In late April, a Massachusetts appellate court reversed dismissal of a lawsuit between a reinsurer and the underlying insurer’s servicer regarding disputes over reinsurance coverage. In the case, Transatlantic Reinsurance Company (“Transatlantic”) was the reinsurer to two major insurers that had entered into an administrative insurance agreement with National Indemnity Company (“National”). Although factually unique, the case hinged on whether Massachusetts or New York law would ultimately apply.
The case centered around Transatlantic, which became an independent company in 2010 and sought a merger. National offered to purchase Transatlantic, but a deal could not be reached and Transatlantic was acquired by Alleghany Corporation, which had been looking to enter the reinsurance market. Soon, the relations between Transatlantic and National became strained, and National filed a lawsuit claiming violations of Massachusetts’s consumer protection statute as well as tortious interference with contractual relations.
The lower court dismissed the case against Transatlantic for failure to state a claim. However, in so doing, the lower court applied New York law to the tortious interference claim. Under New York law, to prevail on a claim of tortious interference, a plaintiff must be able to show an actual breach of contract with a third party, which National could not do. However, Massachusetts law required only a showing of increased burden or expense.
Applying the substantial relationship test of conflict of laws, the Massachusetts appellate court determined that there was simply not enough in the record to determine if New York or Massachusetts law would ultimately apply. Additionally, the Massachusetts court could not determine if the action was governed by the Massachusetts consumer protection statute on this same basis. Accordingly, the court reversed dismissal to allow the plaintiffs to take discovery to establish if New York or Massachusetts law would ultimately apply.
Resolute Management Inc. v. Transatlantic Reinsurance Co., No. 14-P-573, (Mass. Ct. App. Apr. 29, 2015).