Source: http://caselaw.findlaw.com/us-supreme-court/509/764.html
Timestamp: 2017-02-27 20:47:31
Document Index: 114283529

Matched Legal Cases: ['§ 52', '§ 38', '§ 39', '§ 50', '§ 51', '§ 56', '§ 39', '§ 51', '§ 39', '§ 53', '§ 97', '§ 29', '§ 34', '§ 4', '§ 4', '§ 55', '§ 56', '§ 59', '§ 61', '§ 62', '§ 111', '§ 64', '§ 65', '§ 67', '§ 68', '§ 69', '§ 71', '§ 74', '§ 78', '§ 82', '§ 84', '§ 97', '§ 131', '§ 125', '§ 88', '§ 90', '§ 136', '§ 130', '§ 94', '§ 94', '§ 141', '§ 140', '§ 105', '§ 146', '§ 135', '§ 108', '§ 22', '§ 34', '§ 4', '§ 4', '§ 131', '§ 136', '§ 146', '§ 236', '§ 4', '§ 115', '§ 111', '§ 115', '§ 106', '§ 110', '§ 147', '§ 136', '§ 147', '§ 136', '§ 151', '§ 145', '§ 236', '§ 236', '§ 26', '§ 89', '§ 93', '§ 74', '§ 78', '§ 82', '§ 86', '§ 85', '§ 89', '§ 68', '§ 66', '§ 70', '§ 131', '§ 146']

HARTFORD FIRE INS. CO. v. CALIFORNIA, (1993)
Argued: February 23, 1993 Decided: June 28, 1993
First, CGL insurance has traditionally been sold in the United States on an "occurrence" basis, through a policy obligating the insurer "to pay or defend claims, whenever made, resulting from an accident or "injurious exposure to conditions" that occurred during the [specific time] period the policy was in effect." App. 22 (Cal. Complaint § 52). In place of this traditional "occurrence" trigger of coverage, the defendants wanted a "claims-made" trigger, obligating the insurer to pay or defend only those claims made during the policy period. Such a policy has the distinct advantage for the insurer that, when the policy period ends without a claim's having been made, the insurer can be certain that the policy will not expose it to any further liability. Second, the defendants wanted the "claims-made" policy to have a "retroactive date" provision, which would further restrict coverage to claims based on incidents that occurred after a certain date. Such a provision eliminates the risk that an insurer, by issuing a claims-made policy, would assume liability arising from incidents that occurred before the policy's [509 U.S. 764, 4]
To understand how the defendants are alleged to have pressured the targeted primary insurers to make these changes, one must be aware of two important features of the insurance industry. First, most primary insurers rely on certain outside support services for the type of insurance coverage they wish to sell. Defendant Insurance Services Office, Inc. (ISO), an association of approximately 1,400 domestic property and casualty insurers (including the primary insurer defendants, Hartford Fire Insurance Company, Allstate Insurance Company, CIGNA Corporation, and Aetna Casualty and Surety Company), is the almost exclusive source of support services in this country for CGL insurance. See id., at 19 (Cal. Complaint § 38). ISO develops standard policy forms and files or lodges them with each State's insurance regulators; most CGL insurance written in the United States is written on these forms. Ibid. (Cal. Complaint § 39); id., at 74 (Conn. Complaint § 50). All of the "traditional" features of CGL insurance relevant to this litigation were embodied in the ISO standard CGL insurance form that had been in use since 1973 (1973 ISO CGL form). Id., at 22 (Cal. Complaint §§ 51-54); id., at 75 (Conn. Complaint §§ 56-58). For each of its standard policy forms, ISO also supplies actuarial and rating information: it collects, aggregates, interprets, and distributes data on the premiums charged, claims filed and paid, and defense costs expended with respect to each form, id., at 19 (Cal. Complaint § 39); id., at 74 (Conn. Complaint §§ 51-52), and on the basis of this [509 U.S. 764, 5]
data it predicts future loss trends and calculates advisory premium rates, id., at 19 (Cal. Complaint § 39); id., at 74 (Conn.Complaint § 53). Most ISO members cannot afford to continue to use a form if ISO withdraws these support services. See id., at 32-33 (Cal.Complaint §§ 97, 99).
