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ALLSTATE INS. CO. v. ADMINISTRATIA ASIGURARILOR DE

December 11, 1996

ALLSTATE INSURANCE COMPANY, Plaintiff, against ADMINISTRATIA ASIGURARILOR DE STAT; ASIGURAREA ROMANEASCA S.A.; ASTRA S.A.; CAROM S.A.; REASEGURADORA ALBATROS; ALLAMI BIZTOSITO BANCO DE SEGUROS DEL ESTADO; CAISSE NATIONALE DE REASSURANCE; CESKA STATNI POJISTOVNA; EASTERN MARINE & FIRE INSURANCE CO., LTD.; INSTITUTO NACIONAL DE REASEGUROS; KUWAIT INSURANCE CO., S.A.K.; COMPANIA MERCANTIL DE MUNDIAL DE PANAMA, S.A.; PAN KOREA INSURANCE CO.; PHILIPPINE REINSURANCE CORP.; POZAVAROVALNA SKUPNOST SAVA; SOCIETE D'ASSURANCE SYRIENNE S.A.; P.T. REASURANSI UMUM INDONESIA; UNIVERSAL GUARANTEE INSURANCE CO. OF AUCKLAND; HALVANON INSURANCE CO., LTD.; KOREAN REINSURANCE CORP.; MILLI REASSURANS, T.A.S.; MILLI REASSURANS, R.C.D.; SOCIETE CENTRALE DE REASSURANCE; SEGUROS LA TERRITORIAL, S.A.; CAJA NACIONAL DE AHORRO Y SEGURO; INTERNATIONAL FIRE & MARINE INSURANCE CO., LTD.; GRUPO UNIVERSAL DE REASEGUROS P.T. ASURANSI ANTAR MALAYAN BALI; EASTERN GENERAL REINSURANCE CORP.; P.T. ASURANSI KREDIT INDONESIA; ASEGURADORA MUNDIAL, S.A.; SEGUROS PROGRESO, S.A.; MUTUELLE CENTRALE MAROCAINE D'ASSURANCE; GROUPE KLEBER, Defendants.


The opinion of the court was delivered by: EDELSTEIN

 EDELSTEIN, District Judge :

 Currently before this Court is a motion for summary judgment brought by defendant Groupe Kleber ("GK" or "defendant"). For the following reasons, defendant's motion for summary judgment is granted in part and denied in part.

 BACKGROUND

 This action arises out of a complex series of insurance transactions involving Allstate Insurance Company ("Allstate" or "plaintiff") and thirty-five defendant reinsurance companies. Although Allstate originally named all thirty-five companies as defendants, due to several stipulated dismissals, this litigation presently is left with only thirty defendant reinsurance companies ("defendants").

 This Court previously described the facts underlying this litigation in Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 875 F. Supp. 1022, 1023-25 (S.D.N.Y. 1995) (the "1995 Opinion"). Nevertheless, because the instant opinion resolves issues raised by just one of this case's numerous defendants, GK, it is necessary to review the facts of this case with a specific focus on GK's alleged role in the relevant insurance transactions.

 Allstate is an Illinois corporation "engaged in the business of insurance," headquartered in Northbrook, Illinois. (First Amended Complaint, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Complaint") at 2 (April 26, 1995).) GK "is a Societe Anonyme registered with the Tribunal de Commerce de Paris." (Affidavit of Paul-Alain Plenet de Badts, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Plenet Aff.") P 2 (Dec. 16, 1996).) GK's "principal activity is as a reinsurance underwriting agency," and is located in Paris, France. Id.

