Aldrich v Marsh & McLennan Co., Inc.

[*1] Aldrich v Marsh & McLennan Co., Inc. 2009 NY Slip Op 51998(U) [25 Misc 3d 1207(A)] Decided on September 29, 2009 Supreme Court, New York County Kornreich, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 29, 2009
Supreme Court, New York County

George Aldrich, et al., Plaintiffs,

against

Marsh & McLennan Co., Inc., Marsh, Inc., Guy Carpenter & Co., Inc., C.T. Bowring & Co. Ltd., Winchester Bowring, Inc. & Sedgwick Group, PLC., Defendants.



605336/99



Attorney for The Aldrich Group of Plaintiffs: David L. Trueman, Law Offices of David L. Trueman, P.C., Mineola, New York

Attorneys for the Defendants: Willkie Farr & Gallagher LLP, New York, New York

Shirley Werner Kornreich, J.

The present action arises from plaintiffs' involvement as investors (Names) in syndicates that are reinsurance underwriters for asbestos related risks through the Lloyd's of London (Lloyd's) insurance market. Defendants Marsh & McLennan Co., Inc., Marsh, Inc., Guy Carpenter & Co., Inc., C.T. Bowring & Co. Ltd., and Sedgwick Group, PLC, are the brokers who procured the insurance and reinsurance covering various companies' risks of exposure to asbestos claims. Defendants now move to dismiss plaintiffs' second amended verified complaint pursuant to CPLR 3211 and 3016(b). The first amended complaint, which contained causes of action for negligent misrepresentation and fraud, was dismissed by Justice Cahn as time-barred. Justice Cahn then granted plaintiffs' motion to amend the pleadings on October 15, 2007. Familiarity with Justice Cahn's previous decisions is presumed.

I.Background

Briefly, in 2002, Justice Cahn found that plaintiffs consisted of 104 individual Names and two corporate reinsurance companies. Justice Cahn further found that common to the causes of action alleged in the first complaints, were allegations that Marsh & McLennan Co., Inc. and its wholly owned subsidiary Marsh, Inc. (collectively, Marsh), as insurance broker for Johns-Manville, knew the extent of Johns-Manville's liability for asbestos related illnesses as early as 1978, but never revealed the true extent of that liability to the underwriting industry, or fraudulently misrepresented those facts to the underwriters and to reinsurers. Plaintiffs contended they first learned of the true extent of the asbestos claims against Johns-Manville in 1996, through the efforts of one of the Names, a journalist, but not a plaintiff in the action. This [*2]journalist allegedly had uncovered documentary proof of defendants' early knowledge of the true risks facing Johns-Manville and made the information known to plaintiffs.

Justice Cahn dismissed plaintiffs' claims for negligent misrepresentation based on the running of the six-year statute of limitations, which was found to have commenced at the time the injury was incurred, without any toll for injuries which were alleged to have been unknown to plaintiffs when incurred and later discovered. The claims for fraud were found to have been sufficiently pleaded and were referred to a Special Referee to hear and report on the issue of their timeliness, under the discovery rule contained in CPLR 208 (g). Justice Cahn confirmed the referee's finding that, with reasonable diligence, the plaintiffs could have discovered the defendants' alleged fraud much earlier than they did, and dismissed the remaining fraud claims based on the running of the statute of limitations. His decision was affirmed on appeal by the Appellate Division, 52 AD3d 435 (1st Dept 2008), and leave to appeal was denied by the Court of Appeals, 11 NY3d 716 (2009).

II.Second Amended Complaint

The single claim in the instant action is based on common-law indemnity against the brokers who placed the insurance. The claim is brought by 64 Names who are residents of Canada, the United Kingdom and the United States. In its ad damnum clause, plaintiffs seek a declaratory judgment of non-liability with respect to possible future damages for which they may be liable in related lawsuits, as well as indemnification, punitive and exemplary damages.

