Anham U.S. v. Afghan Glob.

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ANHAM USA, INC. and ANHAM FZCO, Plaintiffs, v. AFGHAN GLOBAL INSURANCE, LTD., CERTAIN UNDERWRITERS OF LLOYD'S, LONDON, USI INSURANCE SERVICES, and TYSERS INSURANCE BROKERS, Defendants.

No. 23-CV-2763 (CS)

United States District Court, S.D. New York

July 10, 2024

Appearances:

W Hunter Winstead Daniel I. Wolf Ethan H. Kaminsky Gilbert LLP Washington, DC Counsel for Plaintiffs

Edward J. Baines Ryan M. Jerome Saul Ewing LLP New York, New York Counsel for Defendant USI Insurance Services

Edward J. Kirk Scott W. Schwartz Clyde & Co U.S. LLP New York New York Counsel for Defendant Tysers Insurance Brokers

OPINION & ORDER

CATHY SEIBEL, U.S.D.J.

Before the Court are the motions of Defendant USI Insurance Services, (ECF No. 79), and Defendant Tysers Insurance Brokers, (ECF No. 85), to dismiss the Amended Complaint (ECF No. 72 (“AC”)), pursuant to Federal Rule of Civil Procedure (“FRCP”) 12, or in the alternative, to stay the action.

I. BACKGROUND

A. Facts

The AC alleges as follows. Plaintiff ANHAM FZCO is a government contractor that conducts procurement and logistics around the world, including providing food to United States troops in the Middle East and Afghanistan. (AC ¶ 22.) ANHAM FZCO is incorporated and headquartered in Dubai, United Arab Emirates. (Id.) Plaintiff ANHAM USA, Inc. (together with ANHAM FZCO, “Plaintiffs” or “ANHAM”), is a corporate affiliate of ANHAM FZCO that provides ANHAM FZCO with administrative and management services. (Id. ¶ 21.) ANHAM USA, Inc. is a Virginia corporation with its principal place of business in Virginia. (Id.) Defendant USI Insurance Services (“USI”) is a Delaware limited liability company with its principal place of business in Valhalla, New York, that provides insurance brokerage and consulting services in connection with, among other things, property insurance and specialty solutions. (Id. ¶ 23.) USI's sole member is a Delaware corporation with its principal place of business in New York. (Id.) Defendant Tysers Insurance Brokers (“Tysers” and together with USI, the “Broker Defendants”) is a wholesale insurance broker providing international services. (Id. ¶ 24.) Plaintiffs allege on information and belief that Tysers is incorporated and headquartered in the United Kingdom. (Id.)

This case arises from Political Violence Insurance that ANHAM purchased for a 1.3 million square foot warehouse in the Bagram District, Parwan Province, Afghanistan (the “Warehouse” or “Bagram Warehouse”), near the U.S. Air Force base then in Bagram. (Id. ¶¶ 1, 30.) In 2011, ANHAM began constructing the Bagram Warehouse as part of an effort to secure a contract to provide food to U.S. troops and others in Afghanistan. (Id. ¶ 27.) The construction of the Warehouse - which cost roughly $40 million and was valued by ANHAM at nearly $45 million - was completed in August 2012, after which ANHAM FZCO was awarded the contract by the U.S. Defense Logistics Agency. (Id. ¶¶ 28-29.) The Bagram Warehouse's location and unique value, and the sensitivity of its use, required ANHAM to maintain a significant security presence, (id. ¶ 32), and it was a valuable potential target for the Taliban, (id. ¶ 33). As a result, ANHAM began purchasing Political Violence Insurance in 2012, using USI as its broker and primary point of contact to negotiate the coverage. (Id. ¶ 34.) USI entered into a sub-brokering agreement with Tysers under which those parties agreed that USI had “been appointed by the Client [ANHAM] to act as its (re)insurance broker for the purposes of providing advisory and placement services in respect of an insurance contract” and that Tysers was engaged to “assist the Broker in connection with the placement of the Client's [ANHAM's] (re)insurance contract(s).” (Id. ¶ 35 (alterations in original); see ECF No. 87-1 (“Sub-Brokering Agmt.”) ¶ 1.) The agreement further provided that ANHAM had consented to Tysers's engagement as subbroker but that Tysers would not contact ANHAM and would take instruction only from USI. (Sub-Brokering Agmt. ¶¶ 1-2.)

On January 2, 2014, during negotiations to place the Political Violence Insurance, a representative of ANHAM emailed USI asking, “I see you are using Afghan Global Insurance as the Fronting Company. Who is the primary insurance company?” (Id. ¶ 36.)^[1] USI responded, “We do not understand this question. It is a legal requirement that this insurance is fronted in Afghanistan and Lloyd's, London Insurers Underwriters will provide the reinsurance. This will be led by London Underwriters through virtue of the Claims Control Clause contained within our wording.” (Id. ¶ 37.) USI had previously explained that “[f]ronting carriers are admitted insurers (in a country) that issue a policy on behalf of a non-admitted carrier (London or Belgium) without the intention of transferring the risk.” (Id. ¶ 38.) ANHAM, based on USI's advice, agreed with USI's arrangement to place the Political Violence Insurance and instructed USI to bind its coverage on January 3, 2014. (Id. ¶ 37.)

