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ACE PROPERTY & CASUALTY INSURANCE COMPANY v. TRAVELERS CASUALTY AND SURETY COMPANY

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Case Number: 
1:14-cv-04901 Search Pacer
Court Type: 
Federal
US District Court: 
Southern District of New York
Date Filed: 
Jun 30 2014

Plaintiff ACE Property & Casualty Insurance Company ('%(SJ&'%£s'lsuccessqgf?in interest
to Central National Insurance Company of Omaha as respects busings vvrMep^fffts behalf by
Cravens Dargan & Co., Pacific Coast ("Central National"), as and for its complaint against
defendant Travelers Casualty and Surety Company f/k/a Aetna Casualty & Surety Company
("Travelers"), alleges as follows:

NATURE OF THE CASE
1. This action seeks declaratory relief pursuant to 28 U.S.C. § 2201 et seq. and Rule
57 of the Federal Rules of Civil Procedure, and injunctive relief pursuant to Rule 65(a) of the
Federal Rules of Civil Procedure. Travelers has purported to demand arbitration against ACE,
asserting that there are arbitrable disputes between Travelers and ACE under two facultative
reinsurance contracts allegedly issued by ACE to Travelers reinsuring, respectively, insurance
policies issued by Travelers to two of its policyholders, Smith Kline Corporation ("Smith Kline")
and Rorer Amchem Corporation ("Rorer Amchem"). In fact, however, ACE did not issue a
facultative reinsurance contract to Travelers in connection with the Rorer Amchem policy.
Moreover, although ACE issued a facultative reinsurance certificate to Travelers in connection
with the Smith Kline policy (the "Smith Kline Certificate"), there currently are no disputes
between the parties under the Smith Kline Certificate, and in any event no disputes that fall
within the scope of the arbitration clause contained in that certificate. Accordingly, ACE brings
this action seeking: (a) a Declaration that no reinsurance contract exists between ACE and
Travelers as respects the Rorer Amchem policy; (b) a Declaration that there are presently no
arbitrable disputes between ACE and Travelers under the Smith Kline Certificate; and (c) a
permanent injunction prohibiting the putative arbitration improperly demanded by Travelers
from proceeding.

PARTIES
2. ACE is an insurance company organized under the laws of the Commonwealth of
Pennsylvania with its principal place of business in Philadelphia, Pennsylvania.
3. Travelers is an insurance company organized under the laws of the State of
Connecticut with its principal place of business in Hartford, Connecticut. Travelers is licensed to
and does regularly carry on the business of insurance in the State of New York.

JURISDICTION AND VENUE
4. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)
because the parties are citizens of different states, and the matter in controversy exceeds
$75,000.00 exclusive of interest and costs.
5. Venue is proper in this district pursuant to 28 U.S.C. §§ 1391(b), (c) and (d)
because Travelers is subject to personal jurisdiction within this district.

FIRST CAUSE OF ACTION - DECLARATORY JUDGMENT
6. ACE repeats and incorporates herein by reference the allegations contained in
paragraphs 1 through 5 above as if fully set forth herein.
7. By letter dated April 28, 2014 ("Travelers' April 28 Letter"), Travelers asserted
that ACE had issued a facultative reinsurance certificate to Travelers reinsuring an insurance
policy issued by Travelers to Rorer Amchem. Travelers' April 28 Letter further asserted that
ACE had failed or refused to reimburse Travelers in full in connection with unspecified Rorer
Amchem reinsurance billings allegedly due from ACE, and purported to demand arbitration
against ACE seeking "an award . . . which, among other things: (1) orders [ACE] to pay the
overdue principal balances in full, plus interest; and, (2) prescribes such other and further relief,
including but not limited to attorneys' fees and costs, as the [arbitration] Panel deems
appropriate."'
8. Upon information and belief, ACE did not issue a facultative reinsurance
certificate to Travelers reinsuring a policy issued by Travelers to Rorer Amchem.
9. ACE has repeatedly requested that Travelers and its broker provide a copy of the
alleged facultative certificate, but no certificate has ever been provided.
10. ACE has undertaken a thorough and exhaustive search of its records for the
alleged facultative certificate, but no such facultative certificate was located.
11. Travelers has provided ACE with so-called "secondary evidence" of the existence
of the alleged facultative certificate, but that purported "evidence" does not establish the
existence of the certificate or any other contract between Travelers and ACE reinsuring the
policy issued by Travelers to Rorer Amchem.
12. An actual and justiciable controversy exists between the parties with respect to the
existence of a facultative reinsurance certificate allegedly issued by ACE to Travelers in
connection with the policy issued by Travelers to Rorer Amchem, including the existence of an
agreement that contains an arbitration clause.
13. Accordingly, ACE seeks a judicial declaration that there is no reinsurance
agreement between it and Travelers reinsuring the insurance policy issued by Travelers to Rorer
Amchem, and thus no reinsurance agreement between the parties that contains an arbitration
clause, and that Travelers' putative arbitration demand dated April 28, 2014 is a nullity.

