AmTrust North America, Inc. v. KF&B, Inc.

Background

AmTrust North America, Inc., Wesco Insurance Company, Inc., and Technology Insurance Company, Inc. sued KF&B, Inc., doing business as KF&B Program Managers Insurance Services. The plaintiffs alleged that KF&B breached a Managing Producer Agreement by failing to maintain underwriting files as required by Section X.B. of the agreement. The agreement required an underwriting file for each risk written, with specified policy, correspondence, underwriting, pricing, rating, loss, and miscellaneous records.

The agreement separately required KF&B to maintain complete, accurate, and current books and records, including underwriting files, and allowed AmTrust to inspect and audit those records. KF&B did not keep a separate underwriting file for each risk in one physical location. Instead, it used several electronic systems and locations, including the Agent Aid system, email backups, and servers. Some records for taxi accounts were kept in a separate server connected to work performed from a home office in Florida.

AmTrust identified two categories of claimed damages: $45,566,867.96 in losses allegedly resulting from violations of underwriting guidelines involving 25 accounts, and $5,019,149.29 in policy deductibles and deductible collateral allegedly uncollected from policyholders involving 11 accounts.

Parties’ Arguments

KF&B argued that the agreement defined an underwriting file by the records it contained, not by where those records were stored. KF&B also argued that the agreement contemplated electronic records maintained in separate systems or locations. AmTrust argued that the agreement required separate, account-specific files containing the categories of information listed in Section X.B.

The parties also disputed whether AmTrust knew how KF&B maintained its records and effectively accepted that practice by renewing the program without objecting. The court did not resolve that issue.

Court’s Analysis

Under New York law, a breach-of-contract claim requires a contract, the plaintiff’s performance, a breach, and damages caused by the breach. The court held that AmTrust had not offered evidence showing that the alleged failure to maintain separate underwriting files caused the damages it claimed.

Of the 25 accounts connected to AmTrust’s claimed underwriting losses, 17 had been submitted to AmTrust’s underwriters for review and approval before insurance was quoted or bound. The court found no evidence that the alleged file-maintenance failure deprived AmTrust of information it had requested or needed. The uncontested evidence instead showed that KF&B provided AmTrust with the information AmTrust requested and said it needed to make informed decisions.

The court also rejected the plaintiffs’ expert’s assertions that the lack of separate files prevented KF&B from properly performing its underwriting and monitoring duties. The court characterized those assertions as conclusory and explained that any failure of those duties would have to be proven independently; the plaintiffs could not establish damages merely by linking those duties to the way KF&B stored its files.

Because AmTrust failed to show damages with reasonable certainty, the court found it unnecessary to decide whether KF&B’s recordkeeping complied with Section X.B. or whether AmTrust had ratified KF&B’s practices.

Disposition

The court granted KF&B’s motion for summary judgment on the claims concerning maintenance of the underwriting files. The Clerk of Court was directed to close docket entry 115.