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Policyholder cannot collect $22M claim from reinsurers, brokers

Posted On: Apr. 22, 2022 4:47 PM CST


A policyholder cannot sidestep its insurer by collecting a $22 million claim from 10 reinsurers and insurance brokers, a federal appeals court said Friday, in a ruling involving a Willis Towers Watson PLC captive manager.

The complex case involves a network of insurance and reinsurance agreements between several companies, according to the ruling by the U.S. Court of Appeals for the District of Columbia Circuit in Vantage Commodities Financial Services I, LLC v. Assured Risk Transfer PPCC, LC et al.

New York-based Vantage, which finances retail energy companies, entered into a loan agreement extending credit to Glacial Energy Holdings, according to the ruling.

Seeking to mitigate its risk, Vantage retained New York-based Equifin Risk Solutions LLC to create and manage a special purpose captive backed by reinsurance, Assured Risk. Equifin in turn retained Willis Towers Watson Management (Vermont) Ltd. to assist in ART’s formation, licensing and management.

After forming ART, Equifin’s president began looking for reinsurers, which initially included Hannover Re and Partner
Reinsurance Europe PLC, then eight additional reinsurers.

The two ensuing reinsurance agreements covered about 90% of the $22 million of liability in ART’s credit insurance policy with Vantage, the decision said.

When Global, which had filed for bankruptcy, defaulted on its loan, Vantage submitted a claim to ART seeking more than $19 million in payment. 

An arbitration panel held Vantage was entitled to recover more than $25 million, consisting of $22 million under the credit insurance policy plus interest and costs, but ART had insufficient funds to pay the award.

After the reinsurers notified ART they would deny any reinsurance claims, Vantage filed suit in U.S. District Court for the District of Columbia against ART, Willis Vermont, other Willis entities and the reinsurers, charging breach of contract.

The district court ruled in favor of the reinsurers and Willis, and was affirmed by a three-judge appeals court panel.

“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 the 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,” the ruling said, in affirming the lower court.

Attorneys did not respond to requests for comment.