Pennsylvania District Court Rejects Reinsurer’s “First-Filed” Complaint As Improperly Anticipatory And Filed In Bad Faith

Carlton Fields

A reinsurer filed a complaint in the Eastern District of Pennsylvania seeking declaratory relief regarding its obligations under a reinsurance contract on May 7, 2015. The defendants filed an action concerning the same parties, facts, and issues in the District of Connecticut on May 12, 2015. Despite the fact that the Pennsylvania action was filed first, the court declined to exercise jurisdiction under the Declaratory Judgment Act.

On May 1, 2015, the defendants requested payment by May 15th from the reinsurer under the parties’ reinsurance contract and indicated that they would file suit in the District of Connecticut if payment was not timely received. Instead of either paying or responding, the reinsurer filed its complaint for declaratory judgment, preemptively, in the Eastern District of Pennsylvania. The defendants moved to dismiss. Noting that the timing of these events suggested an improper first filing, the Pennsylvania court dismissed the reinsurer’s complaint. Fatal to the reinsurer’s action were the court’s finding that the Pennsylvania filing “was filed in bad faith, as it was improperly anticipatory and solely for declaratory relief.” Additionally, the court found that the reinsurer’s first filed action was merely an “attempt to secure better procedural law by rushing to the [Pennsylvania] courthouse ahead of [the defendants].” Finally, because the defendants were able to establish a nexus between Connecticut and the dispute, and because the plaintiff had improperly “fired the first shot” while the defendants’ pre-litigation demand was pending, the court held that the reinsurer was not entitled to the benefits of the equitable “first-filed” rule. Excalibur Reinsurance Corp v. Select Ins. Co., et al., Case No. 15-2522 (USDC E.D. Pa. July 7, 2015)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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