A Pennsylvania federal court judge recently dismissed a cedent’s lawsuit against its reinsurer for want of personal jurisdiction. See Pacific Employers Insurance Company v. AXA Belgium S.A. f/k/a Royale Belge Incendie Reassurance, No. 2:09-cv-05211-MSG (E.D.Pa. Apr. 27, 2011). The case involved a breach of contract claim asserted by a cedent domiciled in Pennsylvania against a Belgian reinsurer. The cedent alleged that the reinsurer refused to pay certain claims arising under a Quota Share Reinsurance Agreement, which was negotiated and underwritten in California by the cedent’s agent. Notably, at the time the reinsurance agreement was entered into, the cedent was domiciled in California.

The reinsurer moved to dismiss the action for lack of personal jurisdiction and based on the doctrine of forum non conveniens. The court granted the reinsurer’s motion, finding that the court lacked general jurisdiction over the dispute because the reinsurer did not have continuous and systematic contacts with Pennsylvania in the relevant timeframe, and was not authorized to do business in that state. The court also concluded that it lacked specific jurisdiction , noting that the underwriting of the Quota Share Agreement had taken place outside of Pennsylvania, and that two audits the reinsurer conducted in Pennsylvania, along with communications with the cedent (including claim payments), were the result of the cedent’s unilateral decision to reincorporate in that state.

Last, the court declined to transfer the suit to California based upon the “interests of justice.” The court noted that neither party was presently domiciled in California (or had been for fifteen years), none of the witnesses or relevant documents were located in California, and that California courts lacked authority over a dispute concerning a Belgian company that allegedly breached a reinsurance agreement with a Pennsylvania company. The court stated that litigation in California would be burdensome on both parties, adding that neither side disputed the availability of Belgium as an alternative forum for their dispute – a jurisdiction in which both companies were authorized to do business.

This decision is notable because it involved a reinsurance agreement that did not include a service of suit, arbitration, choice of law or any other forum selection provision. The failure to address these matters is an open invite to future litigation, such as what occurred in this case.

Click here to review the district court’s decision.