 Before outlining the facts of this case, it is helpful to define a number of relevant insurance terms. "Reinsurance" is a form of insurance provided by one insurance company, "the reinsurer," to another insurance company, "the reinsured." Reinsurance 661-62 (Robert W. Strain ed. 1980). The objective of reinsurance is to indemnify the reinsured for losses it sustains under insurance policies that the reinsured has issued to the general public. Id. at 6-7. Reinsurance contracts typically fall into two categories. Delta Holdings, Inc. v. National Distillers & Chem. Corp., 945 F.2d 1226, 1229 (2d Cir. 1991). A "facultative contract" is an agreement "under which a reinsurer assumes specific risks instead of an entire class of risks." Id. A "treaty" is an agreement "under which a reinsurer accepts a percentage participation in all risks of a certain type or class underwritten by the primary insurer (or another reinsurer) during a specified period of time." Id. A "proportional reinsurance treaty" is a specific type of reinsurance treaty, pursuant to which a "reinsurer participates in specific risks on a percentage basis." Graydon S. Staring, The Law of Reinsurance § 2:4, at 5 (1993).

 A "retrocession is a form of reinsurance provided by one reinsurance company, the "retrocessionaire," to another reinsurance company, the "retrocedent." Reinsurance at 662. The goal of retrocession is to indemnify the retrocedent for losses that the retrocedent sustains under the reinsurance policies that it has issued to insurance companies. Id. at 587-88. Finally, a "pool" is:

 
Any joint underwriting operation of insurance or reinsurance in which the participants assume a predetermined and fixed interest in all business written. Pools are often independently managed by professionals with expertise in the classes of business undertaken, and the members share equally in the premiums, losses, expenses and profits.

 Reinsurance at 659.

 In 1976 and 1977, Allstate's former wholly-owned subsidiary, Northbrook Excess and Surplus Insurance Company ("NESCO"), "provided umbrella liability and excess liability insurance coverage on a layered basis to a large number of commercial insureds (the "NESCO risks")." (Complaint at 8.) In accordance with its customary practice, NESCO covered a portion of its liability under the policies it had issued by purchasing reinsurance from a number of reinsurance carriers. (Affidavit of Daniel W. Kummer in Support of Plaintiff's Motion to Compel Pre-Filing Security, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Kummer Aff.") P 5 (Oct. 9, 1992).) One of the reinsurance carriers from which NESCO purchased reinsurance was Seguras La Republica ("SLR"), a Mexican insurance and reinsurance company. Id. ; (Memorandum of Law on Behalf of Allstate Insurance Company in Opposition to Groupe Kleber's Motion for Summary Judgment, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Pltf.'s Opp. Memo") at 5 (June 17, 1994).)

 NESCO obtained this reinsurance through its reinsurance intermediary, Interbroker, S.A. ("Interbroker"), which placed the reinsurance with CJV Associates, Inc. ("CJV"), a reinsurance intermediary located in New York City that had represented itself as acting on behalf of SLR. (Kummer Aff. P 6); (Pltf.'s Opp. Memo at 5-6); (Certification of James Kirkland, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Kirkland Cert.") P 4 (May 12, 1987).) Allstate alleges that CJV "acted as the agent of defendants in the development, underwriting and servicing of reinsurance and retrocession business for defendants." (Complaint at 9.) The reinsurance SLR provided to NESCO through CJV "is evidenced by four 'reinsurance treaties' or contracts for reinsurance," (the "NESCO Treaties"). (Pltf.'s Opp. Memo at 6); (Kummer Aff. P 7 & Exh. B.) NESCO and SLR entered into two of these reinsurance contracts in each of the years 1976 (the "1976 NESCO Treaties") and 1977 (the "1977 NESCO Treaties"), thereby creating four reinsurance treaties. (Complaint at 9.)

 The POSA Pool "authorized the POSA Group to obtain and place reinsurance business, including retrocession insurance, on [the POSA Pool's] behalf." (Pltf.'s Opp. Memo at 6); (Kirkland Cert. PP 5, 7.) Allstate also contends that the POSA Pool members "authorized the POSA Group to service the reinsurance business placed in the POSA Pool, including the handling and reporting of claims, [and] the accounting, receipt, and remission of premiums on the business written." (Pltf.'s Opp. Memo at 6); (Kirkland Cert. PP 5, 7.) CJV, as part of the POSA Group, "placed NESCO business into the POSA Pool and each of the member reinsurers was assigned a specific percentage participation in the NESCO reinsurance." (Pltf.'s Opp. Memo at 7); (Kummer Aff. P 8.)

