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Massachusetts Appellate Court Rules Dispute Over “Bad Faith” Between Insurer And Reinsurer Must Stay In Massachusetts – – For Now

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The Massachusetts Appellate Court recently reversed a trial court’s dismissal of claims for tortious interference and violation of M. G. L. 93A (unfair business practices) because the record was unclear as to whether Massachusetts or New York substantive law should apply. Resolute Mgmt. Inc. v. Transatlantic Reinsurance Co.,87 Mass. App. Ct. 296, 29 N.E.3d 197 (2015).

In 2013, National Indemnity Company (“National”) and Resolute Management Company (“Resolute”) commenced a lawsuit against Transatlantic Indemnity Company (“Transatlantic”) and Alleghany Corporation (“Alleghany”) seeking damages for alleged unfair business practices and interference with contractual relations. The dispute arose from an asbestos reinsurance pool in which National and Resolute administered the collection of reinsurance recoveries. According to the complaint, Transatlantic purportedly refused to timely pay its obligations as punishment for the rejection of its offer to commute its obligations under the reinsurance agreements. National and Resolute alleged that Transatlantic was attempting to harm client relationships, impede their ability to perform contractual obligations, and force National to commute Transatlantic’s asbestos-related obligations at an unfair price.

The trial court dismissed Resolute’s claims because they were not a party to the complaint and granted Transatlantic’s motion to dismiss under Mass.R.Civ.P 12(b)(6). National appealed the motion. 

The Court of Appeals concluded that the viability of the M.G.L. c. 93A allegations and National’s allegations of tortious interference were dependent on whether Massachusetts law applied instead of New York law. In New York, plaintiffs must demonstrate an actual breach of contract, whereas Massachusetts law requires only that a defendant made performing the contract more expensive or burdensome. In order to determine the appropriate jurisdiction, the defendant is required to show that the center of gravity is not primarily and substantially located in Massachusetts.

The trial court concluded that New York was the appropriate forum, but the Appellate Court disagreed and ruled that the allegations in the complaint were enough to survive a motion to dismiss because the record did not contain sufficient facts to determine the center of gravity. The Appellate Court reversed the dismissal and held that the case should proceed to discovery to develop a record sufficient for the judge to conduct a center of gravity analysis.