In what the court termed a “risk-free reinsurance scheme [that] proved anything but,” a New York federal court dismissed a third-party claim against the insurance brokerage service that put the two parties to the insurance arrangement in contact and counterclaims against the reinsurer that acquired business through the customers of its insured. The case involves a dispute between AmTrust North America, Inc. and SafeBuilt Insurance Services, Inc., as well as a third-party insurance consulting service, Preferred Reinsurance Intermediaries. AmTrust had retained PreferredRe to help AmTrust find prospective business opportunities, and PreferredRe succeeded in introducing AmTrust to SafeBuilt. As a result, AmTrust and SafeBuilt entered into an agreement in which AmTrust provided reinsurance to SafeBuilt, which SafeBuilt then provided a retrocession through a Montana subsidiary. The idea was that AmTrust was “to provide reinsurance but was not actually to have anything at risk.” Because of undercapitalization in the primary insurer and the retrocessionaire, however, AmTrust ended up shouldering close to $10 million of liability. When faced with the lawsuit, SafeBuilt filed a third-party complaint against PreferredRe, alleging, among other things, that PreferredRe was negligent because it “knew or should have known that . . . the parties were not well-suited for one another.” Having indemnified PreferredRe, AmTrust filed a motion to dismiss the third-party claims against it, which the court granted. In addition, AmTrust faced a counterclaim for breach of fiduciary duty and tortious interference with business relationships that the court dismissed.

Dispatching the claims against PreferredRe, the court found, among other things, that “there [was] no allegation of any agreement between PreferredRe and [SafeBuilt] at all.” Even if SafeBuilt was an intended beneficiary of a contract between AmTrust and PreferredRe, this did not include a duty to conduct due diligence of a relationship between AmTrust and SafeBuilt. The counterclaims against AmTrust centered on allegations that AmTrust used information from auditing the insurance arrangement to provide to a subsidiary, which was able to acquire business from SafeBuilt’s former customers. The fiduciary duty claim centered on allegations that AmTrust was the principal and SafeBuilt was its agent—however, absent specific contractual language, “a principal does not necessarily owe its agent a fiduciary duty.” As to tortious interference, the court ruled that absent a contractual duty to keep information confidential, AmTrust’s did “nothing more than engage in sharp practice” which “may be repugnant, but is not a wrongful means.” AmTrust North America, Inc. v. SafeBuilt Insurance Services, Inc., No. 14-cv-09494-CM-JLC (USDC S.D.N.Y. Dec. 1, 2015).