Court Refuses to Strike Allegations From Counterclaims in Reinsurance Dispute

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The Lloyd’s of London Renewal and Reconstruction happened some time ago yet it still lives on with disputes over the role and liability of Equitas in the U.S. for pre-1993 liabilities of Lloyd’s underwriters. In a recent reinsurance dispute, reinsurers–certain Lloyd’s syndicates–sought to strike references to Equitas from the factual allegations of the cedent’s counterclaims. The court denied the motion.

In Certain Underwriters at Lloyd’s of London v. The North River Insurance Co., No. 19-17231 (D. N.J. Jun. 23, 2021) (Not for Publication), a reinsurance dispute arose concerning allocation of settlements to numerous reinsurance contracts. In responding to the reinsurers’ lawsuit, the cedent asserted counterclaims and a third-party claim seeking a declaration concerning Equitas Insurance Limited’s (“Equitas”) role as successor-in-interest to pre-1993 Lloyd’s syndicates under the operative reinsurance contracts. The third-party claims against Equitas were resolved through a consent order, which dismissed the claims without prejudice and which allowed the cedent to reassert those claims if it obtained a final judgment against reinsurers (the final judgment binding Equitas).

The parties updated their pleadings after the consent order and the cedent, in its factual allegations in its counterclaims, provided background information about Lloyd’s and included a discussion of Equitas and the consent order. The reinsurers moved to strike those paragraphs of the counterclaims as a violation of the consent order. The district court denied the motion.

While the reinsurers argued that the references to Equitas was an end-around the consent order, the court found that the identities of the parties and third-parties and the historical background might be useful to the jury. The court noted that the reinsurers conceded that the cedent offered a few true background facts and, therefore, the information was not completely immaterial to the case.

The court offered the reinsurers the opportunity to seek protective orders or move before trial to strike material that it believes would be prejudicial, but otherwise held that there was no basis to strike the paragraphs from the counterclaims at the pleadings stage.

My guess is that this is not the last motion on the issue.

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