create such a relationship." Vantage I , 321 F. Supp. 3d at 60 (citing Bruckner-Mitchell v. Sun Indemnity Co. of New York , 82 F.2d 434, 444 (D.C. Cir. 1936) ). The Reinsurance Agreements here created no contractual relationship with Vantage, stating instead that the agreements were "solely between [ART] and the Reinsurer[s]" and that "nothing contained in th[e] Agreement[s] shall create any obligations or establish any rights against the Reinsurer[s] in favor of any person or entity not a party hereto." Am. Compl. Ex. 7 at 2, Ex. 8 at 4.

Vantage cites several cases explaining that, in certain circumstances, the reinsurer may become directly liable to the insured. See, e.g. , World Omni Financial Corp. v. Ace Capital Re, Inc. , No. 02-cv-0476, 2002 WL 31016669, at *1 (S.D.N.Y. Sept. 10, 2002) (Reinsurer and original insured "dealt directly with each other," and reinsurer "consistently treated [original insured] as if it were [the reinsurer's] direct insured."); Executive Risk Indemnity, Inc. v. Charleston Area Medical Center, Inc. , 681 F. Supp. 2d 694, 724 (S.D. W. Va. 2009) ("[Reinsurer] dealt with [insured] directly[.]"). But unlike those cases, Vantage's complaint contains no allegations that the Reinsurers dealt directly with Vantage or otherwise treated Vantage as if it were directly insured by them. Accordingly, Vantage's breach of contract and declaratory judgment claims are not "plausible on [their] face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted).

III.

The district court properly granted summary judgment for the Reinsurers on Vantage's remaining claims against them. Beginning with the implied contract claim, Vantage points to no record evidence of any consideration to support its alleged implied contract with the Reinsurers. See Paul v. Howard University , 754 A.2d 297, 311 (D.C. 2000) (To establish an implied-in-fact contract, a plaintiff must show "all the necessary elements of an express contract—including offer, acceptance, and consideration[.]"). As the district court observed, the record reveals only two exchanges of consideration, neither of which occurred between Vantage and the Reinsurers. First, the Credit Insurance Policy required Vantage to pay premiums to ART in the amount of 12 percent of the policy limit in exchange for the insurance provided by ART to Vantage. Vantage II , 531 F. Supp. 3d at 175–76. Second, the Reinsurance Agreements obligated ART to pay $800,000 in premiums to the Reinsurers as consideration for their reinsurance obligations to ART. Vantage II , 531 F. Supp. 3d at 176. Because Vantage identifies no evidence of any "consideration that the Reinsurers received for allegedly obligating themselves to cover Vantage directly and on top of the risk that [the...