A New York federal district court recently held that the follow the fortunes doctrine does not govern certain claims brought against a third-party administrator of a reinsurance program, but otherwise granted the administrator’s motion to dismiss on various grounds. AmTrust North America, Inc. and its affiliate, Technology Insurance Company, Inc., brought suit against certain individuals and companies in which those individuals were purportedly involved (the “Third-Party Plaintiffs”) seeking a declaratory judgment and monetary damages arising from a reinsurance venture. The gist of the insurers’ claims was that the Third-Party Plaintiffs fraudulently induced the insurers to act as “middle men” in a reinsurance program that was supposed to be structured so that the insurers avoided risk, when in fact they were exposed. The Third-Party Plaintiffs, in turn, sued Network Adjusters, Inc., the claims administrator for the program, alleging that its conduct inflated the insurers’ purported losses.
The factual background discussing the complex transactions involved in the lawsuit is described here. Network moved to dismiss the third-party complaint. The court denied the prong of Network’s motion that sought dismissal under the follow the fortunes doctrine, finding the doctrine inapplicable to the claims alleged against Network, which did not arise from a cedent/reinsurer relationship. Dismissal was nonetheless warranted because: (a) the Third-Party Plaintiffs’ breach of contract claim was not actionable, as they were not parties to or third-party beneficiaries of the contract under which the claims against Network arose; (b) Network owed no duty of care to the Third-Party Plaintiffs, defeating the cause of action for negligence; (c) the Third-Party Plaintiffs’ contribution claim sought only economic/contract damages, and was not cognizable under New York law; and (d) the causes of action for common law and contractual indemnification failed because Network owed no independent duties to the Third-Party Plaintiffs, nor did they plead facts alleging that Network’s contractual duty to indemnify was triggered. Amtrust North America, Inc. v. Safebuilt Insurance Services, Inc., No. 1:14-cv-09494 (USDC S.D.N.Y. Oct. 28, 2015).