 Allstate alleges that, between 1976 and 1980, NESCO paid $ 9,770,000 in premiums to its reinsurance intermediary, Interbroker, for reinsurance coverage. (Complaint at 11); (Pltf.'s Opp. Memo at 7); (Kummer Aff. P 9.) Interbroker, in turn, paid these premiums to CJV at its offices in New York City. (Pltf.'s Opp. Memo at 7); (Kummer Aff. P 9.) Each member of the POSA Pool received a portion of NESCO's premiums according to its respective percentage participation of assumed risk of NESCO's claims. (Pltf.'s Opp. Memo at 7); (Kummer Aff. P 8.)

 Allstate also contends that, between 1976 and 1980, NESCO received payment on claims under the NESCO Treaties which were submitted to CJV. (Kummer Aff. P 10.) Because the NESCO Treaties provided excess coverage, claims volume was not heavy during this time period and, therefore, the amount of the claims submitted under the NESCO Treaties was small in comparison to the premiums which NESCO paid. Id. Allstate maintains that NESCO received approximately $ 575,000 in reinsurance from defendants. Id. ; (Complaint at 11.) Allstate also alleges that, even though it already paid SLR $ 9,770,000 in reinsurance premiums, "as of December 31, 1985, Allstate projected with reasonable certainty that it would pay the additional sum of $ 8,539,828 on the NESCO risks covered by the [NESCO Treaties] for which it had received no payment or security from defendants." (Kummer Aff. P 10); (Complaint at 11.)

 In 1980, however, as the volume of NESCO's reinsurance claims increased, "payment on the reinsurance claims that NESCO submitted to CJV abruptly stopped." (Pltf.'s Opp. Memo at 7); (Kummer Aff. P 11.) At approximately this time, "CJV's operations were shut down and the POSA Group disbanded soon after a federal grand jury sitting in the Southern District of New York initiated a criminal investigation into the activities of the POSA Group." (Pltf.'s Opp. Memo at 7); (Kummer Aff. P 11); (Kirkland Cert. P 8.) As a result, NESCO contacted SLR directly in an effort to obtain payments on unpaid reinsurance claims which the POSA Group had placed into the POSA Pool. (Pltf.'s Opp. Memo at 7); (Kirkland Cert. P 8.) SLR then informed NESCO that NESCO's reinsurance had been placed by CJV, as part of the POSA Group, into the POSA Pool, and that each POSA Pool member participating in the NESCO business was responsible for the percentage of claims coming due under the NESCO Treaties according to its respective percentage participation in NESCO's reinsurance coverage. (Pltf.'s Opp. Memo at 7-8); (Kummer Aff. PP 12-14); (Kirkland Cert. P 8.) SLR also informed NESCO that SLR "did not have the financial resources to pay the full amount of the claims coming due under the NESCO Treaties." (Kirkland Aff. P 8); (Kummer Aff. P 15.) The alleged POSA Pool members are the defendants in the instant litigation. (Complaint at 9.)

 In 1985, NESCO merged into Allstate, thereby rendering Allstate the successor-in-interest to NESCO. (Complaint at 2); Allstate, 875 F. Supp. at 1024. Also in 1985, Allstate entered into an agreement with SLR under which SLR both agreed to pay to Allstate only SLR's own percentage participation in the NESCO reinsurance claims, and assigned to Allstate all of SLR's rights against other POSA Pool members concerning the NESCO reinsurance (the "1985 Assignment"). (Pltf.'s Opp. Memo at 8); (Kummer Aff. P 15); (Kirkland Cert. P 10.)