Second, primary insurers themselves usually purchase insurance to cover a portion of the risk they assume from the consumer. This so-called "reinsurance" may serve at least two purposes, protecting the primary insurer from catastrophic loss and allowing the primary insurer to sell more insurance than its own financial capacity might otherwise permit. Id., at 17 (Cal. Complaint § 29). Thus, "[t]he availability of reinsurance affects the ability and willingness of primary insurers to provide insurance to their customers." Id., at 18 (Cal. Complaint § 34); id., at 63 (Conn. Complaint § 4(p)). Insurers who sell reinsurance themselves often purchase insurance to cover part of the risk they assume from the primary insurer; such "retrocessional reinsurance" does for reinsurers what reinsurance does for primary insurers. See ibid. (Conn. Complaint § 4(r)). Many of the defendants here are reinsurers or reinsurance brokers, or play some other specialized role in the reinsurance business; defendant Reinsurance Association of America (RAA) is a trade association of domestic reinsurers.
The prehistory of events claimed to give rise to liability starts in 1977, when ISO began the process of revising its 1973 CGL form. Id., at 22 (Cal. Complaint § 55). For the first time, it proposed two CGL forms (1984 ISO CGL forms), one the traditional "occurrence" type, the other "with a new `claims-made' trigger." Id., at 22-23 (Cal. Complaint § 56). The "claims-made" form did not have a retroactive date provision, however, and both 1984 forms covered "`sudden and accidental' pollution" damage and provided for unlimited coverage of legal defense costs by the [509 U.S. 764, 6]
insurer. Id., at 23 (Cal. Complaint §§ 59-60). Within the ISO, defendant Hartford Fire Insurance Company objected to the proposed 1984 forms; it desired elimination of the "occurrence" form, a retroactive date provision on the "claims-made" form, elimination of sudden and accidental pollution coverage, and a legal defense cost cap. Defendant Allstate Insurance Company also expressed its desire for a retroactive date provision on the "claims-made" form. Id., at 24 (Cal. Complaint § 61). Majorities in the relevant ISO committees, however, supported the proposed 1984 CGL forms and rejected the changes proposed by Hartford and Allstate. In December, 1983, the ISO Board of Directors approved the proposed 1984 forms, and ISO filed or lodged the forms with state regulators in March, 1984. Ibid. (Cal. Complaint § 62).
The first four Claims for Relief in the California Complaint, id., at 36-43 (in §§ 111-130), and the Second Claim for Relief of the Connecticut Complaint, id., at 90-92 (Par; 120-124), charge the four domestic primary insurer defendants and varying groups of domestic and foreign reinsurers, brokers, and associations with conspiracies to manipulate the ISO CGL forms. In [509 U.S. 764, 7]
March, 1984, primary insurer Hartford persuaded General Reinsurance Corporation (General Re), the largest American reinsurer, to take steps either to procure desired changes in the ISO CGL forms, or "failing that, [to] `derail' the entire ISO CGL forms program." Id., at 24 (Cal. Complaint § 64). General Re took up the matter with its trade association, RAA, which created a special committee that met and agreed to "boycott" the 1984 ISO CGL forms unless a retroactive date provision was added to the claims-made form, and a pollution exclusion and defense cost cap were added to both forms. Id., at 24-25 (Cal. Complaint §§ 65-66). RAA then sent a letter to ISO "announc[ing] that its members would not provide reinsurance for coverages written on the 1984 CGL forms," id., at 25 (Cal. Complaint § 67), and Hartford and General Re enlisted a domestic reinsurance broker to give a speech to the ISO Board of Directors in which he stated that no reinsurers would "break ranks" to reinsure the 1984 ISO CGL forms. Ibid. (Cal. Complaint § 68).
The four primary insurer defendants (Hartford, Aetna, CIGNA, and Allstate) also encouraged key actors in the London reinsurance market, an important provider of reinsurance for North American risks, to withhold reinsurance for coverages written on the 1984 ISO CGL forms. Id., at 25-26 (Cal. Complaint §§ 69-70). As a consequence, many London-based underwriters, syndicates, brokers, and reinsurance companies informed ISO of their intention to withhold reinsurance on the 1984 forms, id., at 26-27 (Cal. Complaint §§ 71-75), and at least some of them told ISO that they would withhold reinsurance until ISO incorporated all four desired changes, see supra, at 3 and n. 3, into the ISO CGL forms. App. 26 (Cal. Complaint § 74).
For the first time ever, ISO invited representatives of the domestic and foreign reinsurance markets to speak at an ISO Executive Committee meeting. Id., at 27-28 (Cal. Complaint § 78). At that meeting, the reinsurers "presented [509 U.S. 764, 8]
their agreed-upon positions that there would be changes in the CGL forms or no reinsurance." Id., at 29 (Cal. Complaint § 82). The ISO Executive Committee then voted to include a retroactive-date provision in the claims-made form, and to exclude all pollution coverage from both new forms. (But it neither eliminated the occurrence form nor added a legal defense cost cap.) The 1984 ISO CGL forms were then withdrawn from the marketplace, and replaced with forms (1986 ISO CGL forms) containing the new provisions. Ibid. (Cal. Complaint § 84). After ISO got regulatory approval of the 1986 forms in most States where approval was needed, it eliminated its support services for the 1973 CGL form, thus rendering it impossible for most ISO members to continue to use the form. Id., at 32-33 (Cal. Complaint §§ 97, 99).
