Reinsurer Permitted to Intervene in Affiliate’s Lawsuit Related to Breach of MGA Agreement

Texas Insurance Co. sued Talisman Specialty Underwriters Inc. for breaching the parties’ managing general agent (MGA) agreement by authorizing the issuance of hundreds of insurance policies by Texas Insurance in sectors (like marine and energy) where Talisman Specialty did not have the authority to do so. Texas Insurance further alleged that Talisman Specialty had withheld $10 million in premiums owed to Texas Insurance and that it had failed to segregate them in a fiduciary account for Texas Insurance’s benefit as required by the MGA agreement.

Talisman Insurance Co., an affiliate of Talisman Specialty, filed a motion to intervene. Talisman Insurance alleged that it had entered into a quota share reinsurance agreement with Texas Insurance, pursuant to which Talisman Insurance agreed to reinsure the insurance sold by Talisman Specialty. In turn, Texas Insurance agreed to pay Talisman Insurance 94% of the insurance premiums it received, pursuant to the reinsurance agreement. Talisman Insurance argued additionally that Texas Insurance agreed that Talisman Specialty would remit these payments directly to Talisman Insurance, bypassing Texas Insurance. Talisman Insurance alleged that Texas Insurance breached the reinsurance agreement by initiating the lawsuit and by claiming that Talisman Specialty must first remit the premiums to Texas Insurance, thereby interfering with Talisman Insurance’s right to payment.

The district court found that Talisman Insurance was entitled to intervene as of right because it timely filed its motion early in the case and because it had a direct and substantial interest in the insurance premiums which interest would not be adequately represented by the existing parties and which could be impaired if it were not permitted to intervene. Talisman Insurance timely sought to intervene as the motion, although filed approximately two months after Talisman Insurance learned of the suit, came before discovery had opened in the matter, and further, Talisman Insurance did not seek to reopen any prior proceedings in the case.

The court found that Talisman Insurance had a direct and substantial property interest in the premiums and the method of payment, as its alleged contractual right to receive its share of the premiums directly from Talisman Specialty allegedly resulted in administrative cost-savings. If Talisman Insurance were not permitted to intervene and instead was required to institute a separate proceeding, its interests in the premiums and method of payment could be impaired by rulings in the instant lawsuit. Finally, the court found that Talisman Insurance’s interests were not adequately represented by its affiliate, Talisman Specialty, even though the two shared the same counsel, as Talisman Specialty was not a party to the reinsurance agreement and the two entities sought to enforce different contractual rights derived from their individual contracts with Texas Insurance.

As such, the court granted the motion to intervene, finding Talisman Insurance satisfied all of the requirements necessary to establish its entitlement to intervention.

Texas Insurance Co. v. Talisman Specialty Underwriters, Inc., No. 2:23-cv-03412 (E.D. La. Dec. 1, 2023).