Arent Fox Secures Dismissal of Claim Against Aviation Reinsurance Agency Fortress Re, Inc.

New York, NY — Arent Fox LLP secured a victory for Fortress Re Inc. — formerly one of the largest aviation reinsurance agencies in the market — after a New York district court dismissed a breach of contract claim in late March.

Insurance & Reinsurance partner Jule Rousseau and associate Lee A. Pepper have represented Fortress through all stages of litigation and successfully argued that the statute of limitations on claims in New York starts when there is a legal right to demand payment and not when a fiduciary communicates a rejection of its trust.
On March 24, Judge Victor Marrero for the US District Court for the Southern District of New York dismissed a complaint against Fortress brought by NEM Re Receivables LLC, formerly known as Federated Reinsurance Co., that sought payment for funds stemming from a settlement agreement that never came to fruition. Judge Marrero agreed with Arent Fox attorneys that requirements for a claim of accounting were not met and that New York’s statute of limitation for breach of contract passed more than five years ago.
“We are thrilled that Judge Marrero dismissed the complaint and that he found, as other courts have, that a conventional business relationship does not become a fiduciary relationship by mere allegation,” said Mr. Rousseau. “Our argument is clear that NEM Re did not meet the requirements for a claim of accounting and the statute of limitations expired several years ago.”
Fortress served as an agent and manager for insurance companies and was in possession of reinsurance recoverables belonging to Federated several decades ago. In 1990, Federated became insolvent and was placed into liquidation. In 2004, the Commissioner of Insurance of the State of New York assigned all of Federated’s then un-collected reinsurance receivables to NEM Re — starting the six-year window for NEM Re to file a complaint. But it was not until 2015 that NEM Re filed suit, demanding that Fortress pay any amounts that may have been owed, along with interest, attorney fees, and costs. This case demonstrates the necessity for reinsurers and their agents to diligently pursue recoverables. 
Mr. Rousseau focuses his practice on insurance and reinsurance related matters and litigation. He advises clients in all areas of the business, including policy and treaty wording, regulatory compliance and strategy. His practice includes property and casualty, life, accident, health insurance, and insurance-linked products and he represents various participants in these markets.
Arent Fox’s Insurance & Reinsurance practice advises US and European insurers, reinsurers, and brokers on multistate licensing projects, payment of Federal Excise Tax, regulatory compliance matters, and investigations in a number of states. The team counsels clients on cross-border acquisitions including difficult employment issues for public companies. The firm also advises US and international insurers and producers on compliance, Market Conduct Examinations, licensing, and surplus lines eligibility issues. The practice’s attorneys are experienced in crafting new forms of insurance and drafting reinsurance and producer agreements.

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