The Fifth Claim for Relief in the California Complaint, id., at 43-44 (§§ 131-135), and the virtually identical Third Claim for Relief in the Connecticut Complaint, id., at 92-94 (§§ 125-129), charge a conspiracy among a group of London reinsurers and brokers to coerce primary insurers in the United States to offer CGL coverage only on a claims-made basis. The reinsurers collectively refused to write new reinsurance contracts for, or to renew longstanding contracts with, "primary . . . insurers unless they were prepared to switch from the occurrence to the claims-made form," id., at 30 (Cal. Complaint § 88); they also amended their reinsurance contracts to cover only claims made before a "`sunset date,'" thus eliminating reinsurance for claims made on occurrence policies after that date, id., at 31 (Cal. Complaint §§ 90-92).
The Sixth Claim for Relief in the California Complaint, id., at 45-46 (§§ 136-140), and the nearly identical Fourth Claim for Relief in the Connecticut Complaint, id., at 94-95 (§§ 130-134), charge another conspiracy among a somewhat different group of [509 U.S. 764, 9]
London reinsurers to withhold reinsurance for pollution coverage. The London reinsurers met and agreed that all reinsurance contracts covering North American casualty risks, including CGL risks, would be written with a complete exclusion for pollution liability coverage. Id., at 32 (Cal. Complaint §§ 94-95). In accordance with this agreement, the parties have in fact excluded pollution liability coverage from CGL reinsurance contracts since at least late 1985. Ibid. (Cal. Complaint § 94).
The Seventh Claim for Relief in the California Complaint, id., at 46-47 (§§ 141-145), and the closely similar Sixth Claim for Relief in the Connecticut Complaint, id., at 97-98 (§§ 140-144), charge a group of domestic primary insurers, foreign reinsurers, and the ISO with conspiring to restrain trade in the markets for "excess" and "umbrella" insurance by drafting model forms and policy language for these types of insurance, which are not normally offered on a regulated basis. Id., at 33 (Cal. Complaint 101). The ISO Executive Committee eventually released standard language for both "occurrence" and "claims-made" umbrella and excess policies; that language included a retroactive date in the claims-made version and an absolute pollution exclusion and a legal defense cost cap in both versions. Id., at 34 (Cal. Complaint § 105).
Finally, the Eighth Claim for Relief in the California Complaint, id., at 47-49 (§§ 146-150), and its counterpart in the Fifth Claim for Relief in the Connecticut Complaint, id., at 95-97 (§§ 135-139), charge a group of London and domestic retrocessional reinsurers
for North American seepage, pollution, and property contamination risks. Those retrocessional reinsurers signed, and have implemented, an agreement to use their "`best endeavors'" to ensure that they would provide such reinsurance for North American risks "`only . . . where the original business includes a seepage and pollution exclusion wherever legal and applicable.'" Id., at 35 (Cal. Complaint § 108).
This pattern of activity bears a striking resemblance to the first act of boycott listed by the South-Eastern Underwriters Court; although neither the South-Eastern Underwriters opinion nor the underlying indictment, see Transcript of Record, O.T. 1943, No. 354, p. 11 (§ 22(e)), details exactly how the defendants managed to "cut off [nonmembers] from the opportunity to reinsure their risks," 322 U.S., at 535
crucial to the 3(b) boycott alleged here. From the vantage point of a ruling on motions to dismiss, however, I discern sufficient allegations in the complaints that this is not the case. In addition, according to the complaints, the four primary insurers were not acting out of concern for the reinsurers' financial health when they prompted the reinsurers to refuse reinsurance for certain risks; rather, they simply wanted to ensure that no other primary insurer would be able to sell insurance policies that they did not want to sell. Finally, as the complaints portray the business of insurance, reinsurance is a separate, specialized product, "[t]he availability [of which] affects the ability and willingness of primary insurers to provide insurance to their customers." App. 18 (Cal. Complaint § 34). Thus, contrary to the majority's assertion, the boundary between the primary insurance industry and the reinsurance industry is not merely "technica[l]." Post, at 9.
