Reinsurers not liable for $26M judgment for failed loan
The decision turned on whether the court had the jurisdiction to hold a group of foreign-based reinsurers liable for a $26 million arbitration award.
Four years after Glacial Energy Holdings went bankrupt, the energy retailer’s collapse continues to reverberate as demonstrated by a judge’s ruling this week letting a group of reinsurers off the hook for more than $26 million an investor is trying to recoup.
Glacial owed Vantage Commodities Financial Services $44 million. When it failed to pay up, Vantage turned to its captive insurer, Assured Risk Transfer PCC, or ART, which denied coverage on the grounds that Vantage failed to properly collateralize the loan.
A group of seven European-based reinsurers that ART contracted with to cover the loan refused coverage, saying ART had not informed them about Vantage’s losses promptly and fully.
Vantage filed an arbitration action against ART and the reinsurers, and in 2016 a three-judge panel awarded it more than $26 million.
Neither ART nor the reinsurers paid the judgment, and a lawsuit Vantage filed last year in U.S. district court in Washington, D.C., accused ART and the reinsurers — Hannover Ruckversicherung AG, Partner Reinsurance Europe PLC, Catlin Re Switzerland, Caisse Centrale de Réassurance and three other London insurance syndicates — of breach of contract. Vantage also sought a declaratory judgment that the reinsurers owed 90% of the judgment and ART owed 10%.
The suit also included negligence claims against three related entities that brokered the insurance agreement with Vantage: Willis Ltd., Willis Re Inc. and Willis Towers Watson Management, or the “Willis defendants.”
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No direct contract equals no jurisdiction
The reinsurers and Willis defendants filed motions to dismiss, and on Aug. 6 U.S. District Judge Trevor McFadden of the District of Columbia tossed the claims against the reinsurers but left alive some of those against the Willis defendants.
McFadden ruled that, while Vantage had a direct contractual relationship with ART, it had no such agreement with the foreign-based reinsurers, and that he had no jurisdiction to enforce the arbitration judgment against them.
“Because Vantage has failed to carry its burden of establishing personal jurisdiction, I will immediately grant the reinsurer defendants’ motions to dismiss,” wrote McFadden.
The Willis defendants were not so fortunate.
Taking the claims in turn, McFadden first said Vantage had not established a breach of contract claim, and that “none of the paragraphs in the complaint that Vantage cites show that the Willis defendants undertook a contractual obligation to Vantage that they would transmit information to the reinsurers at Vantage’s request.”
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Negligence claims survive
But, he wrote, the Willis defendants had not adequately challenged Vantage’s negligence, professional negligence and negligent undertaking claims.
“The only element of these claims that the Willis defendants challenge in their motion to dismiss is the existence of a duty that they owed to Vantage,” McFadden wrote. “But they do not offer any clear standard for determining when a duty exists or satisfy their burden of showing the complaint’s inadequacy.”
Similarly, he wrote, the Willis defendants have not adequately challenged Vantage’s negligent misrepresentation claims.
In sum, wrote McFadden, [b]ecause Vantage failed to establish the court’s personal jurisdiction over the reinsurance companies, their motions to dismiss will be granted. And because Vantage did not state a contract claim but has stated several negligence claims against the Willis defendants, their motion to dismiss will be granted in part and denied in part.”
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Vantage is represented by James Carter and John Gibbons of Blank Rome in Washington, D.C. The Willis defendants are represented by Elizabeth Bower of Willkie Farr & Gallagher in Washington, D.C., and Maxwell Bryer and Christopher St. Jeanos of the firm’s New York office. None of the attorneys responded to requests for comment.
The reinsurers are represented by Alanna Clair and G. Richard Dodge Jr. of Dentons in Washington; Mary Ann D’Amato of Mendes & Mount in New York; William Davis of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo in Washington; and Madeleine Hogue and Brian Netter of Mayer Brown in Washington, D.C.
ART is represented by David Berger, Michael Vogel and Vera Zolotaryova of Allegaert Berger & Vogel in New York.
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