The opinion of the court was delivered by: HAROLD BAER, JR., District Judge
Defendant Certain Underwriters at Lloyd's London ("Lloyd's
Underwriters" or "defendant") moves to dismiss the Amended Complaint with
respect to it, pursuant to Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim upon which relief can be granted. For the
following reasons, Lloyd's Underwriters' motion is denied.
Plaintiff Caribbean Petroleum Refining LP ("Caribbean Refining") is the
owner of a petroleum refinery in Bayamon, Puerto Rico. ("the Bayamon
refinery"). The second named plaintiff, Caribbean Petroleum Corporation
("Caribbean Petroleum"),*fn1 is the named insured under the insurance
policy at issue in this dispute and is a Delaware corporation with its
principal place of business in Bayamon, Puerto Rico. Amended Complaint
("Am. Compl") ¶¶ 9, 20. With the hope of restarting operations at the
Bayamon refinery, which had been idle for a period of years, in April
1998 plaintiffs decided to inspect the facility. Am. Compl. ¶¶ 1, 24.
Before plaintiffs inspected the facility, they contacted defendant Aon
and provided it with detailed plans
of the inspection in order to ascertain whether any additional premium
was required to cover the inspection. Am. Compl. f 25. Plaintiffs were
informed that no such additional premium was required. Am. Compl. ¶ 26.
Based on the inspection, the plaintiffs decided to refurbish the Bayamon
refinery and, accordingly, requested that Aon obtain appropriate coverage
for the refurbishment and start-up. Am. Compl. ¶¶ 27-28. Plaintiff
specifically requested that Aon obtain coverage for business-interruption
losses and provided information intended to obtain such coverage. Am.
Compl. ¶¶ 30-31. In addition, Aon was separately advised by plaintiffs'
insurance consultant to obtain business-interruption coverage in
connection with refurbishment and start-up of the Bayamon refinery. Am.
Compl. ¶ 33. The Bayamon refinery was insured under a policy issued by
Lloyd's (policy number EL9800325) for the period from March 30, 1998 to
March 30, 1999. Am. Compl. ¶ 19. Plaintiffs allege upon information and
belief that by agreements among the Lloyd's Underwriters, New Hampshire
Insurance Company,*fn2 and Allianz, each of these defendants shares a
portion of the risk insured under the policy. Am. Compl. ¶ 20. In July
1998, plaintiffs began to refurbish the Bayamon refinery. Am. Compl. ¶
2. On August 31, 1998, Aon advised plaintiffs that it issued a binder*fn3
for the additional coverage, including coverage for business-interruption
losses. Am. Compl. ¶ 4, 33.
Three weeks later, on September 21, 1998, Hurricane George struck
Puerto Rico. and caused substantial damage to the Bayamon refinery and
delayed its refurbishment and start-up by three months. Am. Compl.
¶ 36. Plaintiffs made a claim for physical damage to the Bayamon
refinery in excess of $12 million. The parties subsequently reached a
settlement with respect to this claim. Plaintiffs also made a claim for
business-interruption amounting to $5,237,089, which represented the
amount claimed as the loss ($5,709,419) less a deductible of $472,330.
Am. Compl. ¶¶ 6, 35-38. By letter dated April 17, 2001, New Hampshire
denied coverage for plaintiffs' business-interruption claim on the basis
that the policy did not provide coverage for
business-interruption losses, and Allianz did so as well by letter dated
July 2, 2001. Am. Compl. ¶¶ 38-39. By letter on August 26, 2002,
plaintiffs requested New Hampshire to reconsider its denial of plaintiffs'
business-interruption claim. Am. Compl. ¶¶ 41, 43.
Plaintiffs filed a complaint in New York State Supreme Court on August
5, 2003 against three insurance carriers American International
Group ("AIG"),*fn4 Certain Underwriters at Lloyd's London, and Allianz
Insurance and against Aon as the insurance broker. On September
5, 2003, AIG and Allianz removed the matter to federal court. Plaintiffs'
instant lawsuit with respect to the carriers seeks a declaration that
business-interruption losses were covered under the policy, that the
policy was in effect, and that these insurance carriers breached this
contract when they denied plaintiffs' claim for business-interruption
Lloyd's Underwriters contends that plaintiffs' claims against it must
be dismissed on the ground that plaintiffs have failed to sue the "Names"
or syndicate members who assumed the portion of the risk on the Policy at
issue and instead have improperly sued the Corporation of Lloyd's, which
does not issue, write, or sell insurance and does not take part in
adjusting insurance claims. Lloyd's Underwriters also move for costs
against plaintiffs for the "needless expenses in defending a baseless
coverage suit." Memorandum of Law in Support of Defendant Certain
Underwriters at Lloyd's Motion to Dismiss the Complaint ("Underwriters'
Mem.") at 9. Plaintiffs contend that defendant in effect seeks the
dismissal of an entity that has not been named in the suit and that their
use of "John Doe", i.e., "Certain Underwriters at Lloyd's" is
frequently employed in litigation in the United States and contemplated
by N.Y.C.P.L.R. § 1024.
On a motion to dismiss under Rule 12(b), all well-plead factual
allegations are taken as true, and all reasonable inferences are
construed in favor of the plaintiff. Leeds v. Meltz, 85 F.3d 51, 52 (2d
Cir. 1996). Dismissal of the complaint is appropriate only when it
appears that the
plaintiff cannot prove a set of facts "in support of his claim which would
entitle him to relief." Gant v. Wallingford Bd. of Educ., 69 F.3d 669,
673 (2d Cir. 1995).
