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Colonial Assurance Co. v. Mercantile and General Reassurance Co. Ltd.

December 10, 2003

COLONIAL ASSURANCE COMPANY ET AL.
v.
THE MERCANTILE AND GENERAL REASSURANCE COMPANY LTD. ET AL.



The opinion of the court was delivered by: Anita B. Brody, J.

MEMORANDUM AND ORDER

In February of 2003, plaintiffs Colonial Assurance Company ("Colonial") and Louis Mazzella, filed a three count complaint against defendants Mercantile and General Reinsurance Company, Ltd. ("M & G") and Swiss Reinsurance America Corporation ("SRA")*fn1 in the Court of Common Pleas of Philadelphia County. Plaintiffs alleged breach of contract, tortious interference with contract, and unjust enrichment. On March 26, 2003, defendant M & G removed the action to federal court on the basis of diversity jurisdiction.*fn2 On May 7, 2003, M & G moved to dismiss plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), contending that the plaintiffs' complaint is time-barred on its face. Upon review of the parties' submissions and the relevant law, I conclude that the plaintiffs' claims are time-barred.

Accordingly, I will grant M & G's motion to dismiss.

SUMMARY OF FACTS

The complaint alleges that plaintiff Colonial is a small insurance company that provided residual guarantee insurance. (Compl. ¶ 29.) The residual guarantee business guarantees a prospective purchaser of capital equipment that the equipment will have a stated value at a future time. (Id. ¶ 13) Defendant M & G is a reinsurance company. (Id. ¶ 3.) Colonial and M & G entered into a written reinsurance agreement*fn3 obligating M & G to reinsure the residual guarantee line of business ("Reinsurance Agreement").*fn4 (Id. ¶ 26.) In this capacity, M & G accepted premiums and issued residual guarantee reinsurance to three entities insured by Colonial ("insureds"). (Id. ¶ 14, 15.) Many of the policies issued by M & G to the insureds reinsured their property at 100% and had a "cut-through" provision through which the insureds could collect directly from M & G and avoid collecting from Colonial altogether. (Id. ¶ 16.)

At some time not mentioned in the complaint, M & G refused to honor the cut-through provision or to pay the claims submitted by the insureds. (Id. ¶ 17-18.) It was not until M & G filed a lawsuit seeking declaration of the contract as void that M & G explained the basis for its refusal to pay the claims to the insureds. (Id. ¶ 20.) The complaint further alleges:

¶36. When other insureds submitted claims under the residual line of business, M & G refused to honor its contractual obligation or stand behind Colonial.

¶37. The Pennsylvania Insurance Department treated the claims of the insureds as 100% liabilities of Colonial in light of M & G's refusal to honor its contractual obligation and stand behind Colonial.

¶38. According to the Pennsylvania Insurance Department, the claims of these insured rendered Colonial insolvent.

(Id. ¶ 36-38.)*fn5

Upon petition of the Pennsylvania Insurance Department ("Department"), the Commonwealth Court of Pennsylvania declared Colonial insolvent on March 28, 1984. (Id. ¶ 5.) The Department has acted as a fiduciary of Colonial in gathering its assets and adjusting its debts while in liquidation. (Id. ¶ 7.) At present, the liquidation of Colonial has not been completed by the Department, nor has a final Order of Distribution been entered by the Commonwealth Court. (Id. ¶ 6.) On or about March 29, 2002, the Department assigned Colonial's claim under the reinsurance agreement to recover against M & G to plaintiff Mazzella.

(Id. ¶ 8.)

Sometime in 1982, M & G filed an action against Colonial, among others, in the Supreme Court of New York, County of New York seeking rescission and declaratory judgment that the reinsurance obligations it had to Colonial and the insureds under the reinsurance agreement were void. On September 22, 1982, Colonial was served with a summons and M & G's complaint. *fn6

In the instant action, plaintiffs claim: (1) M & G breached the written agreement obliging M & G to reinsure the residual guarantee line of business at 100%; (2) M & G tortiously interfered with Colonial's performance of the contract with the insureds, and (3) M & G was unjustly enriched by keeping the premiums it ...


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