An appellate court in New York has reversed a decision by the trial court dismissing an antitrust action against Equitas Ltd. The case will now proceed in state court in New York.

In 2007, Global Reinsurance Corp. – US Branch filed a complaint against Equitas Ltd. and other Equitas defendants in state court in Manhattan alleging, in the words of the appellate court’s decision, “that the Equitas defendants are the hub of a conspiracy that violates New York’s antitrust law.” Global’s predecessor had purchased retrocessional protection from various Lloyd’s underwriters. Global alleged that the restructuring of Lloyd’s for pre-1993 business through the 1996 Reconstruction and Renewal Plan (the “R&R Plan”) that led to Equitas resulted in antitrust violations. Prior to the R&R Plan, as alleged by Global, participants in the Lloyd’s marketplace competed for business, including by paying certain claims even when the contract terms might provide a basis to reject the claims. Global alleged that combining claims-handling authority for all pre-1993 business in Equitas changed that competitive landscape. As the appellate court said, “According to plaintiff, Equitas engaged in claims payment behavior – i.e., denying claims and, when they were not denied, paying less and later – that retrocessionaires subject to competitive constraints could not have engaged in . . . .”

The trial court dismissed the complaint with prejudice, but the Appellate Division, First Department reversed, holding that Global had adequately alleged violations of New York’s antitrust statute, the Donnelly Act. The complaint was reinstated and the action remanded to the trial court for discovery on the merits of the allegations. The full text of the Appellate Division decision can be found on the court’s website.