A New York trial court has denied a motion to dismiss a tortious interference claim filed against a third party administrator alleging that the administrator had delayed making required insurance payments because it wanted to benefit by investing the money before paying it out.
The Case
David J. Konstantin died from mesothelioma resulting from exposure to asbestos. He allegedly had been exposed to asbestos while working as a carpenter in buildings where Tishman Realty & Construction Co., Inc., had acted as the general contractor.
Mr. Konstantin's executor, Ruby Konstantin, sued Tishman Realty and its related entities, including Tishman Liquidating, and received a jury verdict in the litigation, adjusted post-trial, with a final judgment entered on November 29, 2012, for $7,195,738.57.
Ms. Konstantin alleged that, in February 2013, she served notice of the judgment on various insurers that allegedly had issued policies to predecessors or affiliates of Tishman corporations, demanding that they provide coverage pursuant to the terms and conditions of their policies.
Then, on August 19, 2013, Ms. Konstantin filed a lawsuit against more than a dozen insurance companies under New York Insurance Law § 3420 in an effort to recover the trial-judgment damages from them.
In addition, Ms. Konstantin asserted a claim for tortious interference against Resolute Management Inc., a third-party claims administrator for several of the insurance companies sued by Ms. Konstantin. Resolute is a wholly owned subsidiary of National Indemnity Company ("NICO"), which is a wholly owned subsidiary of Berkshire Hathaway, Inc., a conglomerate holding company owned by Warren Buffett.
Ms. Konstantin claimed that Resolute handled the insurers' policies "in a manner whose sole purpose" was "to delay payment of millions of dollars, so that its parent [NICO] would not have to pay out some of their reinsurance funds owed" for the insurers' losses.
Ms. Konstantin claimed that Resolute had directed the insurers to refuse to make any payments toward the Tishman judgment, thus tortiously interfering with, or causing or inducing the breach of, their liability insurance policies for Resolute's sole benefit.
In support of her claim, Ms. Konstantin submitted letters written by Mr. Buffett, the chairman of Berkshire Hathaway, to Berkshire Hathaway shareholders, discussing the company's growth in "float" – money generated by insurance customers paying the required premiums, and then held or invested by the reinsurer until claims were paid. Ms. Konstantin argued that these letters showed Resolute's motive to delay or withhold payments of the Tishman judgment "by taking control of the claims-handling functions" of the companies it and its parent companies reinsured, thereby increasing the float period and returns on float investments.
For its part, Resolute claimed that Ms. Konstantin had "raised absolutely no facts suggesting that Resolute's claims handling decisions with respect to this claim were in any way motivated by self-interest, by the shareholder letters (which do not describe anything beyond standard insurance practices), or by any improper motive." Further, Resolute contended that any reinsurance obligation had not been triggered because the obligation for the primary insurers to pay the Tishman judgment had not been established.
Resolute moved to dismiss.
The Trial Court's Decision
The court denied Resolute's motion, finding that Ms. Konstantin had "at least pleaded a viable cause of action at common law" for tortious interference.
The court explained that Ms. Konstantin had alleged that she had a contract with the defendant insurers through Tishman; that Resolute had known about these contracts because Resolute was the claims-handler for NICO and because its clients included several of the defendant insurers; and that Resolute had handled claims under these insurers' policies intending to delay the payment of millions of dollars so that Resolute's parent company would not have to pay out some of its reinsurance funds owed for these insurers' policies.
The court found that Ms. Konstantin had sufficiently pleaded that but for Resolute's delay in paying out to its insurer clients, she would have the money from the Tishman judgment.
Finally, the court said, Ms. Konstantin had sufficiently pleaded that Resolute, even as an agent of NICO, had acted in bad faith and in a predatory manner by withholding funds owed to her.
The court then ordered Resolute to serve and file its answer to Ms. Konstantin's complaint.
The case is Konstantin v. Certain Underwriters at Lloyd's London, No. 652897/2013 (N.Y. Sup.Ct. N.Y. Co. Jan. 24, 2018). Attorneys involved include: McKool Smith, P.C.. New York (Robin L. Cohen, Adam S. Ziffer, and Elizabeth A. Sherwin of counsel), for plaintiff. Squire Patton Boggs (US) LLP, New York (John M. Nonna and Suman Chakraborty of counsel), for defendant Resolute Management, Inc.