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The Insurance Co. of the State of Pennsylvania v. TIG Insurance Co.

Issue Discussed: Other

Submitted by Rick Rosenblum, Katharine Southard

Date Promulgated: March 11, 2013

Issues Decided: Whether reinsurer waived its right to consent to removal in dispute involving multiple reinsurance contracts where reinsurer included a service of suit clause with no limiting language in some, but not all, of those reinsurance contracts.


Background

On August 1, 2012, The Insurance Company of the State of Pennsylvania (“ICSOP”) filed a breach of contract claim against TIG Insurance Company (“TIG”) in the Supreme Court of the State of New York, County of New York (“State Court”), seeking to recover reinsurance benefits and other declaratory relief, and alleging that TIG, as predecessor in interest to International Surplus Lines Insurance Company (“ISLIC”), failed to honor its contractual obligations under certain reinsurance contracts issued by ISLIC to ICSOP. TIG removed the action on August 30, 2012 to the U.S. District Court for the Southern District of New York on the basis of diversity jurisdiction. On September 27, 2012, ISCOP filed a Motion to Remand.

In the State Court action, ICSOP had asserted four claims against TIG, alleging breach of six different reinsurance certificates. At least three of the certificates contained “service of suit” provisions under which TIG agreed, in case of a dispute, to submit to the jurisdiction of, and comply with the requirements necessary to perfect jurisdiction in, a court requested by ICSOP. In challenging the removal from state court, ICSOP did not contest the federal court’s jurisdiction based on the diversity of the parties pursuant to 28 U.S.C. § 1332, but instead argued that the service of suit clause operated as a waiver of TIG’s right to remove a state court action to federal court. ICSOP also argued that the existence of a “service of suit” clause in one of the reinsurance certificates in dispute served as a sufficient basis to justify that all disputes between the parties, including those based on certificates which do not contain a service of suit clause, remain joined in one action in a court selected by ICSOP. TIG, on the other hand, argued that a service of suit clause should be limited to only those actions involving exclusively contracts containing service of suit clauses. Therefore, TIG argued, because three of the six reinsurance certificates at issue did not contain service of suit clauses, TIG should not be bound by these clauses and had not waived its right to remove the action to federal court.


Holding

In its analysis, the Court was persuaded by the reasoning of the Eleventh Circuit in Russell Corp. v. American Home Assurance Co., 264 F.3d 1040 (11th Cir. 2001), which the Second Circuit cited favorably in Dinallo v. Dunav Insurance Co., 402 F. App’x 595, 596 (2d Cir. 2010). In Russell, the Eleventh Circuit held that the defendant insurance company had granted the plaintiff the power to select the court in which disputes concerning the policy would be adjudicated by including a service of suit provision in one of the three policies in dispute that it had issued to plaintiff. 264 F.3d at 1046-47. The Court in Russell reasoned that because the service of suit clause in one of the three policies at issue in the dispute contained no exception for cases also involving the insurance company’s other policies, the service of suit clause applied to the entire dispute. Id.

Because ICSOP’s claims concerning the TIG reinsurance policies in this case involved service of suit clauses in some of the reinsurance policies at issue and those service of suit clauses contained no language limiting their application, the Court here held that TIG’s waived its removal right and remanded the case to state court. Therefore, the Court held that inclusion of a service of suit clause in some of the reinsurance certificates at issue in a dispute waives a reinsurer’s right to removal of the entire action, notwithstanding the fact that not all of the certificates at issue contain a service of suit clause.