Reinsurance Focus

This action stems from litigation arising from Boston’s “Big Dig” construction project. In early 2003, the Massachusetts Turnpike Authority (as manager of the project) made a claim against a subcontractor, Parsons Corporation (“Parsons”), arising from construction delays. Parsons gave notice of the claim to its liability insurer, National Union Fire Insurance Company of Pittsburgh, PA (“National Union”). The claim against Parsons was settled in November 2007 for more than $1.5 million. In April 2008, National Union demanded payment of the $500,000 alleged limit of the reinsurance contract from its reinsurer, Syndicate 1861, for indemnity under the agreement. Syndicate 1861 denied the claim.

In the instant matter, National Union filed suit against Tonicstar (the “capital provider” to Syndicate 1861) in California federal court alleging that Tonicstar wrongfully denied paying National Union the amount due to it under the contract. Tonicstar argued that National Union did not give timely notice under the agreement or fulfill its claims cooperation clause. Tonicstar also moved to transfer, stay or dismiss the suit, arguing that California was not a suitable forum and noting that a substantially similar suit was proceeding in New York.

Persuaded by Tonicstar’s argument that National Union was forum shopping, the California court granted Tonicstar’s motion to transfer the action to the Southern District of New York. National Union Fire Ins. Co. of Pittsburg v. Tonicstar Ltd., Case no. 08-03706 (USDC C.D. Cal. Aug. 20, 2008). Further information about this motion is found in a Memorandum of Law filed in the case.

This post written by Lynn Hawkins.