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Allegis Investment Services LLC v. Arthur J Gallagher & Co.

United States District Court, D. Utah, Central Division

December 19, 2017

ALLEGIS INVESTMENT SERVICES, LLC, ALLEGIS INVESTMENT ADVISORS, LLC, Plaintiffs,
v.
ARTHUR J. GALLAGHER & CO; INDIAN HARBOR INSURANCE COMPANY; XL GROUP LTD.; XL CATLIN; XL INSURANCE AMERICA, INC.; XL REINSURANCE AMERICA, INC.; XL SPECIALTY INSURANCE COMPANY; XL AMERICA INC.; and PAIGE NABAVIAN, Defendants.

          MEMORANDUM DECISION AND ORDER

          DALE A. KIMBALL, UNITED STATES DISTRICT JUDGE.

         This matter is before the court on Defendants Indian Harbor Insurance Company, XL Group Ltd., XL Catlin, XL Insurance America, Inc., XL Reinsurance America, Inc., XL Specialty Insurance Company, and XL America Inc.'s (“XL Defendants”) Motion to Dismiss or, Alternatively, to Transfer Venue [Docket No. 27]; Certain Underwriters at Lloyd's, London's Rule 83-2(g) Motion to Transfer [Docket No. 47]; and XL Defendants' Motion to Consolidate [Docket No. 51]. On November 29, 2017, the court held a hearing on the motions. At the hearing, Plaintiffs were represented by Mary Anne Q. Wood and Jared M. Asbury, the XL Defendants were represented by Thomas J. Judge and David S. Bridge, Certain Underwriters at Lloyd's, London were represented by Steven A. Revelli and Robert A. Benjamin, and Arthur J. Gallagher & Co and Paige Nabavian were represented by Mark W. Pugsley. After hearing argument, the court took the motions under advisement. After carefully considering the parties' memoranda and the law and facts relevant to the pending motions, the court issues the following Memorandum Decision and Order.

         BACKGROUND

         Defendant Indian Harbor issued a Professional Liability Insurance for Securities Broker-Dealers and Investment Advisors Policy (“Policy”) to Allegis for the claims-made period from March 3, 2015 to March 3, 2016. The Policy was a renewal of a policy issued the preceding year. In late August 2015, Allegis investors brought claims against Allegis after suffering losses on options trading. Allegis then sought coverage under the Policy for those investor claims. After conducting an investigation, Indian Harbor denied coverage for the investor claims, relying on an exclusion in the Policy for claims arising out of the sale of “any type of option contract or derivative.” Allegis then filed this action.

         Allegis' original Complaint named XL Insurance America, Inc., Arthur J. Gallagher & Co. (AJG”) and Paige Nabavian as defendants. XL Insurance America's counsel notified Allegis that the proper party was Indian Harbor because the Policy was with Indian Harbor. Allegis amended its Complaint to add Indian Harbor and also added five other XL entities.

         The Second Amended Complaint refers to Indian Harbor and all of the XL Defendants individually and jointly as “XL.” Indian Harbor Insurance Company is a U.S. non-admitted insurance company, organized under Delaware law with its principal place of business in Connecticut. XL Group Ltd. is the ultimate parent company of the XL group of companies, organized under the laws of Bermuda, is not an insurance company, and does not conduct business in the United States. XL Catlin is a brand name not a legal entity. XL America, Inc. is a U.S. holding company, organized under Delaware law and with its principal place of business in Connecticut. XL America, Inc. does not write or issue insurance policies or administer claims under insurance polices issued by other XL entities. XL Reinsurance America, Inc. is a U.S. reinsurance company, organized under New York law and with its principal place of business in Connecticut. XL Reinsurance is licensed to write reinsurance in all fifty states and the District of Columbia. XL Reinsurance does not write or issue policies for Indian Harbor nor does it administer claims under Indian Harbor policies. XL Insurance America, Inc. is a U.S. admitted insurance company, organized under Delaware law and with its principal place of business in Connecticut. XL Insurance America does not write or issue insurance policies for Indian Harbor, nor does it administer claims under Indian Harbor policies. XL Specialty Insurance Company is a U.S. admitted insurance company, organized under Delaware law and with its principal place of business in Connecticut. XL Specialty does not write or issue insurance policies for Indian Harbor, nor does it administer claims under Indian Harbor policies.

         The Policy expressly identifies Indian Harbor as the insurance company issuing the Policy. The “In Witness” clause immediately following the policy language is expressly signed on behalf of “Indian Harbor Insurance Company.” No other XL Defendant is identified as the insurance company or administrator of the Policy under the terms of the Policy. Indian Harbor is part of the XL Insurance Group. Allegis points out that the layout of the pages puts an XL Insurance header on several pages and an XL America, Inc. footer on several pages, identifying that entity as owning the copyright for the page.

         Allegis alleges that XL wrongfully denied coverage for investor claims based on an options trading exclusion. The Policy states that the insurance does not apply to any claim or defense expenses “[a]rising out of the actual or alleged purchase, sale, attempted sale, solicitation or servicing of any . . . [c]ommodities, any type of futures contracts, any type of option contract or derivative.”

         DISCUSSION

         Defendants' Motion to Dismiss

         Defendants argue that the court does not have personal jurisdiction over the non-insurer XL Defendants, the claims against the non-insurer entities related to the insurance contract fail to state a claim upon which relief can be granted, and the court should transfer the action to the District of Connecticut if the court does not dismiss the action.

         1. Personal Jurisdiction

         Allegis has the burden of establishing personal jurisdiction over Defendants in the State of Utah. Because Utah's long-arm statute extends personal jurisdiction to the maximum extent allowed by due process, Allegis must meet the federal due process standards for general and specific personal jurisdiction.

         Allegis admits there is no general personal jurisdiction over Defendants. In determining whether this court has specific personal jurisdiction over Defendants, the court must consider whether: (1) Defendants purposefully directed their activities at the forum; (2) Allegis' claims arise out of or are related to those activities; and (3) the assertion of personal jurisdiction over Defendant ...


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