AmTrust North America, Inc. v. Signify Insurance Ltd.

Background

AmTrust North America, Inc., acting for Technology Insurance Company, Inc. and Security National Insurance Company, sued Signify Insurance Ltd. for breaching a reinsurance agreement. The agreement concerned workers’ compensation policies issued through an insurance program for Employers HR, LLC. Signify agreed to reinsure part of the policies and to provide required collateral, including Loss Fund collateral and Gap collateral.

Signify did not post any Loss Fund collateral and did not make all required Gap collateral payments. AmTrust sent Signify a November 28, 2016 letter stating that the agreement would be terminated unless Signify posted specified security. Signify later provided some letters of credit. AmTrust withdrew its termination notice but continued to demand additional collateral. Signify did not provide all of the required security.

Signify asserted six counterclaims and related claims against AmTrust’s underwriters. Among other things, Signify argued that the reinsurance agreement had been rescinded, that AmTrust had breached the reinsurance agreement by failing to provide premiums and other amounts, and that AmTrust breached the underlying program agreement by refusing to underwrite new policies for Employers HR.

The court had previously ruled that the reinsurance agreement was valid, that AmTrust’s November 28 letter was a request to cure rather than a termination of the agreement, and that Signify was required to provide both Loss Fund and Gap collateral. The court also had rejected Signify’s arguments that AmTrust had failed to perform its obligations under the reinsurance agreement.

Motions and Legal Standard

AmTrust moved for summary judgment under Federal Rule of Civil Procedure 56 before fact discovery. It sought judgment on its breach-of-contract claim, a declaration that Signify remained required to provide collateral, and dismissal of Signify’s remaining counterclaims. Signify sought permission to file a sur-reply, meaning an additional written response to an argument raised in reply. The court granted that request.

Summary judgment is appropriate when the record shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court must view disputed facts and reasonable inferences in favor of the party opposing the motion, but unsupported assertions and speculation are insufficient.

AmTrust’s Claims and Signify’s Counterclaims

The court granted summary judgment for AmTrust on its breach-of-contract claim. Relying on its earlier ruling, the court found that the reinsurance agreement was valid; that AmTrust performed its duties by handling claims and reporting results to Signify; that Signify breached the agreement by failing to post required collateral; and that the resulting damages totaled $1,678,732, the amount of the collateral shortfall.

The court also granted AmTrust summary judgment on its request for a declaration that Signify was required, and would remain required, to post collateral securing its obligations under the reinsurance agreement. The court held that the agreement’s terms extended Signify’s collateral obligations beyond the agreement’s term until all covered claims were closed or three years had passed after the last claim was reported, whichever was later.

The court treated Signify’s arguments concerning its third, fourth, and fifth counterclaims as waived because Signify did not address AmTrust’s arguments about those claims. The court nevertheless reviewed AmTrust’s arguments and found them meritorious. It rejected the third counterclaim because it depended on Signify’s already-rejected contention that the reinsurance agreement had been rescinded. It rejected the fourth and fifth counterclaims because the agreement continued Signify’s obligations after the agreement’s term.

Signify’s Program-Agreement Claim

Signify’s sixth counterclaim alleged that AmTrust breached the program agreement by refusing, beginning in or around July 2016, to underwrite new Employers HR business that met AmTrust’s guidelines. Signify claimed it lost the profits it would have received from reinsuring those policies.

The court held that Signify had not identified a specific program-agreement provision requiring AmTrust to issue every policy that met the alleged guidelines. The agreement was based on estimated gross written premiums of $9,062,903, while AmTrust issued policies generating $21,286,310 in premiums. The court found that AmTrust therefore met its contractual obligations under the agreement and that Signify’s president’s declaration, without supporting documents or identified underwriting parameters, did not create a genuine factual dispute.

The court further held that Signify independently could not prevail because it materially breached the program agreement by failing to post Loss Fund collateral. The agreement plainly required that collateral. The court rejected Signify’s arguments that AmTrust’s communications waived the requirement or that AmTrust’s conduct prevented it from relying on Signify’s breach. Because Signify’s material breach occurred before the alleged breach by AmTrust, Signify could not pursue its claim based on AmTrust’s later refusal to underwrite new policies.

Disposition

Judge Edgardo Ramos granted AmTrust’s motion for summary judgment and granted Signify’s motion to file a sur-reply. The court granted judgment on AmTrust’s breach-of-contract and declaratory-judgment claims and on Signify’s remaining counterclaims. The clerk was directed to terminate the motions and close the case.