The opinion of the court was delivered by: Mishler, District Judge.
MEMORANDUM OF DECISION AND ORDER
Defendants Insco Limited, Old Republic Insurance Company,
Nutmeg Insurance Co., Twin City Fire Insurance Co., Hartford
Casualty Insurance Co., Pacific Insurance Co., and Hartford
Fire Insurance Co. (collectively the "Issuing Company
defendants") move to stay this action in favor of arbitration
based on the arbitration clauses in their reinsurance contracts
with plaintiff, Meadows Indemnity Company Limited ("Meadows").
Defendants Baccala & Shoop Insurance Services, G.L. Hodson and
Sons, Inc., Corroon & Black of Illinois, Inc., Corroon & Black
Corporation, and National Excess Insurance Co. (collectively
the "Managing Agent defendants"), move to stay the claims
against them pending the
arbitration between the Issuing Company defendants and Meadows
or, alternatively, to dismiss the complaint pursuant to Fed.R.
Civ.P. 12(b)(1) (lack of subject matter jurisdiction), 12(b)(6)
(failure to state a claim upon which relief can be granted),
and failure to satisfy the pleading requirements of Rule 9(b).
Meadows opposes the motions.
This suit arises out of Meadows' participation with the
Issuing Company defendants in a "reinsurance pool" from 1979 to
1984. Reinsurance is a transaction whereby an insurance company
agrees to indemnify another insurance company against all or
part of the loss which the latter may sustain under policies
which it has issued. Reinsurance provides the means by which
insurance companies spread among other companies the risks they
have underwritten. Through reinsurance in such a "pool," the
ultimate loss liability on a particular policy or loss is
spread among a number of insurance market entities.
The following facts are alleged by Meadows in the complaint.
Meadows is an insurance company organized and existing under
the laws of Guernsey.*fn1 Meadows is a wholly owned subsidiary
of Gould, Inc., which is headquartered in Ohio.
The Managing Agent defendants, as intermediaries, established
and managed a reinsurance pool for the Issuing Company
defendants and other primary insurers (the "Pool"). Meadows
engaged Corroon & Black of Illinois to provide consulting
services in connection with Meadows' entry into the reinsurance
business. The Managing Agent defendants, primarily Corroon &
Black Corporation, provided information and advice to Meadows
inducing Meadows to contract with the Issuing Company
defendants into the Pool and to renew such reinsurance
contracts. The initial information and subsequent renewal
information consistently indicated that the Pool was acquiring
profitable business in accordance with the stated goals, and
that the Pool was well managed by Baccala & Shoop Insurance
Services. Meadows and the Issuing Company defendants executed
thirty-four reinsurance contracts between 1979 and 1984.
Meadows alleges that, unbeknownst to it, the Managing Agent
defendants managed the Pool for the purpose of reaping
risk-free commissions to the detriment of the reinsurers, and
without regard to their fiduciary obligations to manage the
Pool in the best interests of all of the Pool participants,
including Meadows. The Managing Agent defendants allegedly
manipulated the underwriting and administration of the Pool to
the detriment of Meadows, and failed to disclose information
material to Meadows' decision whether or not to renew its
yearly contracts with the other members of the Pool.
Meadows alleges that when the Issuing Company defendants
became primary insurers in the Pool, they manipulated the
underwriting of the Pool for their own ends, without the
knowledge and to the detriment of Meadows and its
co-reinsurers. In addition, the Issuing Company defendants,
working in concert with the Managing Agent defendants,
allegedly developed or became apprised of information material
to Meadows' decision to renew its participation in the Pool,
which they failed to disclose to Meadows, thereby inducing
Meadows' yearly execution of Pool contracts.
Meadows alleges the following causes of action against
(1) violation of and conspiracy to violate the
Racketeer Influenced and Corrupt Organizations
Act, 18 U.S.C. § 1962(a), (c), (d) ("RICO");
(3) fraud in the inducement;
(4) breach of fiduciary duties;
(8) breach of contract as against Corroon & Black
As a condition precedent to any right of action
hereunder, any dispute arising out of this
contract shall be submitted to the decision of a
board of arbitration composed of two arbitrators
and an umpire. . . .
Two of the contracts*fn2 provide:
If any dispute shall arise between the reinsured
and the reinsurer, either before or after the
termination of this contract, with reference to
the interpretation of this contract or the rights
of either party with respect to any transactions
under this contract, the dispute shall be referred
to three arbitrators, one to be chosen by each
party and the third by the two so chosen. . . .
The Issuing Company defendants assert that the court should
stay the claims against them and order arbitration pursuant to
the arbitration clauses in the contracts between them and
Meadows. The Managing Agent defendants contend that the court,
in the exercise of its discretion, should also stay this action
as to them (though they are not parties to the contracts
containing the arbitration clauses) because the claims ...