 Over a decade ago, Allstate commenced the instant litigation against all of the alleged members of the POSA Pool who participated in NESCO's reinsurance business, including GK. (Pltf.'s Opp. Memo at 8.) Allstate seeks to "recoup its payments and to obtain a judgment declaring the members of the POSA Pool liable for future claims arising under the [NESCO] Treaties." Id. Allstate alleges three causes of action. First, Allstate contends that, as SLR's assignee, Allstate is entitled to sue defendants based on the retrocession agreements between SLR and defendants. (Complaint at 12.) Second, Allstate maintains that defendants and NESCO had an implied contract and that Allstate, as NESCO's successor-in-interest, is entitled to recover on that implied contract. Id. at 13. Third, Allstate brings a claim for unjust enrichment. Id. at 16.

 The parties' respective versions of the facts surrounding GK's alleged reinsurance of SLR create three issues relevant to this Court's resolution of the instant summary judgment motion. First, Allstate contends that GK was a member of the POSA Pool. See, e.g., (Kirkland Cert. PP 6-8). GK, however, maintains that it has never been a part of the POSA Pool. See, e.g., (Certification of Stephane Benhamou, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, et al., 86 Civ. 2365 ("Benhamou Cert.") P 8 (Oct. 11, 1993).) Second, GK submits a retrocession agreement (the "Retrocession Agreement"), by which SLR cedes a "up to a 70% quota share" of its reinsurance business to an unspecified retrocessionaire. (Benhamou Cert. at Exh. B.) Allstate asserts that GK was the retrocessionaire under this agreement, (Pltf.'s Opp. Memo at 17-19), while GK claims that it was not. (GK Memo at 5-6.) Instead, GK contends that it was acting as an agent for its principals, Nissan Fire & Marine Insurance Co., Ltd. ("Nissan") and Compagnie Centrale de Reassurance ("CCR"), as "members of the Groupe Kleber Pool, a reinsurance pool managed by Groupe Kleber." (GK Memo at 5-6.) GK thus argues that Nissan and CCR, rather than GK, are the true retrocessionaires under the Retrocession Agreement. Id. Third, Allstate claims that, in addition to the Retrocession Agreement, there is another retrocession agreement between SLR and GK. Allstate, however, presents no evidence of this other retrocession agreement.

 DISCUSSION

 Pursuant to Federal Rule of Civil Procedure ("Rule") 56, Groupe Kleber moves "for an Order granting summary judgment dismissing in its entirety the Complaint of Plaintiff Allstate . . . insofar as it respects Groupe Kleber, and awarding such other relief as the Court deems just and proper." (GK Memo at 1 (footnote omitted).) Allstate opposes the substance of GK's motion for summary judgment, and, in addition, argues that GK's motion is premature. Because Allstate's argument that summary judgment is untimely imperils this Court's ability to resolve GK's summary judgment motion, this Court will address the timeliness issue first.

 I. The Timeliness of GK's Motion For Summary Judgment

 Allstate also argues that, "following this Court's decision on those [jurisdictional] motions[,] Allstate moved to compel the defendant reinsurers which had prematurely filed answers to post the required security" (the "pre-filing security motion") under New York Insurance Law, Section 1213 ("Section 1213"), because each answering defendant was an unauthorized foreign reinsurer. Id. Allstate asserts that, to "avoid incurring the substantial expense of taking discovery in foreign countries from numerous reinsurers," Allstate elected to await decision on its pre-filing security motion before conducting discovery. Id. at 16. This Court denied Allstate's pre-filing security motion on January 19, 1995. See Allstate, 875 F. Supp. at 1030.