Plaintiffs again claim that they invested in syndicates that underwrote policies of reinsurance and insurance based on defendants' fraudulent or negligent omissions regarding the risks to be insured.[FN1] As a result of defendants' alleged misrepresentations of the risks to be covered and resulting failure to collect sufficient premiums, plaintiffs claim they had to pay out on covered risks both directly and by contribution to a settlement agent, or by some other payment vehicle. Plaintiffs contend defendants' conduct "breached their...duty of utmost good faith," "uberrimae fidei," owed to the syndicates and plaintiffs.

According to plaintiffs, this second amended complaint is necessitated by "material new developments" which occurred following the filing of the first amended complaint on May 22, 2001. Second Amended Complaint, ¶ 2. Specifically, they allege:

In the four years following the filing of that amended complaint...

material new developments have occurred including the payment

of funds by plaintiffs for which they claim they should be indemnified

and information relating to the conduct of defendants which has

exposed plaintiffs to additional liabilities and risks.

Id. Thus, plaintiffs presently are complaining of conduct which is alleged to have occurred between 2001 and 2005. Plaintiffs claim that they now are, and will continue to be, held liable for asbestos-related risks connected to the products of four companies: Babcox and Wilcox; Honeywell; Brown & Root and Dresser Industries, under the name of Haliburton; and CSR, Ltd., as well as other claims they have paid or will have to pay in the future. Second Amended Complaint at ¶¶ 29, 60(d). These claims include more than $1.6 billion in settlement proceeds [*3]paid by the reinsurance company Equitas formed by Lloyd's as part of a broad-reaching plan to settle pre-1993 asbestos-related claims. Under settlement agreements with these four asbestos-producing insureds, Equitas received releases of all pending and future claims.

Plaintiffs also contend that defendants' concealment of the actual risks of asbestos, as well as risks of insuring or reinsuring asbestos-related liabilities, harmed not only the insurance and reinsurance industry, but the public in general, as well as individuals who contracted asbestosis and other asbestos-related illnesses for whom insurance was delayed or completely denied. Plaintiffs claim to have incurred over $1 billion in asbestos losses involving policies brokered by defendants, other than the policies issued to Johns-Manville Companies. Plaintiffs further claim a new loss of $245 million related to claims of bad faith or fraudulent handling of claims related to Johns-Manville Company policies and approved by a judge in the United States Bankruptcy Court for the Southern District of New York. Second Amended Complaint ¶66. Additionally, plaintiff R.H.M. Outhwaite Ltd. (Outhwaite Agencies) seeks damages for having been forced to cease its underwriting business as a foreseeable result of defendants' alleged conduct.

III.Motion to Dismiss

Through their exhibits, including plaintiffs' complaints, defendants explain that Lloyd's is not an insurer but a market for buying and selling insurance risk. Names are the investors who provide the financial backing for underwriting the risks. Names invest through syndicates which authorize a managing agent to conduct the underwriting for the syndicate. The syndicates do not have limited liability, and so the personal assets of the Names are at risk should an insured obtain a judgment for more than the assets of the syndicate that insured him.

Marsh Inc. operated as an insurance broker in the United States and is a subsidiary of Marsh & McClennan Cos., Inc. (MCC). Guy Carpenter & Co. also is a broker in the United States and, according to plaintiffs' complaint, a wholly owned subsidiary of MCC that provides reinsurance brokering. The United States brokers placed risks into Lloyd's through their agents — C.T. Bowring & Co., Ltd., Winchester Bowring, Inc. (Bowring entities) and Sedgwick Group, PLC. (Sedgwick), all Lloyd's brokers..