According to the AC, ANHAM was reasonably led to believe that while an Afghan fronting company facilitated the placement of insurance on paper to comply with local laws, the underwriters at Lloyd's, London were the actual insurers and would, pursuant to the “Claims Control Clause” in the policy, take the lead on any claim that ANHAM might make. (Id. ¶ 39.) The AC alleges on information and belief that “the Lloyd's, London Insurers” covered 100% of the risk in the Afghan Global policy, Afghan Global was not involved in the “underwriting, renewal, formulation or placement of ANHAM's insurance coverage beyond issuing local paper and paying local taxes,” and Afghan Global typically does not perform underwriting for policies where it does not retain any risk or obligations. (Id. ¶ 40.)^[2] Similarly, the AC alleges on information and belief that “the Lloyd's, London Insurers” underwrote ANHAM's Political Violence Insurance in all material respects and requested that the Broker Defendants arrange the “fronting” with Afghan Global. (Id. ¶ 41.) ANHAM renewed the Political Violence Insurance bi-annually, using the same insurers and fronting arrangement as discussed above. (See id. ¶ 42.)

After several bi-annual renewals, the Lloyd's Insurers issued Policy Number B0572PV201437 (the “Primary Policy”) covering November 7, 2020 to November 7, 2021. (Id. ¶ 44; see ECF No. 72-1.) The Primary Policy identifies ANHAM as the “Original Insured,” and its “Risk Details” specify that it covered up to $20 million in losses arising from “RIOTS, STRIKES, CIVIL COMMOTION, MALICOUS DAMAGE, WAR, TERRORISM AND POLITICAL VIOLENCE (INCLUDING TERRORISM AND SABOTAGE) REINSURANCE.” (AC ¶ 44; see ECF No. 72-1 at 1.) The Primary Policy set forth the insured interest as follows:

In respect of Property Damage only as a result of Direct physical loss of or damage to the interest insured caused by or arising from Riots and/or Strikes and/or Civil Commotions including fire damage and loss by looting following Riots and/or Strikes and/or Civil Commotions and/or Malicious Damage, Insurrection, Revolution, Rebellion, Mutiny and/or Coup d'Etat, War and/or Civil War (including Terrorism and Sabotage) to the Insured's Physical Assets as declared to Underwriters and held on file with Tysers.

(AC ¶ 45; see ECF No. 72-1 at 1.) A copy of the Primary Policy was delivered to ANHAM at its Virginia address. (AC ¶ 44.) The Lloyd's Insurers also issued ANHAM a $21 million excess policy - containing a scope of coverage and terms materially identical to the Primary Policy - for the same period under Policy Number B0572PV201700 (the “Excess Policy” and together with the Primary Policy, the “Lloyd's Policies”). (AC ¶ 47; see ECF No. 72-2 at 1.) ANHAM paid premiums on the Lloyd's Policies, as well as on the Afghan Global policy, to USI, and believes USI forwarded the payments to the Lloyd's Insurers and Afghan Global. (AC ¶ 48.)

On August 15, 2021, Taliban forces took control of Parwan Province, including the Bagram Warehouse. (Id. ¶¶ 52, 56.) ANHAM, through the Broker Defendants, notified its insurers about these events on August 17, 2021, referencing the Lloyd's Policies, which were the only policies that the Broker Defendants had provided to ANHAM for the Bagram Warehouse for the relevant period. (Id. ¶ 58.) On October 25, 2021, the Lloyd's Insurers wrote to Afghan Global to request information about the claim and to indicate that it was “taking control of the defense and settlement of any claim made against [Afghan Global] by ANHAM.” (Id. ¶ 59.) The Lloyd's Insurers also requested a copy of the Afghan Global policy, apparently acknowledging that the Lloyd's Insurers were unaware of the policy that they were allegedly reinsuring. (Id.) Plaintiffs allege that these actions show that Defendants were aware that the risk resided with the Lloyd's Insurers, not Afghan Global. (Id.)

On December 13, 2021, ANHAM filed a Proof of Loss notifying Afghan Global and the Lloyd's Insurers that it sustained a total loss somewhat exceeding the policy limits, and requesting payment of the full $41 million for which the policies provided. (Id. ¶ 60.) On December 15, 2021, the Lloyd's Insurers' counsel sent Afghan Global correspondence asserting that the Lloyd's Insurers had learned “of certain serious allegations of criminality made against ANHAM that were not disclosed to Reinsurers prior to the inception of the Reinsurances, on 7 November 2020,” and that the Lloyd's Insurers were reserving their rights regarding potential breaches under United Kingdom law. (Id. ¶ 62.) While the Lloyd's Insurers acknowledged receiving ANHAM's Proof of Loss, they asserted that they “have no privity of contract with ANHAM” and reserved their rights. (Id. ¶ 63.)

On January...