The majority insists that I "disregar[d] th[e] integral relationship between the terms of the primary insurance form and the contract of reinsurance," post, at 9, a fact which it seems to believe makes it impossible to draw any distinction whatsoever between primary insurers and reinsurers. Yet it is the majority that fails to see that, in spite of such an "integral relationship," the interests of primary insurer and reinsurer will almost certainly differ in some cases. For example, the complaints allege that reinsurance contracts often "layer" risks, "in the sense that [a] reinsurer may have to respond only to claims above a certain amount. . . ." App. 10 (Cal. Complaint § 4.q); id., at 61 (Conn. Complaint § 4(f)). Thus, a primary insurer might be much more concerned than its reinsurer about a risk that resulted in a high number of relatively small claims. Or the primary insurer might simply perceive a particular risk differently from the reinsurer. The reinsurer might be indifferent as to whether a particular risk was covered, so long as the reinsurance premiums were adjusted to its satisfaction, whereas [509 U.S. 764, 26]
Finally, we take up the question presented by No. 91-1128, whether certain claims against the London reinsurers should have been dismissed as improper applications of the Sherman Act to foreign conduct. The Fifth Claim for Relief in the California Complaint alleges a violation of 1 of the Sherman Act by certain London reinsurers who conspired to coerce primary insurers in the United States to offer CGL coverage on a claims-made basis, thereby making "occurrence CGL coverage . . . unavailable in the State of California for many risks." App. 43-44 (§§ 131-135). The Sixth Claim for Relief in the California Complaint alleges that the London reinsurers violated 1 by a conspiracy to limit coverage of pollution risks in North America, thereby rendering "pollution liability coverage . . . almost entirely unavailable for the vast majority of casualty insurance purchasers in the State of California." Id., at 45-46 (§§ 136-140). The Eighth Claim for Relief in the California Complaint alleges a further 1 violation by the London reinsurers who, along with domestic retrocessional reinsurers, conspired to limit coverage of seepage, pollution, and property contamination risks in North [509 U.S. 764, 28]
Id., at 47-48 (§§ 146-150).
, n. 6 (1986); United States v. Aluminum Co. of America, 148 F.2d 416, 444 (CA2 1945) (L. Hand, J.); Restatement (Third) of Foreign Relations Law of the United States 415, and Reporters' Note 3 (1987) (hereinafter Restatement (Third) Foreign Relations Law); 1 P. Areeda & Turner, Antitrust Law § 236 [509 U.S. 764, 29]
] CGL insurance provides "coverage for third party casualty damage claims against a purchaser of insurance (the `insured')." App. 8 (Cal. Complaint § 4.a).
] The First Claim for Relief in the Connecticut Complaint, App. 88-90 (§§ 115-119), charges all the defendants with an overarching conspiracy to force all four of these changes on the insurance market. The eight federal law Claims for Relief in the California Complaint, id., at 36-49 (§§ 111-150), charge various subgroups of the defendants with separate conspiracies that had more limited objects; not all the defendants are alleged to have desired all four changes.
] The First Claim for Relief in the Connecticut Complaint, id., at 88-90 (§§ 115-119), charging an overarching conspiracy encompassing all of the defendants and all of the conduct alleged, is a special case. See n. 18, infra.
] The California and Connecticut Complaints' Statements of Facts describe this conspiracy as involving "[s]pecialized reinsurers in London and the United States." App. 34 (Cal. Complaint § 106); id., at 87 (Conn. Complaint § 110). The claims for relief, however, name only London reinsurers; they do not name any of the domestic defendants who are the [509 U.S. 764, 10]
petitioners in No. 91-1111. See id., at 48 (Cal. Complaint § 147); id., at 96 (Conn. Complaint § 136). Thus, we assume that the domestic reinsurers alleged to be involved in this conspiracy are among the "unnamed coconspirators" mentioned in the complaints. See id., at 48 (Cal.Complaint § 147); id., at 96 (Conn. Complaint § 136).
] The Ninth, Tenth, and Eleventh Claims for Relief in the California Complaint, id., at 49-50 (§§ 151-156), and the Seventh Claim for Relief in the Connecticut Complaint, id., at 98 (§§ 145-146), allege state law violations not at issue here.
] Under 402 of the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), 96 Stat. 1246, 15 U.S.C. 6a, the Sherman Act does not apply to conduct involving foreign trade or commerce, other than import trade or import commerce, unless "such conduct has a direct, substantial, and reasonably foreseeable effect" on domestic or import commerce. 6a(1)(A). The FTAIA was intended to exempt from the Sherman Act export transactions that did not injure the United States economy, see H.R.Rep. No. 97-686, pp. 2-3, 9-10 (1982); P. Areeda & H. Hovenkamp, Antitrust Law § 236a, pp. 296-297 (Supp. 1992), and it is unclear how it might apply to the conduct alleged here. Also unclear is whether the Act's "direct, substantial, and reasonably foreseeable effect" standard amends existing law or merely codifies it. See id. § 236a, p. 297. We need not address these questions here. Assuming that the FTAIA's standard affects this litigation, and assuming further that that standard differs from the prior law, the conduct alleged plainly meets its requirements.