Plaintiffs have not pled, but the parties' motion papers, oral argument and a number of decisions have described the crisis visited on Lloyd's by hundreds of thousands of asbestos related lawsuits, particularly in the 1970s and 1980s, and the response. See, e.g., Tropp v The Corp. of Lloyd's, 2008 U.S. Dist. LEXIS 30635 (SDNY, Mar. 25, 2008).[FN2] As explained in Tropp at 7, Lloyd's is run by the Council of Lloyd's, which promulgates by-laws. Names are required to become members of the Society of Lloyd's. Id. Individual syndicates underwrite insurance for one year and must remain open to calculate gains and losses for three years, at the end of which [*4]time a syndicate must find a new syndicate to reinsure its liabilities. Id. at 8-9. As found by Justice cahn, Lloyd's stopped writing asbestos policies by 1986. Thus, the syndicates at issue here are reinsurers of asbestos risk.

Many syndicates were forced to issue "cash calls" to their Names to meet the asbestos-related claims against them. In the ensuing years, the Names brought lawsuits against entities involved with the Lloyd's market. In the mid-1990s, Lloyd's attempted to "ring fence" its cash-call and litigation problems created by the asbestos crisis. After three years and at a cost of over $100 Million, Lloyd's issued a restructuring plan called "Reconstruction and Renewal," or "R & R." To ward off this disaster the governing body of Lloyd's, a Council elected primarily by the managing agents of the syndicates, created a company called "Equitas" to reinsure the risks underwritten by the syndicates. The reinsurance would both protect the insureds against being unable to collect the proceeds of their insurance policies from the syndicates and protect the names from unlimited personal liability for the underwriting losses. To finance the new company, Lloyd's levied an assessment (the reinsurance premium) against all the names. Lloyd's offered a discount on the assessment to induce the names to go along with this plan voluntarily, and 95 percent of them did.

Society of Lloyd's v. Ashenden, 233 F.3d 473, 478 (7th Cir. 2000).

Again, as explained by the court in Tropp, id. at 17, R & R applied mandatorily to all Names. The Lloyd's syndicates had transferred all open liabilities preceding 1993 to Equitas, and Equitas, after calculating the premiums owed by each Name, assigned the right to collect these premiums to Lloyd's. Id. Further, Equitas is owned by a trust whose beneficiaries are the Names. Id. Moreover, through by-laws and resolutions, Lloyd's Council appointed a substitute agent for Names, which agent signed the Equitas Contract on behalf of all Names. Id. at 20. The validity of the Equitas Contract has been upheld by courts repeatedly and the judgments obtained against non-settling Names, enforced. Id. at 23. Under the Equitas Contract, settling Names gave Equitas all authority for the handling and settlement of pre-1993 asbestosis and other claims, and released Lloyd's and various market participants, including defendants, of all potential claims.

The application of the Equitas Contract to non-settling Names was explored by the District Court in Society of Lloyd's v Webb, 156 F Supp 2d 632 (ND Tex 2001), aff'd 303 F3d 325 (5th Cir 2002): The Equitas premium was mandatory and each Name was required to pay Equitas the amount shown on his statement. If, however, the Name signed the settlement agreement included in the R & R package, the Name would be awarded a credit, which would result in a reduction in the amount he paid in. This credit was from the Names' litigation recoveries impounded by Lloyd's and settlement proceeds attributable to the Names. To obtain the credit, the Name was required to grant Lloyd's a release. However, the Names were not given a reciprocal release and were not provided indemnity. Furthermore, if Equitas were to fail, the Names were still required to provide the additional funds necessary until all liabilities for the old policies were paid. Finally, Lloyd's disclaimed any responsibility for the [*5]accuracy of the statements in the settlement proposal and the Names were required to waive rescission or damages claims based on misrepresentations in the settlement proposal.

The legality of this arrangement has been litigated extensively both in the U.K. and the U.S., and it has been found to be enforceable. Therefore, it is not in issue here. Defendants, however, have not submitted a copy of the Equitas Reinsurance Contract and, only recently, at the court's request, have plaintiffs specified which of the Names are settling and which are non-settling.