 GK counters Allstate's arguments that GK's motion for summary judgment is premature on several grounds. First, GK asserts that the November 1986 Order expressly precluded all discovery except that relating to issues of jurisdiction and forum non conveniens. (Reply Memorandum of Law In Further Support of Groupe Kleber's Motion For Summary Judgment Dismissing The Complaint, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("GK Reply Memo") at 6 n.7 (July 22, 1994).) GK then maintains that "Allstate concedes that 'the purpose of this Order was to stay merits discovery until the Court had ruled on the various motions to dismiss.'" Id. (quoting Affidavit of James H. Forte in Opposition to Groupe Kleber's Motion for Summary Judgment, Allstate Ins. Co. v. Administratia Asigurarilor de Stat, 86 Civ. 2365 ("Forte Aff.") P 2 (June 17, 1994).) Accordingly, GK argues, "as a practical matter, the [November 1986 Order] could have been lifted as a matter of course and, therefore, was not an impediment to merits discovery after this Court ruled on the motions to dismiss." Id.

 Second, GK argues that, although Allstate's Section 1213 motion (which this Court has since denied) may bar GK from filing a pleading, it does not preclude GK from filing a motion for summary judgment. (GK Reply Memo at 2-4.) GK distinguishes between pleadings and motions, and argues that because Section 1213 precludes unauthorized insurers and reinsurers only from filing "pleadings," GK is "entitled to make a motion asserting a substantive defense prior to [the] posting of security" under Section 1213. Id. (emphasis added).

 Third, GK maintains that, pursuant to Rule 56(f), "Allstate is not entitled to discovery at this time as a matter of law." Id. at 4-5. In support of this assertion, GK contends that Allstate has not complied with the Second Circuit's decision in Burlington Coat Factory Warehouse v. Esprit de Corp., 769 F.2d 919, 925 (2d Cir. 1985), which sets forth the burden of production on a party seeking to forestall summary judgment, pursuant to Rule 56(f), due to incomplete discovery. Id. at 5-8.

 Rule 56(f) applies where a non-moving party seeks to delay a court's consideration of a motion for summary judgment due to the non-moving party's inability to produce facts sufficient to meet is burden of production in response to the motion for summary judgment. Rule 56(f) provides:

 
Should it appear from the affidavits of a party opposing the [summary judgment] motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

 Commentators note, however, that "the rule will not be liberally applied to aid parties who have been lazy or dilatory." Id. § 2740, at 535. As the Second Circuit explained in Burlington,

 
claims of a need for more discovery from a party who has diligently used the time available . . . should be given more favorable consideration than claims by one who has allowed months to pass unused. Moreover, when alerted to a forthcoming motion for summary judgment, a party wanting more time for discovery should seek, through negotiation with the other party, and if necessary, through application to the district court, an appropriate discovery schedule. A party who both fails to use the time available and takes no steps to seek more time until after a summary judgment motion has been filed need not be allowed more time for discovery absent a strong showing of need.

 769 F.2d at 927-28 (emphasis added).

 Moreover, while "Rule 56(f) discovery is specifically designed to enable a plaintiff to fill material evidentiary gaps in its case . . . it does not permit a plaintiff to engage in a 'fishing expedition.'" Capital Imaging Assoc. v. Mohawk Valley Medical Assoc., Inc., 725 F. Supp. 669, 680 (N.D.N.Y. 1989) (citing Waldron v. Cities Serv. Co., 361 F.2d 671, 673 (2d Cir. 1966)) (citations omitted), aff'd, 996 F.2d 537 (2d Cir.), cert. denied, 385 U.S. 1024, 17 L. Ed. 2d 672, 87 S. Ct. 743 (1993). "Rule 56(f) is not a shield against all summary judgment motions." Sundsvallsbanken 624 F. Supp. at 815. Rather, "litigants seeking relief under the rule must show that the material sought is germane . . . and that it is neither cumulative nor speculative." Id. (citation omitted). A party opposing summary judgment who chooses to utilize Rule 56(f) "directly and forthrightly invokes the trial court's discretion." 6 James W. Moore, Moore's Federal Practice P 56.24, at 56-797 (2d ed. 1995). Accordingly, a district court's denial of a request for more time under Rule 56(f) "is subject to reversal only if it abused its discretion." Burlington, 769 F.2d at 925; see also Contemporary Mission v. United States Postal Serv., 648 F.2d 97, 105 (2d Cir. 1981).

