New York Court Reinstates Reinsurer’s Case, Reaffirming Antitrust Injury Extends Beyond Competitors And Consumers

The Appellate Division of the New York State Supreme Court has reinstated an antitrust lawsuit against a reinsurer created in the 1990s to rescue underwriters at Lloyd’s of London from soaring asbestos and environmental liabilities stemming from policies Lloyd’s sold before 1993.

The appellate court opinion reaffirms the principle that antitrust injury can extend beyond simply competitors and consumers of a defendant.

Global Reinsurance Corp sued Equitas Ltd, alleging that its creation by Lloyd’s underwriters was anti-competitive and was used to the financial disadvantage of reinsurers like Global.  The case, Global Reinsurance Corp. v. Equitas Ltd., 600815/2007, alleges Equitas violated the Donnelly Act – New York’s state antitrust law – by conspiring with Lloyd’s of London to push retrocessional claims payments to reinsurers such as Global below what reinsurers would have received in a competitive market.  Specifically, the suit alleges that Equitas engaged in claims payment activities, such as denying claims and paying less money later, that a company subject to competitive constraints could not have afforded.  Global claims to have suffered millions of dollars in damages as a result.

New York’s Appellate Division rejected the argument that Global could not prove an injury because the company had not purchased new coverage after the allegedly unlawful 1996 agreement creating Equitas went into effect.  The court emphasized that an antitrust plaintiff “need not be a purchaser at all,” and that there is no reason “grounded in the law or economics for concluding that only a customer injured by a purchase made after the illegal agreement takes effect suffers antitrust injury and is a proper antitrust plaintiff.”  Rather, the court found that Global had sustained antitrust injury, and was therefore a proper plaintiff, because it was “adversely affected by an agreement eliminating competition over claims-handling.”

The appellate court also held that the Global complaint was incorrectly dismissed because the lower court did not properly consider Global’s claims about the worldwide market for reinsurance and the status of Lloyd’s within that market.  According to the court, despite noting that Global had alleged a worldwide market, the lower court did not discuss whether the allegations of this market were sufficient to support an antitrust claim, and instead dismissed the suit on the grounds that the plaintiff had not sufficiently alleged a submarket for Lloyd’s.  The appellate court held that Global’s complaint undeniably alleged a worldwide market and that the allegations of market power were sufficient for the case to proceed.