That is, in a post-hearing letter requested by the court, counsel for plaintiffs identified nine Names who voluntarily signed R & R and signed releases, twenty-one Names who did not voluntarily sign R & R but were sued for contributions (one has withdrawn from the suit), thirty Names who did not voluntarily sign R & R but were not sued for contributions and four Names who had not responded to counsel's inquiries. In a subsequent letter dated July 23, 2009, counsel informed the court that three of the non-responding four Names had finally responded and indicated they did not voluntarily sign R & R. Counsel did not, however, indicate whether these three Names had been sued for contributions.

Defendants make the following arguments in support of their motion to dismiss: (1) the indemnity claim, based on the duty of utmost good faith, uberrimae fidei, does not provide a basis for an action against insurance brokers; (2) the payments do not provide a basis for plaintiffs' claim of indemnity because they were made by Equitas and plaintiffs have no standing; (3) Equitas, on plaintiffs' behalf, released all claims against defendants; (4) plaintiffs cannot meet the requirements of the Codling test, which requires plaintiffs to establish their liability for the underlying payments as a prerequisite to indemnification [Codling v Paglia, 38 AD2d 154 (3d Dept 1972), aff'd in part, rev'd in part on other grounds by 32 NY2d 330 (1973)]; (5) plaintiffs have not met the heightened pleading requirements for fraud; and (6) the court lacks personal jurisdiction over Sedgwick and Winbow.

The court heard argument on the motion on May 19, 2009. The following facts were clarified by counsel during argument: (1) Equitas was set up pursuant to an Act of the British Parliament; (2) money held in Equitas' reserves is for payment of asbestosis claims under the ceding policies, and the money was provided by all the syndicates and the British Government; (3) it is possible that if the actual claims amount to less than the reserve, then the Names will get some of their money back; and (4) Equitas has been sold to Berkshire Hathaway, which has agreed that it will not sue any of the Names for additional reserve money, but could sue non-settling Names for premiums previously paid on their behalf.

In addition, counsel for plaintiffs made representations regarding the nature of plaintiffs' claims. Plaintiffs took the position that the brokers, that is defendants, were acting as agents of the Names by obtaining reinsurance for them and the syndicates and that Justice Cahn ruled that they could amend the complaint back to 1999 with a claim for indemnification. Counsel also based the indemnification claim on the duty of utmost good faith, the concept of privity, and the alleged misrepresentations of defendants, which counsel asserted his clients were not aware of until 1998. Counsel explained that plaintiffs are seeking "indemnification of the monies that plaintiffs have paid and will continue to pay, and declaratory judgment for any monies that they will pay in the future." 5/19/09 Transcript: 32. [*6]

IV.Discussion

A. Motion to Dismiss

On a motion to dismiss pursuant to CPLR 3211, the court must accept the facts as alleged in the complaint as true, accord plaintiff the benefit of every possible favorable inference and determine only whether the facts as alleged fit within any cognizable legal theory. Morone v Morone, 50 NY2d 481, 484 (1980); Rovello v Orofino Realty Co., 40 NY2d 633, 634 (1976). CPLR 3026 mandates that "[p]leadings shall be liberally construed. Defects shall be ignored if a substantial right of a party is not prejudiced." Under CPLR 3211(a)(1), a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law.

In assessing a motion under CPLR 3211, however, a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint. Rovello v Orofino Realty Co., supra , at 635. "[T]he criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one." Id. at 636. The test is whether the pleadings give adequate notice to the court and the adverse party of the transactions or occurrences intended to be proved. Two Clinton Sq. Corp. v Friedler, 91 AD2d 1193, 1194 (4th Dept 1983); see Ackerman v 305 E. 40th Owners Corp., 189 AD2d 665, 666 (1st Dept 1993).

B.Indemnity

The Court of Appeals has described indemnity as "[t]he right of one party to shift the entire loss to another." Bellevue South Assoc. v HRH Constr. Corp., 78 NY2d 282, 296 (1991). It explained, indemnification may be based upon an express contract or an implied obligation, as is the case here. Implied indemnification claims, in turn, may rest on various independent grounds for example, indemnity may be appropriate because of a separate duty owed the indemnitee by the indemnitor, or because one of two parties is considered actively negligent or the primary or principal wrongdoer.

