Opinion ID: 784807
Heading Depth: 2
Heading Rank: 3

Heading: Lloyd's of London

Text: 17 Lloyds of London is not an insurance company but rather a self-regulating entity which operates and controls an insurance market. John M. Sylvester & Roberta D. Anderson, Is It Still Possible To Litigate Against Lloyd's in Federal Court?, 34 Tort & Ins. L.J. 1065, 1068 (1999). The Lloyd's entity provides a market for the buying and selling of insurance risk among its members who collectively make up Lloyd's. Certain Interested Underwriters at Lloyd's, London v. Layne, 26 F.3d 39, 41 (6th Cir.1994) (citing Clifford Chance, Doing Business in the United Kingdom, §§ 46.02, 46-6 to 46-8 (Barbara Ford, A.D.M. Forte, & Herbert Wallace eds. 1990); Eileen M. Dacey, The Structures of the Lloyd's Market, in Lloyd's, the ILU, and the London Insurance Market 1990, at 33, 49-0 (PLI Commercial Law & Practice Course Handbook Series No. 555, 1990)). Thus, a policyholder insures at Lloyd's but not with Lloyd's. Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 39:47 (3d ed. 1995) (citing Bickelhaupt, D., General Insurance 775 (1983, 11th ed.)). 18 The members or investors who collectively make up Lloyd's are called Names and they are the individuals and corporations who finance the insurance market and ultimately insure risks. Sylvester & Anderson, supra, at 1068. Names are underwriters of Lloyd's insurance and they invest in a percentage of the policy risk in the hope of making return on their investment. Squibb, 160 F.3d at 929. Lloyd's requires Names to pay a membership fee, keep certain deposits at Lloyd's, and possess a certain degree of financial wealth. Chemical Leaman Tank Lines, Inc. v. Aetna Cas. & Surety Co., 177 F.3d 210, 221 (3d Cir.1999). Each Name is exposed to unlimited personal liability for his proportionate share of the loss on a particular policy that the Name has subscribed to as an underwriter. Squibb, 160 F.3d at 929. Typically hundreds of Names will subscribe to a single policy, and the liability among the Names is several, not joint. Id. 19 Most Names or investors do not actively participate in the insurance market on a day to day basis. Layne, 26 F.3d at 42. Rather, the business of insuring risk at Lloyd's is carried on by groups of Names called Syndicates. Id. at 41-42. In order to increase the efficiency of underwriting risks, a group of Names will, for a given operating year, form a Syndicate which will in turn subscribe to policies on behalf of all Names in the Syndicate. Squibb, 160 F.3d at 929; Chemical Leaman, 177 F.3d at 221. A typical Lloyd's policy has multiple Syndicates which collectively are responsible for 100 percent of the coverage provided by a policy. Sylvester & Anderson, supra, at 1068. The Syndicates themselves have been said to have no independent legal identity. Id. Thus, a Syndicate is a creature of administrative convenience through which individual investors can subscribe to a Lloyd's policy. A Syndicate bears no liability for the risk on a Lloyd's policy. Rather, all liability is born by the individual Names who belong to the various Syndicates that have subscribed to a policy. 20 Each Syndicate appoints a managing agent who is responsible for the underwriting and management of each Name's investments. Chemical Leaman, 177 F.3d at 221. The managing agent receives this authority through contracts with each Name. Id. The managing agent, which is typically a legal entity, appoints one of its employees to serve as the active underwriter for the Syndicate. Id. at 222. The active underwriter selects the risks that the Names in the syndicate will underwrite and has the authority to bind all Names in the Syndicate. Id. The active underwriter has the authority to buy and sell insurance risks on behalf of all Names in the syndicate, and to bind the Syndicate members in these transactions. Layne, 26 F.3d at 42. 21 In practice, since many Names through their respective Syndicates are liable on a Lloyd's policy, the active underwriter from one of the underwriting Syndicates is designated as the representative of all the Names on the policy. Squibb, 160 F.3d at 929. This single underwriter, called the lead underwriter on the policy, is usually the only Name disclosed on the policy with all other Names remaining anonymous. Id. The lead underwriter is typically the first to subscribe to the policy and typically assumes the greatest amount of risk. The Lloyd's corporate entity maintains records on the identity and last known residence of Names insuring risk in the Lloyd's market. That information is kept strictly confidential. 22 In sum, while an insured receives a Lloyd's policy of insurance, what he has in fact received are numerous contractual commitments from each Name who has agreed to subscribe to the risk. The Names are jointly and severally obligated to the insured for the percentage of the risk each has agreed to assume. The insured does not have to sue each Name individually however to collect on their individual promises because the typical Lloyd's policy contains a clause providing that any [Name] can appear as representative of all [Names]. Id. Thus, when litigation ensues over a Lloyd's policy, the only named Lloyd's party appearing in the litigation is usually the lead underwriter on the policy. Id. The standard Lloyd's policy states that in any suit instituted against any one of [the Names] upon this contract, [all the Names] will abide by the final decision of such Court or of any Appellate Court in the event of an appeal. 4 Id. Thus, each Name is contractually bound on an individual basis to the insured to adhere to any adverse judgment reached in the suit notwithstanding that only one Name participates in the litigation as a named party. Thus, a Syndicate, being only a grouping of Names, has no contractual relationship with the insured. 23 In the instant case, Syndicate 190 is a single-Name Syndicate with Liberty as its sole Name and underwriting member. Liberty is the lead underwriter on the Policy and insures 32.79 percent of the risk which is more than the risk insured by any other Name on the Policy. 5 Liberty is a British corporation with its principal place of business in the United Kingdom. Thus, if only Liberty's citizenship is relevant for jurisdictional purposes, then the parties are completely diverse because DGH is a citizen of Texas, Delaware, and New York. If, however, the citizenship of every Name subscribing to the Policy is relevant for jurisdictional purposes, then the district court's dismissal was proper as Liberty has not alleged the citizenship of all Names subscribing to the policy, and at least one Name is believed to be a citizen of Texas.