AmTrust North America has secured a victory against Signify Insurance in a dispute at the US District Court for the Southern District of New York, alleging breach of their reinsurance agreement.
AmTrust contended that Signify, a Bermuda captive company formed by temporary staffing agency Employers HR, breached their reinsurance agreement by failing to provide the required collateral.
In response, Signify filed six counterclaims against AmTrust and its underwriters, Technology Insurance Company and Security National Insurance Company, claiming that the agreement had lapsed.
In March 2016, AmTrust provided Signify with a 2016-2017 Captive Insurance Proposal, outlining the terms and geographic scope of the policies it would provide to Employers HR, as well as the terms on which Signify would reinsure those policies.
The interdependent captive reinsurance agreement stipulated that Signify would be required to provide “required security” in the form of collateral amounting to $4.4 million, while AmTrust would be required to hand over net ceded premium (NCP) and issue monthly reports.
Provisions of the reinsurance agreement meant that Signify were liable to provide required security until all reinsurance policies had been closed.
AmTrust terminated the reinsurance agreement in November 2016, and contended that Signify failed to provide its collateral due on 1 December 2016, amounting $2 million.
Signify’s counterclaims were sixfold, with the first and second regarding a declaration of termination and rescindment of the reinsurance agreement respectively.
The third counterclaim argued AmTrust be ordered to return letters of credit, while the fourth counterclaim contended that AmTrust breached the reinsurance agreement by failing to provide $11.7 million in NCP and the fifth counterclaim argued AmTrust must pay the owed NCP.
The sixth counterclaim argued that AmTrust and its underwriters had failed to adequately underwrite and issue new policies for Employers HR.
The district court concluded by granting AmTrust’s motion to dismiss the first and second counterclaims.
In addition, the court denied the third, fourth and fifth counterclaims, as well as denying Signify’s motion to dismiss AmTrust’s claims for breach of contract and declaratory judgment.