Id. Claims for indemnification from insurance brokers are viable under the applicable law. Equitable Life Assur. Soc'y of the U.S. v Werner, 286 AD2d 632 (1st Dept 2001) (insurer, who is under obligation to make payments to insured, may state cause of action for indemnification against broker whose negligence led to issuance of policy). Equitable is on point with this case and must control.[FN3] [*7]

Here, the scheme as alleged permeated the entire industry, impacting insurers, reinsurers policyholders and the public. The Complaint outlines a broadly disseminated web of misinformation designed to perpetuate the underinsurance of asbestos-related industries and the low cost of reinsurance premiums. The shockwave resulting from this massive scheme was intense and devastating. To the extent that plaintiffs were swept up and ensnared, they incurred specific legal obligations through the policies brokered by their syndicates, but, according to the complaint, defendants bear the lion's share of responsibility for the massive losses incurred by all.

Focusing on the specific duty owed by defendants to plaintiff Names that would trigger a claim for indemnity, apropos to this case is the Equitable court's observation that a broker, as the insurer's agent, owes the insurer a "duty to report truthfully regarding information requested on applications." Id. In Equitable, the broker failed to advise the insurer plaintiff that the insured was covered by another insurer, information that certainly would have impacted the risk assessment. The plaintiff insurer in Equitable was seeking to recover payments it was obligated to make under the disability policy it claimed it would not have issued if it had known about the other policy. Indemnification of payments made, as opposed to rescission, was deemed appropriate. Id.; see Seneca Ins. Co. v Wilcock, 2002 U.S. Dist. LEXIS 9451 (SDNY May 24, 2002) (citing to Equitable, court found failure to report truthfully could give rise to indemnification of payments made under policy). The situation here is even more compelling, as it involves reinsurance and the reliance placed by the reinsurer on the underwriting due diligence of the ceding insurer.

The parties are at odds over the exact nature of the underlying "duty" owed to plaintiffs (the indemnitee) by defendants (the indemnitor). Defendants argue that indemnity does not lie because brokers do not owe a duty of uberrimae fidei, good faith, to plaintiffs, and even if they did, the only remedy for violating such a duty is rescission of the contract. Plaintiffs, although initially basing their claim for indemnity on defendants' violation of the duty of uberrimae fidei, in reply, argue that their claim is for indemnification only. Both arguments miss the mark.

As noted above, in assessing the sufficiency of a complaint, "the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one."Rovello v Orofino Realty Co., supra , 40 NY2d at 635. Plaintiffs have clearly stated that defendants had a duty to provide accurate and truthful information regarding the risk in issuing the original policies of reinsurance. The second amended complaint, supplemented by the Outhwaite Affidavit, also sufficiently establishes that defendants served as plaintiffs' agents in the brokering process. Under the Equitable case, the pleading is sufficient as to this basic element and the fact that the claims for fraud and misrepresentation were dismissed as time-barred is not dispositive. See Helfand v Sessler, 194 Misc 2d 38, 39-41 (NY Civ Ct 2002) (claim of unjust enrichment dismissed as time barred but indemnification could be sought), citing City of New York v Lead Indus. Assn., 222 AD2d 119, 125-126 (1st Dept 1996).

Defendants assert that Lloyd's creation of Equitas to handle payment of all pre-1993 asbestosis claims cut off plaintiffs' right to seek indemnification and that through their participation in R & R, plaintiffs have released defendants of any potential claims. They argue [*8]that a plaintiff's transfer of its interest in a claim deprives it of standing to pursue indemnification for any payments made in connection with that claim, argue defendants, citing GE Capital Mtge. Servs., Inc. v Powell, 18 Misc 3d 228 (Sup Ct, Kings County, 2007). Further, standing to sue requires proof of an interest in the claim. Caprer v Nussbaum, 36 AD3d 176 (2d Dept 2006).

