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 are related insurance companies that hired KF&B to operate as program manager for the KF&B Limousine and Taxi Program, which involved selling insurance policies to taxi and limousine companies across the United States.

The parties’ relationship was governed by a Managing Producers Agreement effective from 2011 through 2015. The agreement generally authorized KF&B to market, solicit, underwrite, bind, and produce commercial automobile and general-liability policies under attached underwriting guidelines. Those guidelines required limousine accounts outside the guidelines and all taxi accounts to be submitted to AmTrust’s in-house underwriters for review and approval before binding.

The plaintiffs alleged that KF&B violated the agreement and its fiduciary duties in connection with 25 accounts. The opinion addresses 17 accounts that were referred to AmTrust and approved by AmTrust before they were bound. Fifteen of those 17 accounts were taxi accounts.

KF&B’s summary-judgment argument

KF&B moved for summary judgment under Federal Rule of Civil Procedure 56. It argued that it could not be liable for losses on policies issued at AmTrust’s direction or with AmTrust’s consent. KF&B pointed to AmTrust’s own diligence, including its review of the referred accounts, analysis of recommended premiums, and consultations with loss-control and financial personnel.

Court’s analysis

The court agreed that there was no genuine dispute that KF&B had authority to refer accounts that did not meet the underwriting guidelines and that AmTrust had authority to accept them. The court also held that referring those accounts, including the referred accounts, was not itself a breach of contract or fiduciary duty.

The court further found no genuine dispute that KF&B provided AmTrust and its underwriters with all information they requested and believed they needed to decide whether to bind the referred accounts. Those facts were deemed established for the case.

The court nevertheless rejected KF&B’s argument that AmTrust’s approval and diligence eliminated KF&B’s contractual and fiduciary responsibilities. The agreement required KF&B to perform the program’s functions according to the highest standards of the industry and to use its best efforts to perform acts necessary for AmTrust’s business. The plaintiffs argued that KF&B failed to disclose all relevant information and concealed material risk factors.

The court identified a genuine dispute over whether KF&B withheld material information about any of the referred accounts. As an example, the plaintiffs pointed to ASC, which they described as the program’s largest account and which allegedly resulted in $13 million in losses. The plaintiffs claimed KF&B concluded that ASC’s premiums were too low given its risks and loss history but failed to tell AmTrust. The opinion states that KF&B disputed the concealment allegation, so the issue could not be resolved on summary judgment.

The court also rejected KF&B’s ratification argument because AmTrust could not ratify a decision to withhold information that AmTrust did not know had been withheld. KF&B withdrew its reformation argument after the court accepted the proposition that referring an account outside the underwriting guidelines was not itself a breach. The court additionally found that the plaintiffs had presented no evidence that KF&B manipulated territories in connection with the referred accounts.

Disposition

The court denied KF&B’s motion for summary judgment in part. It did not grant judgment on the claims concerning the referred accounts. Instead, it deemed established that:

- KF&B had authority to refer accounts that did not meet the underwriting guidelines, and AmTrust had authority to accept them; - referring those accounts was not a breach of contract or fiduciary duty; - KF&B provided AmTrust and its underwriters with all information they requested and believed they needed to decide whether to bind the referred accounts; and - KF&B did not manipulate territories in connection with the referred accounts.

The Clerk of Court was directed to close the docket entry for KF&B’s motion.