Neles-Jamesbury Inc. v. Pohjola Ins. Co. Ltd. involved a breach of contract action between a Massachusetts-based insurer, Neles-Jamesbury, Inc. (“NJI”) and a Finnish reinsurer, Pohjola Ins. Co. Ltd. (“Pohjola”). Pohjola provided worldwide reinsurance coverage for Metso Oy, a Finnish corporation, and its subsidiaries. NJI was acquired by Metso Oy, and Metso Oy requested that Pohjola provide gap coverage for NJI during the acquisition period.

Pohjola was not licensed in Massachusetts, so it presented the NJI risk to Lumbermens Mutual Casualty Co. (“Lumbermens”), with whom Pohjola had a reinsurance agreement that allowed it to request that Lumbermens write policies in jurisdictions in which Pohjola was not licensed.  Lumbermens accepted the risk, and issued a CGL policy to NJI, which was 100% reinsured by Pohjola.

Thereafter, a dispute arose under the Lumbermens policy, and NJI brought an action in Massachusetts federal court directly against Pohjola, asserting claims under the policy on the basis that Lumbermens was Pohjola’s agent.  Pohjola moved to dismiss the claim for lack of personal jurisdiction.

The court agreed and held that there was insufficient evidence to prove that Lumbermens acted as Pohjola’s agent when issuing the NJI policy. The court noted that under the reinsurance agreement between Pojhola and Lumbermens, it had the right to refuse risks presented by Pohjola and to make decisions on claims. In addition, Lumbermens also was obligated under the contract to pay claims before seeking reimbursement from Pohjola.  Moreover, the court found that Lumbermens and NJI negotiated the terms of the policy, and that Lumbermens handled the claims at issue for six years without informing Pohjola. Accordingly, the court held that there was no “pass-through” under the agreement that would allow NJI to proceed against Pohjola directly.

As there was no contractual privity between NJI and Pohjola, or agency relationship between Pohjola and Lumbermens, the court held that it would not be reasonably foreseeable that Pohjola could be brought into court in Massachusetts. Therefore, there were insufficient contacts between Pohjola and Massachusetts, and the exercise of personal jurisdiction was deemed to be inappropriate under the Massachusetts long-arm statute.

Click here to review a copy of the District Court’s decision, captioned Neles-Jamesbury, Inc.,, v. Pohjola Ins. Co. Ltd. No.10-cv-40055-FDS (D.Mass. 2010)