Although defendants did not submit a copy of the R & R contract or the Act of Parliament creating Equitas in support of their motion to dismiss, the court takes notice of the abundant case law discussing the R & R bailout plan. Under that plan, Names who voluntarily participated received a discount on the reinsurance premium in return for a release of all Lloyd's market participants. See Soc'y of Lloyds v Webb, 156 F. Supp. 2d 632 (ND Tex), aff'd by 303 F3d 325 (5th Cir 2002), cert denied Bennett v Soc'y of Lloyd's, 546 US 826 (2005); see also 1-1 Insurance Coverage for Environmental Claims § 1.06 (2008), Matthew Bender & Company, Inc.(discussing one basic component of R & R as "the settlement of intra-market litigation whereby Names would release all claims against Lloyd's and its various market participants in exchange for $4.8 billion in credits"). Plaintiffs have submitted a letter from counsel identifying which of the Names did and did not voluntarily participate in R & R.

The court finds, based on plaintiffs' counsel's admission and the wealth of case law and articles on this subject, that the nine plaintiff Names who voluntarily participated in R & R released Lloyd's market participants, inclusive of defendants, of all potential liability. Their actions are dismissed.

That leaves the remaining 54 plaintiff Names. Defendants again base their release argument on the four settlement agreements negotiated by Equitas. Defendants attached copies of two of these agreements to their moving papers, the Babcock and Halliburton agreements. These documents do not conclusively establish that all plaintiffs released all defendants as to all losses paid pursuant to the agreements. The lack of evidence is obvious as to the missing agreements with the Honeywell and CSR, Ltd. entities. As to the submitted agreements, by their terms the releases apply to these entities' agents "solely in their capacities as such" and, respectively, "in such capacity." Exh. 7 [Babcock Agreement] § I(L)(3) and Exh. 9 [Halliburton Agreement] § IV(B)(ii). Defendants have not provided conclusive evidence of their agency status or the scope and duration of agency. Even if defendants were acting as these entities' agents in procuring the policies, they also were acting as plaintiffs' broker/agents. It is in this latter capacity that plaintiffs claim defendants defrauded them and which serves as a basis for the indemnity claim.

Because a claim for indemnification is a separate cause of action, independent of the underlying wrong, the claim does not accrue until the party seeking indemnification pays for the injury. McDermott v City of New York, 50 NY2d 211, 218-219 (1980); see Equitable Life Assur. Socy. of U.S. v Werner, 286 AD2d at 632-633; City of New York v Lead Indus. Assn., 222 AD2d at 124, 126-127. A party who is pursuing a claim for indemnification must establish that it, and not some other entity, actually made the payment for which indemnity is sought. Margolin v New York Life Ins. Co., 32 NY2d 149 (1973). Payment is an element of the claim.

Defendants assert that payments made by Equitas to settle claims, using a fund of money from numerous sources, including premiums paid only in part by plaintiffs, do not confer standing on plaintiffs to sue for indemnity. Plaintiffs assert that their claim for indemnity seeks [*9]the reimbursement of premiums they paid to Equitas, as well as the reimbursement of any and all claims they paid prior to R & R, outside of the scope of R & R, and which they will have to pay in the future.

To the extent that the claim for indemnification is based on payments of claims made prior to R & R, the element of payment has been sufficiently pled. However, the statute of limitations would have run as to these claims and would bar plaintiffs' current complaint seeking indemnification. See McDermott v City of New York, 50 NY2d 211, 218-219 (1980) (six-year statute of limitations for indemnity). That is, unless the pre-R & R claims relate back to the original 1999 complaint.

Counsel for plaintiffs represented at the hearing on May 19th that Justice Cahn had ruled that the second amended complaint would relate back to the original 1999 complaint, which counsel for defendants denied. The court does not have, nor have the parties provided, the minutes of the proceeding in which Justice Cahn granted plaintiffs' motion to amend, and there is no written decision. Without one, the court must undertake its own analysis.