A central premise in Lloyd's Underwriters' initial motion to dismiss
was that the plaintiffs named Lloyd's of London as defendant. For
example, under the heading "no breach of contract claim can be made
against Lloyd's as defendant Lloyd's was not a party to the insurance
contract at issue," Underwriters' Mem. at 8 (bold, underline, and
uppercase removed), defendant argues:
Here again, Lloyd's does not issue, sell, or write
insurance, and was clearly never a party to the
contract for the insurance coverage allegedly
issued to plaintiffs in this action. As such, the
plaintiffs have no right of relief from Lloyd's
based on their breach of contract theory because
they simply cannot establish the existence of an
agreement between Lloyd's and the plaintiffs. . . .
Accordingly, Lloyd's Underwriters sought the dismissal of the
claims against them because Lloyd's of London is not the proper party to
this action; defendant suggested at various points that the proper party
for plaintiffs to sue here are the "Names" or syndicate members who
assumed the risk. Underwriters' Mem. at 7 ("Plaintiffs have improperly
sued Lloyd's by failing to name the appropriate Names/syndicate members
who assumed the portion of risk on the Policy at issue.").*fn6
point needs little discussion, as it is clear that plaintiffs did not sue
Lloyd's of London, the insurance market, but rather sued certain
underwriters (who are currently unidentified) who wrote a policy through
that marketplace. Thus, defendant's observations about how Lloyd's of
London does not issue insurance policies, but rather, is an insurance
the buying and selling of insurance risks*fn7
are informative, but
mostly beside the point
This otherwise simple and straightforward issue is complicated because
plaintiffs did not attach a copy of the policy at issue in this lawsuit,
EL9800325, to the complaint, the amended complaint, or to their brief in
connection with this motion.*fn8 The Court subsequently received a copy
of the 42-page "Package Policy" for the policy number EL9800325. Although
the term "underwriters" appears frequently in this document, it is
nowhere defined or otherwise identified in this document or at least in
that portion of the document that the Court received.*fn9 While it is
evident that the material received by the Court is not a complete
contract, there are nevertheless two endorsements included at the end of
the policy that indicate that the policy was issued by "Certain
Underwriters at Lloyd's London."*fn10 Defendant argues with some force
that plaintiffs here have failed to produce an actual Lloyd's policy, but
nevertheless, there is some evidence that a Lloyd's-related entity was
involved in the underwriting of this risk.*fn11 Therefore, accepting all
well-plead allegation as true and construing all reasonable inferences in
favor of the plaintiffs, I find that there is sufficient evidence that
the policy was issued by Lloyd's.*fn12 Thus, it cannot be
said that plaintiffs' action against Lloyd's Underwriters is
"fundamentally frivolous," as defendant argues. Reply Memorandum of Law
in Support of the Motion to Dismiss by Defendant Certain Underwriters at
Lloyd's ("Underwriters' Reply") at 3.
As defendant notes in its summary of Lloyd's of London, it is a complex
marketplace that occasionally addles American courts. E.R. Squibb &
Sons. Inc. v. Accident & Cas. Ins. Co., 160 F.3d 925, 939 (2d Cir. 1998)
("Squibb I") (Lloyd's of London "operates in accordance with age-old
customs that are, to say the least, unusual in American business law.").
*fn13 It appears from the case law that the proper party in a suit
against a Lloyd's policy is the "Name" who serves as the lead underwriter
and who is ordinarily disclosed on the policy.*fn14 Squibb I, 160 F.3d
at 939 ("When litigation over a Lloyd's policy occurs, only one Name (the
lead underwriter disclosed on the policy) is ordinarily sued.").
However, as noted above, the policy that the Court has
received does not disclose the identity of the lead underwriter.*fn15
Nevertheless, as plaintiffs point out, there are many lawsuits brought
against "Certain Underwriters of Lloyd's" (or some variation thereof);
more significantly, suits are often brought by "Certain Underwriters of
Lloyd's." E.g., Certain London Mkt. Ins. Cos. v. Pa. Nat'l Mut. Cas.
Ins. Co., 269 F. Supp.2d 722, 725-26 (N.D. Miss. 2003) (listing cases);
see also Roby. 796 F. Supp. at 111 (noting that there are many lawsuits
in which Lloyd's of London "syndicates" have been sued and have sued or
asserted counterclaims, but also noting that in none of those cases was
the question of a syndicate's legal existence ever raised); Dallas Glen
Hills, L.P. v. Underwriters at Lloyd's London, No. 3:03-CV-0295-D, 2003
U.S. Dist. LEXIS 10490, at *9 (N.D. Tex. June 19, 2003) ("Suits against
Lloyd's, London generally proceed against one of the following: (1) all
the Names or syndicates subscribing to the risk involved in a policy, (2)
the lead underwriter subscribing to a policy, (3) an individual syndicate
acting in its representative capacity on behalf of all those subscribing
to a risk, (4) an individual syndicate acting in its individual
capacity, and (5) possibly, an individual name." (footnotes omitted)).
*fn16 The argument that defendant asserts here
is very similar to one asserted in Certain London Market Insurance
Companies, a declaratory-judgment action in which the defendant contended
that "Certain London Market Insurance Companies" (the ...