Under the standard described, it is obviously not a "boycott" for the reinsurers to "refus[e] to reinsure coverages written on the ISO CGL forms until the desired changes were made," ante, at 21, because the terms of the primary coverages are central elements of the reinsurance contract - they are what is reinsured. See App. 16-17 (Cal. Complaint § 26-27). The "primary policies are . . . the basis of the losses that are shared in the reinsurance agreements." 1 B. Webb, H. Anderson, J. Cookman, & P. Kensicki, Principles of Reinsurance 87 (1990); see also id., at 55; Gurley, Regulation of Reinsurance in the United States, 19 Forum 72, 73 (1983). Indeed, reinsurance is so closely tied to the terms of the primary insurance contract that one of the two categories of reinsurance (assumption reinsurance) substitutes the reinsurer for the primary or "ceding" insurer and places the reinsurer into contractual privity with the primary insurer's policyholders. See id., at 73-74; Colonial American Life Ins. Co. v. Commissioner, 491 U.S. 244, 247
Under the test set forth above, there are sufficient allegations of a "boycott" to sustain the relevant counts of complaint against a motion to dismiss. For example, the complaints allege that some of the defendant reinsurers threatened to "withdra[w] entirely from the business of reinsuring primary U.S. insurers who wrote on the occurrence form." App. 31 (Cal. Complaint § 89), id., at 83 (Conn. Complaint § 93). Construed most favorably to respondents, that allegation claims that primary insurers who wrote insurance on disfavored forms would be refused [509 U.S. 764, 12]
all reinsurance, even as to risks written on other forms. If that were the case, the reinsurers might have been engaging in a boycott - they would, that is, unless the primary insurers' other business were relevant to the proposed reinsurance contract (for example, if the reinsurer bears greater risk where the primary insurer engages in riskier businesses). Cf. Gonye, Underwriting the Reinsured, in Reinsurance 439, 463-466 (R. Strain ed. 1980); 2 R. Reinarz, J. Schloss, G. Patrik, & P. Kensicki, Reinsurance Practices 21-23 (1990) (same). Other allegations in the complaints could be similarly construed. For example, the complaints also allege that the reinsurers "threatened a boycott of North American CGL risks," not just CGL risks containing dissatisfactory terms, App. 26 (Cal. Complaint § 74), id., at 79 (Conn.Complaint § 78); that "the foreign and domestic reinsurer representatives presented their agreed-upon positions that there would be changes in the CGL forms or no reinsurance," id., at 29 (Cal. Complaint § 82), id., at 81-82 (Conn. Complaint § 86); that some of the defendant insurers and reinsurers told "groups of insurance brokers and agents . . . that a reinsurance boycott, and thus loss of income to the agents and brokers who would be unable to find available markets for their customers, would ensue if the [revised] ISO forms were not approved," id., at 29 (Cal. Complaint § 85), id., at 82 (Conn. Complaint § 89).
Many other allegations in the complaints describe conduct that may amount to a boycott if the plaintiffs can prove certain additional facts. For example, General Re, the largest American reinsurer, is alleged to have "agreed to either coerce ISO to adopt [the defendants'] demands or, failing that, `derail' the entire CGL forms program." Id., at 24 (Cal. Complaint 64), id., at 77 (Conn. Complaint § 68). If this means that General Re intended to withhold all reinsurance on all CGL forms - even forms having no objectionable terms - that might amount to a "boycott." Also, General Re and several other domestic reinsurers are alleged to [509 U.S. 764, 13]
have "agreed to boycott the 1984 ISO forms unless a retroactive date was added to the claims-made form, and a pollution exclusion and a defense cost cap were added to both [the occurrence and claims-made] forms." Id., at 25 (Cal.Complaint § 66), id., at 78 (Conn. Complaint § 70). Liberally construed, this allegation may mean that the defendants had linked their demands so that they would continue to refuse to do business on either form until both were changed to their liking. Again, that might amount to a boycott. "[A] complaint should not be dismissed unless `it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 246
] The counts at issue in this litigation are the Fifth, Sixth, and Eighth Claims for Relief in the California Complaint. See App. 43-46 (§§ 131-140), id., at 479 (§§ 146-150).
Copyright © Mon Feb 27 12:47:31 PST 2017 FindLaw, a Thomson Reuters business. All rights reserved.