CPLR 203(f) provides:

A claim asserted in an amended pleading is deemed to have been interposed at the time the claims in the original pleading were interposed, unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading.

To the extent that plaintiffs' new pleading is based on payments of sums made after the filing of the first amended complaint, it does not relate back to the original complaint in 1999.

But to the extent that the new pleading alleges that plaintiff Names made payments on claims between 1993 and 1996, the pleading does relate back to the original 1999 complaint, which was premised on these pre-R & R payments. The new pleading is not then barred by the statute of limitations. Defendants can still, on summary judgment, seek dismissal of the complaint as to particular plaintiffs if they can show that payments on those claims were made more than six years before the 1999 complaint was filed, or after the original complaint was filed and more than six years before the second amended complaint was filed.

With respect to defendants' argument that plaintiffs cannot rely on premium contributions to establish standing, the court is compelled to focus on the underlying purpose for R & R.[FN4] R & R was put into effect to "reinsure" all claims made against pre-1993 Lloyd's policies. Equitas was given the authority to settle claims and the money collected would be used to pay out on those settlements. R & R was an exposure-reducing method through which the industry dealt with the virtual tsunami of asbestos-related claims. The creation of R & R reduced participants' exposure, but did not eliminate it. The payment of substantial premiums replaced the payment of [*10]claims for the participating syndicates. Plaintiffs have alleged that defendants' misrepresentations caused them to issue the policies under which the asbestos-related claims were made. The court, on this motion to dismiss, finds that payment of the R & R premium, which consisted of what remained in the Names' reserve fund as well as additional premiums, is sufficient to establish payment for purposes of the indemnity claim.

Defendants next argue that plaintiffs cannot meet the requirements of the test set forth in the case of Codling v Paglia, 38 AD2d 154 (3d Dept 1972), aff'd in part, rev'd in part on other grounds, 32 NY2d 330 (1973): [T]he rule in the state of New York is, that a person entitled to indemnity ... may settle the claims and recover over against the indemnitor, subject to the proof (1) of liability, and (2) as to the reasonableness of the amount of settlement ....

38 AD2d at 161; see Mt. Vernon Fire Ins. Co. v Trans World Maintenance Service, Inc., 169 AD2d 519 (1st Dept 1991) (following Codling test). Defendants argue that plaintiffs' claim of

fraud is inconsistent with proof of liability under the policy because plaintiffs would have been able to argue rescission. This argument makes little sense in light of Justice Cahn's prior ruling dismissing the fraud and misrepresentation claims as time-barred. Proof of fraud, however, will be relevant to show that plaintiffs are entitled to indemnity under principles of equity. In any event, a party may by statute plead inconsistent theories of recovery. CPLR 3014.

Finally, defendants attack the sufficiency of plaintiffs' fraud allegations, arguing that the second amended complaint does not contain required allegations specifically tying individual Names to defendants' misrepresentations. CPLR 3016(b) requires "Where a cause of action or defense is based upon misrepresentation, fraud, mistake, wilful default, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in detail." At this point in the litigation, the court is disinclined to find the pleading deficient on this ground. After three rounds of pleading and multiple motions to dismiss, defendants cannot seriously contend that they lack the requisite notice to determine which policies, personnel and representations are at issue. The second amended complaint provides detail regarding the nature of the misrepresentations (risks associated with insuring and reinsuring policies of insurance for asbestos-related claims), the parties involved (the brokers, the insureds and ceding insurers, the identities of the Names, and at least one of the syndicates involved [Outhwaite]), and the time frame (late 1970's and early 1980's).

In any event, as the Court of Appeals recognized in Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 491 (2008), even where plaintiffs have not alleged specific details of each individual defendant's conduct, [W]e have never required talismanic, unbending allegations. Simply put, sometimes such facts are unavailable prior to discovery. Lest we willfully ignore the obviousor the strong suspicion of a fraudwe have always acknowledged that, in certain cases, less than plainly observable facts may be supplemented by the circumstances surrounding the alleged fraud (see Jered, 22 NY2d at 194; Polonetsky, 97 NY2d at 55; see also Board of Mgrs. of 411 E. 53rd St. [*11]Condominium v Dylan Carpet, 182 AD2d 551, 552, 582 NYS2d 1022 [1st Dept 1992]).