SECOND CAUSE OF ACTION - DECLARATORY JUDGMENT
14. ACE repeats and incorporates herein by reference the allegations contained in
paragraphs 1 through 13 above as if fully set forth herein.
15. For the period July 27, 1976 to October 1, 1976, ACE issued to Travelers the
Smith Kline Certificate. Reinsurance Certificate No. CNS 9-41-91, reinsuring Travelers policy
number 04XN89SCA issued to Smith Kline. The Smith Kline Certificate provides reinsurance
in the amount of "$500,000 each occurrence and in the aggregate part of $5,000,000 xs
$15,000,000."
16. The Smith Kline Certificate provides that "[pjayment of its proportion of loss and
expense paid by [Travelers] will be made by [ACE] to [Travelers] promptly following receipt of
proof of loss."
17. The Smith Kline Certificate contains an arbitration clause that provides for
arbitration only of an "irreconcilable difference of opinion" between the parties "as to the
interpretation of this Contract."
-4-
18. Travelers' April 28 Letter asserted that ACE had failed or refused to reimburse
Travelers in full in connection with unspecified Smith Kline billings allegedly due from ACE,
and purported to demand arbitration against ACE pursuant to the Smith Kline Certificate seeking
"an award . . . which, among other things: (1) orders [ACE] to pay the overdue principal
balances in full, plus interest; and, (2) prescribes such other and further relief, including but not
limited to attorneys' fees and costs, as the [arbitration] Panel deems appropriate."
19. Upon information and belief, there are no proofs of loss that have been provided
to ACE and remain unpaid under the Smith Kline Certificate.
20. ACE has repeatedly requested that Travelers and its broker provide copies of the
alleged unpaid proofs of loss, but no proofs of loss have ever been provided.
21. ACE has undertaken a thorough and exhaustive search of its records for any
unpaid proofs of loss under the Smith Kline Certificate, but no such proofs of loss have been
located.
22. There presently is no "irreconcilable difference of opinion" between ACE and
Travelers "as to the interpretation of [the Smith Kline Certificate].'"
23. An actual and justiciable controversy exists between the parties with respect to the
existence of an arbitrable dispute between ACE and Travelers that falls within the scope of the
arbitration clause contained in the Smith Kline Certificate.
24. Accordingly, ACE seeks a judicial declaration that there presently are no
arbitrable disputes between the parties under the Smith Kline Certificate, and that Travelers'
putative arbitration demand dated April 28, 2014 is a nullity.
-5-

THIRD CAUSE OF ACTION - INJUNCTIVE RELIEF
25. ACE repeats and incorporates herein by reference the allegations contained in
paragraphs 1 through 24 above as if fully set forth herein.
26. Travelers" April 28 Letter purports to demand arbitration against ACE despite the
fact that: (a) there is no reinsurance agreement between ACE and Travelers reinsuring the
insurance policy issued by Travelers to Rorer Amchem; and (b) there presently are no arbitrable
disputes between ACE and Travelers under the Smith Kline Certificate.
27. ACE will suffer irreparable harm unless this Court grants the injunctive relief
ACE seeks because the arbitration, if allowed to proceed, will purport to adjudicate claims and
disputes that ACE has not agreed to arbitrate, and ACE may face substantial prejudice if it elects
not to participate in the putative arbitration improperly commenced by Travelers.
28. ACE has no adequate remedy at law.
29. Travelers will suffer no irreparable harm in the event an injunction issues.
30. The balance of equities weighs heavily in favor of an injunction.
31. The public interest would be served by enjoining Travelers from prosecuting its
putative claims against ACE in arbitration because ACE and Travelers did not agree to arbitrate
such disputes.

PRAYER FOR RELIEF
WHEREFORE, ACE respectfully requests:
(a) A Declaration that there is no reinsurance agreement between ACE and Travelers
in relation to the insurance policy issued by Travelers to Rorer Amchem;
(b) A Declaration that there are presently no arbitrable disputes between ACE and
Travelers under the Smith Kline Certificate, and/or that there are presently no
Case l:14-cv-04901-RMB Document 2 Filed 06/30/14 Page 7 of 7
disputes between ACE and Travelers that fall within the scope of the arbitration
provision contained in the Smith Kline Certificate;
(c) A Declaration that Travelers' putative demand for arbitration is a nullity;
(d) An injunction permanently enjoining the putative arbitration demanded by
Travelers from proceeding;
(e) An order staying the putative arbitration demanded by Travelers pending final
resolution of this action;
(

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.