Court Dismisses Reinsurance Litigation in Favor of Prior Pending Action

The plaintiffs, U.S. Fire Insurance Co. and North River Insurance Co., issued 12 umbrella and excess umbrella liability policies for a combined coverage of $244 million to a manufacturer of respiratory protection equipment and asbestos-containing personal protective products. The plaintiffs subsequently entered into reinsurance contracts that covered the 12 policies. Beginning in March 2017, the plaintiffs billed the reinsurers for amounts they claimed were due under the reinsurance contracts as a result of the plaintiffs’ payments for settling liability under the umbrella policies.

When certain reinsurers refused to pay a portion of the reinsurance billings, the plaintiffs brought this lawsuit in the District of New Hampshire, alleging breach of several of the reinsurance contracts and seeking a declaratory judgment arising out of the reinsurers’ refusal to pay certain billings. However, less than an hour before the plaintiffs initiated the lawsuit, the plaintiffs’ reinsurers (mostly the same reinsurers in the initial action, as well as additional reinsurers) sued the plaintiffs in a New Jersey court. There, the reinsurers alleged that they had made payments to the plaintiffs pursuant to the reinsurance contracts under a reservation of rights and sought reimbursement of those amounts. The reinsurers then moved to dismiss or stay the New Hampshire case, arguing, inter alia, that the court should defer to the New Jersey action pursuant to the prior-pending-action doctrine or the related first-filed doctrine. While this motion was pending, the reinsurers filed a notice of an order issued in the New Jersey action denying U.S. Fire and North River’s motion to dismiss or stay on comity, forum non conveniens, and other grounds.

The New Hampshire court granted the reinsurers’ motion to dismiss. The court based its ruling on the prior-pending-action doctrine, which holds that the pendency of a prior action, in a court of competent jurisdiction, between the same parties, predicated upon the same cause of action and growing out of the same transaction, and in which identical relief is sought, constitutes a good ground for abatement of the later suit. The court cited to the interests of judicial efficiency and avoiding inconsistent judgments. The court found that the New Jersey action involved the same issues presented in this case: “the various reinsurers’ obligations to provide payments to plaintiffs under the Reinsurance Contracts.” The court explained: “As the [reinsurers] seek not only the return of payments they previously made to North River, but also a declaratory judgment as to the parties’ respective rights and obligations under the Reinsurance Contracts, the controlling issues in this litigation will be determined in the New Jersey Action.” The court further found that U.S. Fire and North River already moved to dismiss the New Jersey action, and the court in that case denied the motion and made several rulings that directly impacted the arguments raised by the parties in the New Hampshire case. The court concluded that “principles of comity and the convenience of the parties and witnesses weigh in favor of dismissal of this case in favor of the New Jersey Action.”

U.S. Fire Insurance Co. v. Equitas Ins. Ltd., No. 1:18-cv-01205 (D.N.H. Oct. 24, 2019).