(Citations included.) In Pludeman the plaintiffs had alleged a nationwide scheme to defraud that took place over a number of years. The Court of Appeals, in upholding denial of a motion to dismiss, explained that what is "[c]ritical to a fraud claim is that a complaint allege the basic facts to establish the elements of the cause of action," and although under CPLR 3016 (b) "the complaint must sufficiently detail the allegedly fraudulent conduct, that requirement should not be confused with unassailable proof of fraud" Id. at 492). "Necessarily, then, section 3016 (b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct" Id.; see Sargiss v Magarelli, 12 NY3d 527, 530-531 (2009).

Here, plaintiffs have alleged an international scheme to defraud that took place over a number of years. They have satisfied the basic elements of fraud: misrepresentation or material omission, scienter, reliance and injury. Channel Master Corp. v Aluminium Ltd. Sales, Inc., 4 NY2d 403, 407 (1958).

B. Jurisdiction

The parties have not provided the court with sufficient evidence on which to decide defendants' motion to dismiss the complaint for lack of personal jurisdiction as to defendants Sedgwick and Winbow. Accordingly, it is

ORDERED that the defendants' motion to dismiss the second amended complaint as to defendants Sedgwick and Winbow for lack of jurisdiction is referred to a Special Referee to hear and report with recommendations; and it is further

ORDERED that a copy of this order shall be served upon the Clerk of the Reference Part (Rm. 119) to arrange a date for the reference to a Special Referee; and it is further

ORDERED that the Clerk shall notify all parties of the hearing date; and it is further.

ORDERED that defendants' motion to dismiss is granted, in part, as to plaintiffs Charles Cavanaugh-Mainwaring, Alexander Florence, Sir John Colfox, Philip Colfox, Frederick gales, Derek King, Gordon Miller, Richard Nichol and Harrie Schloss; and it is further

ORDERED that defendants' motion to dismiss, in all other respects besides the issue of

personal jurisdiction, is denied.

ENTER,

Date: September, 2009_______________________________

New York, NYJ.S.C.

Footnotes

Footnote 1: As found by Justice Cahn in his May 7, 2002 decision, Lloyd's had stopped writing policies insuring asbestos risk by 1986.

Footnote 2:See also Society of Lloyd's v. Reinhart, 402 F.3d 982 (10th Cir. 2005); Lipcon v. Underwriters at Lloyd's, 148 F.3d 1285 (11th Cir. 1998); Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998); Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997); Allen v. Lloyd's of London, 94 F.3d 923 (4th Cir. 1996); Shell v. R.W. Sturge, Ltd., 55 F.3d 1227 (6th Cir. 1995); Bonny v. Soc'y of Lloyd's, 3 F.3d 156 (7th Cir. 1993); Roby v. Corp. of Lloyd's, 996 F.2d 1353 (2d Cir. 1993).

Footnote 3:The Equitable court based its decision on a separate duty owed the indemnitee by the indemnitor, and cited the case of Raquet v Braun, 90 NY2d 177, 183 (1997) to support the proposition. That decision went beyond Equitable and further stated that "every one is responsible for the consequences of his own negligence, and if another person has been compelled to pay the damages which ought to have been paid by the wrongdoer, they may be recovered from him".' Id., quoting, Oceanic Steam Nav Co. v Compania Transatlantica Espanola, 134 NY 461, 468 (1892). The second case cited by Equitable, Mas v Two Bridges Assoc., 75 NY2d 680, 690-691 (1990), dealt with contribution by co-defendants..

.

Footnote 4:The court accepts plaintiffs' post-hearing submissions as clarification of the second amended complaint to include allegations that they are seeking indemnification for payment of the R & R premiums.