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Certain Underwriters at Lloyd's v. Property Risk Services Management II

United States District Court, N.D. Texas, Dallas Division

October 21, 2019




         This Order addresses Defendant James Morgan, Ltd.'s ("Defendant") Motion to Join Subscribers [ECF No. 6]. For the following reasons, the Court denies the Motion but orders Plaintiffs Certain Underwriters at Lloyd's, London subscribing severally to Policy No. B1230AP03924A17 ("Plaintiffs") to file an amended complaint to allege the citizenship of Cyrene Capital Limited or another member or investor-i.e., a "Name"-to the Policy.


         This action involves a disagreement regarding the appointment of a neutral umpire in an arbitration arising under a commercial property insurance policy (the "Policy"). Compl. ¶¶ 1, 8. Defendant is a Texas limited partnership and, together with Property Risk Services Management, II, is an insured under the Policy issued by Plaintiffs. See Id. Ex. A; Answer ¶ 1. Plaintiffs are the underwriters of Lloyd's of London who "subscribe severally to the Policy issued to" Defendant and Property Risk, Services Management, II. See Compl. ¶ 3. Lloyd's of London, in turn, "is not an insurance company but rather a self-regulating entity which operates and controls an insurance market," and whose members, like Plaintiffs, "buy[] and sell[] . . . insurance risk" and "collectively make up Lloyd's." Corfield v. Ball. Glen Hill LP, 355 F.3d 853, 857-58 (5th Cir. 2003) (citations omitted). The members or investors of Lloyd's

are called "Names" and they are the individuals and corporations who finance the insurance market and ultimately insure risks. Names are underwriters of Lloyd's insurance and they invest in a percentage of the policy risk in the hope of making return on their investment. . . . Each Name is exposed to unlimited personal liability for his proportionate share of the loss on a particular policy that the Name has subscribed to as an underwriter. Typically[, ] hundreds of Names will subscribe to a single policy, and the liability among the Names is several, not joint.
Most Names or investors do not actively participate in the insurance market on a day to day basis. Rather, the business of insuring risk at Lloyd's is carried on by groups of Names called "Syndicates." In order to increase the efficiency of underwriting risks, a group of Names will, for a given operating year, form a "Syndicate" [that] will in turn subscribe to policies on behalf of all Names in the Syndicate. A typical Lloyd's policy has multiple Syndicates which collectively are responsible for 100 percent of the coverage provided by a policy. The Syndicates themselves have been said to have no independent legal identity. Thus, a Syndicate is a creature of administrative convenience through which individual investors can subscribe to a Lloyd's policy. A Syndicate bears no liability for the risk on a Lloyd's policy. Rather, all liability is born by the individual Names who belong to the various Syndicates that have subscribed to a policy.. . .
In sum, while an insured receives a Lloyd's "policy" of insurance, what he has in fact received are numerous contractual commitments from each Name who has agreed to subscribe to the risk. The Names are jointly and severally obligated to the insured for the percentage of the risk each has agreed to assume. The insured does not have to sue each name individually however to collect on their individual promises because the typical Lloyd's policy contains a clause providing that "any [Name] can appear as representative of all [Names]." Thus, when litigation ensues over a Lloyd's policy, the only named Lloyd's party appearing in the litigation is usually the lead underwriter on the policy.

Id. at 858-59 (citations omitted). Plaintiffs identified the following Names and Syndicates to the Policy:

A 20% portion of the Policy is subscribed to by Syndicate 1969, which is not a citizen or resident of Texas or any other state within the United States. Cyrene Capital Limited [("Cyrene")] is a corporate member and capital provider for Syndicate 1969 and is a subsidiary of Cyrene Investments Limited, which is organized and maintains its principal place of business in the United Kingdom, a participating country to the Convention. Furthermore, as to the portions of the risk assumed by other Underwriters under the Policy, certain of these parties too are citizens of countries other than the United States which also participate in the Convention.

Compl. ¶3.

         After Plaintiffs tendered payment to Defendant to cover hail damage to a commercial building, Defendant institute an arbitration proceeding underlying the present action, alleging that the payment was grossly inadequate, See Compl, ¶¶ 9-14; Answer ¶¶ 8-9. The parties have agreed to arbitrate the dispute pursuant to the Policy's arbitration provision and each have selected an arbitrator. See Compl. ¶ 15; Answer ¶¶ 9-10. The arbitrators, however, have been unable to reach an agreement as to the selection of a neutral umpire for the arbitration. See Compl. ¶ 16. Plaintiffs filed the present action for the appointment of an umpire, see Id. ¶¶ 17-22, and Defendant does not oppose the relief Plaintiffs request, provided that the Court does not appoint as an umpire an individual proposed by the parties. See Answer ¶ 12.

         Before the Court could appoint an umpire, however, Defendant filed the pending Motion to require Plaintiffs to join "all subscribers to the . .. [P]olicy." Mot. 3. According to Defendant, joinder is necessary to ensure that the Court has subject matter jurisdiction over the dispute and to ensure that the subscribers are bound by the arbitration process. See Br. in Supp. of Mot. to Join Subscribers ("Br.") 4-6. Plaintiffs filed their Opposition and Defendant filed its Reply.


         A. Req ...

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