 The Second Circuit has articulated a four-part analysis to determine whether a party's request under Rule 56(f) is appropriate. Rule 56(f) requires the opponent of a motion for summary judgment who claims to be unable to produce evidence in opposition to the motion to file an affidavit explaining:

 
1) the nature of the uncompleted discovery, i.e. what facts are sought and how they are to be obtained; and
 
2) how those facts are reasonably expected to create a genuine issue of material fact; and
 
3) what efforts the affiant has made to obtain those facts; and
 
4) why those efforts were unsuccessful.

 Burlington, 769 F.2d at 926 (citations omitted) (emphasis added).

 This Court is persuaded by all three of GK's arguments in favor of immediately considering its motion for summary judgment. First, this Court finds that this Court's November 1986 Order staying discovery did not preclude Allstate from undertaking discovery on the merits of this litigation. That Order expressly provides that "the parties shall not engage in any discovery except with respect to issues of jurisdiction and forum non conveniens unless specifically allowed by the Court upon application." (November 1986 Order at 2 (emphasis added).) Plainly, this Order did not preclude discovery. It merely directed that discovery proceed only with this Court's permission. As a result, Allstate cannot plausibly argue that the November 1986 Order barred Allstate from undertaking merits discovery regarding GK, or any other defendant.

 Second, this Court finds that Section 1213 does not preclude GK's summary judgment motion. To reiterate, GK argues that, even if Section 1213 precludes it from filing a pleading before posting security, GK is entitled to make a motion for summary judgment without posting security. According to its terms, Section 1213 precludes an unauthorized insurer or reinsurer from filing a pleading without first posting adequate security. N.Y. Ins. L. § 1213(c)(1)(A) (McKinney 1985). Section 1213 directs an unauthorized insurer or reinsurer who is a defendant in a civil action to post a bond or security equivalent to the amount for which judgment is sought prior to "filing any pleading in any proceeding against it." Id. As Allstate correctly points out, (Pltf.'s Opp. Memo at 11), the purpose of this statute is to assure that a New York resident or non-resident authorized to do business in New York is able to recover any judgment it obtains against an unauthorized insurer or reinsurer. See N.Y. Ins. L. 1213(c)(1)(A) (McKinney 1985); Dean Constr. Co. v. Agricultural Ins. Co., 42 Misc. 2d 834, 835-36, 249 N.Y.S.2d 247 (N.Y. Sup. Ct. 1964), aff'd, 22 A.D.2d 82, 254 N.Y.S.2d 196 (N.Y. App. Div. 1964) (discussing N.Y. Ins. L. § 59-a, the statutory predecessor to Section 1213).

 Federal Rule of Civil Procedure 7(a) defines the term "pleadings" to include only eight submissions, including two which may be filed only pursuant to court order. Rule 7(a) limits pleadings to a complaint, an answer, a reply to a counterclaim, an answer to a cross-claim, a third party complaint, and a third party answer. Fed. R. Civ. P. 7(a). "No other pleadings shall be allowed, except that a court may order a reply to an answer or a third-party answer." Id. Likewise, Section 3011 of the New York Civil Practice Law and Rules ("Section 3011") sets forth the "kinds of pleadings" appropriate for use in New York state courts. N.Y. Civ. Prac. L. & R. § 3011 (McKinney 1985). Section 3011 provides for a complaint, an answer, a cross-claim against plaintiff, a counterclaim or cross-claim against a not-yet-joined party, interpleader pleadings, third-party pleadings, a reply to counterclaim, and a reply to a reply. See id. The definition of "pleadings" in neither the Federal Rules of Civil Procedures nor the New York Civil Practice Law and Rules includes a motion for summary judgment. Section ...


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