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International Insurance Agency Services, LLC v. Revios Reinsurance U.S.

March 27, 2007


The opinion of the court was delivered by: Judge Joan B. Gottschall


Before the court is defendant's motion to compel arbitration and stay this action in its entirety. For the reasons set forth below, defendant's motion is granted.


International Insurance Agency Services, LLC ("IIS"), is in the employee benefits business; it provides various services in support of employee-sponsored insurance programs such as health insurance and life insurance throughout the United States. Compl. ¶ 4. Some of these programs are "fronted," which means that an insurance company issues the policy directly to the employees while simultaneously passing some or all of the risk to a reinsurer. Id. ¶ 5.

One such fronted program is "Lifetime Companion," a group term life insurance product that IIS developed, marketed, administered, and underwrote. Under this program, Companion Life Insurance Group ("CLIC"), an insurance company, offered the Lifetime Companion product to employees and their employers and dependents of those employees. Id. ¶ 7. Revios Reinsurance U.S., Inc. f/k/a Gerling Global Reinsurance Corporation of America ("Revios") reinsured this program and retroceded a portion of the risk to Harbour Life and Reinsurance Company, Ltd. ("Harbour"), an affiliate of IIS. Id. ¶ 7.

IIS acted as the orchestrator of the Lifetime Companion program, bringing the various parties together.*fn1 Pursuant to a Managing General Underwriter agreement (the "MGU agreement"), CLIC granted IIS "exclusive authority to the marketing rights including, but not limited to, the rights to introduce, present, inform, market, sell and solicit to any and all parties and applicants." Blaine Decl. Ex. 1 Art. II, Section 1. Then, acting as CLIC's agent, IIS negotiated an agreement (the "reinsurance agreement") between CLIC and Revios, whereby Revios assumed the risk of this program. Finally, Revios and Harbour entered into a separate agreement (the "retrocession agreement") whereby Revios retroceded a portion of this risk to Harbour, an affiliate of IIS.

IIS alleges that "[i]n connection with the Lifetime Companion program, it earned commissions, profits and/or agency fees from CLIC, Revios and Harbour pursuant to a series of separate agreements by and among these companies." Compl. ¶ 8. There is no evidence of an agreement between IIS and Revios.

IIS claims that Revios "embarked upon a consistent and deliberate effort to interfere with business relationships that are critical to the success of IIS" (such as IIS' relationships with CLIC and Harbour) by: 1) attempting wrongfully to terminate its reinsurance agreement with CLIC and 2) attempting wrongfully to declare its retrocession agreement with Harbour "null and void ab initio." See Compl. ¶¶ 10, 11-12, 17-25.

As to the first charge, IIS claims that Revios provided notice (presumably to CLIC) in an attempt to terminate its reinsurance agreement with CLIC. Id. ¶ 12. This allegedly caused "chaos" among IIS agents, brokers, and clients, and eventually caused IIS to lose sales, business, revenues, profits, and fees. Id. IIS also alleges this behavior ultimately forced CLIC to terminate its agency agreement with IIS. Id. ¶ 12-14.

As to the second charge, IIS claims that Revios attempted to repudiate the retrocession agreement with Harbour due to the supposed failure of Harbour to maintain a line of credit. Id. ¶ 17. IIS alleges that in fact, Harbour maintained a letter of credit since December 1996 and as a result, Harbour was in full compliance with the terms of the retrocession agreement. Id. ¶ 21-22. Thus, Revios had no basis in law or fact to support its repudiation of the retrocession agreement. Id. ¶ 22. Revios further informed Harbour's auditors, Kaufman Rossin & Co., that the Harbour retrocession agreement was void ab initio, allegedly placing Harbour's solvency in question and jeopardizing Harbour's license to conduct business. Id. ¶ 25-26.

The parties dispute the legal nature of IIS' relationship with Harbour but IIS alleges that it suffered harm indirectly, due to the fact that "Harbour participates in a number of IIS programs, and IIS would lose substantial commissions and agency fees if Harbour were to lose its license." Id. ¶ 27. Further, IIS alleges that it has suffered significant damage to its reputation and both current and future relationships and programs. Id.

Based on these allegations, IIS accuses Revios of intentionally disrupting "IIS' valid business relationships and [interfering] with IIS' valid contractual relationships and current and future relationships." Id. ¶ 28. "As a direct and proximate result of wrongful conduct by Revios," IIS alleges it has been damaged in that it lost commissions, lost agency and other administrative fees, lost profits in the past and future based on loss of business, and suffered damage to its reputation. Id. ¶ 30.

Neither CLIC nor Harbour is named in this suit. IIS also does not allege that CLIC or Harbour breached a contract with IIS as a result of Revios' actions.

Revios asserts that this lawsuit must be submitted to arbitration pursuant to the arbitration clauses in both the reinsurance and retrocession contracts. IIS replies that because it is not a signatory to either ...

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