Case 1:07-cv Document 152 Filed 05/13/2009 Page 1 of 8

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1 Case 1:07-cv Document 152 Filed 05/13/2009 Page 1 of 8 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION CONTINENTAL CASUALTY COMPANY and ) CONTINENTAL INSURANCE COMPANY, ) ) Plaintiffs, ) ) Case No v. ) ) COMMERCIAL RISK RE-INSURANCE COMPANY, ) Hon. Harry D. Leinenweber COMMERCIAL RISK REINSURANCE COMPANY ) LIMITED, GENERAL SECURITY INDEMNITY ) Magistrate Judge Arlander Keys COMPANY OF ARIZONA, GENERAL SECURITY ) NATIONAL INSURANCE COMPANY, GIE ) COLUMBUS, SCOR, and SCOR REINSURANCE ) COMPANY, ) ) Defendants. ) ) AMENDED COMPLAINT FOR DECLARATORY JUDGMENT Plaintiffs Continental Casualty Company and Continental Insurance Company (collectively, Plaintiffs or CNA ) state the following for their Amended Complaint against defendants, Commercial Risk Re-Insurance Company, Commercial Reinsurance Company Limited, General Security Indemnity Company of Arizona, General Security National Insurance Company, GIE Columbus, SCOR and SCOR Reinsurance Company (collectively, Defendants or the SCOR Companies ). NATURE OF ACTION 1. This is a declaratory judgment action brought by Plaintiffs against Defendants, seeking a declaration concerning the scope of a Commutation & Release Agreement entered into in 2006.

2 Case 1:07-cv Document 152 Filed 05/13/2009 Page 2 of 8 THE PARTIES 2. Plaintiff Continental Casualty Company ( CCC ) is an insurance company organized under the laws of the State of Illinois, with its principal place of business in Illinois. 3. Plaintiff Continental Insurance Company ( CIC ) is an insurance company organized under the laws of the State of Pennsylvania, with its principal place of business in Illinois. 4. Defendant Commercial Risk Re-Insurance Company ( CRRC ) is an insurance company organized under the laws of Vermont. On information and belief, its principal place of business is in New York. 5. Defendant Commercial Risk Reinsurance Company Limited ( CRRC Ltd. ) is an insurance company organized under the laws of Bermuda, with its principal place of business in Bermuda. 6. Defendant General Security Indemnity Company of Arizona ( General Indemnity ) is an insurance company organized under the laws of Arizona, with its principal place of business in New York. 7. Defendant General Security National Insurance Company ( General National ) is an insurance company organized under the laws of New York, with its principal place of business in New York. 8. On information and belief, defendant GIE Columbus is an insurance company organized under the laws of France, with its principal place of business in France. 9. Defendant SCOR is an insurance company organized under the laws of France, with its principal place of business in France. 10. Defendant SCOR Reinsurance Company is an insurance company organized under the laws of New York, with its principal place of business in New York. 2

3 Case 1:07-cv Document 152 Filed 05/13/2009 Page 3 of 8 JURISDICTION AND VENUE 11. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. 1332, because Plaintiffs and Defendants are citizens of different States and the amount in controversy exceeds the sum of $75,000, exclusive of interest and costs. 12. Venue is proper in this District pursuant to 28 U.S.C BACKGROUND Reinsurance 13. Under a reinsurance contract, one insurance company, known as the ceding company or the cedent, purchases insurance from another professional insurer, known as the reinsurer, in order to transfer some or all of the insured risk the cedent has assumed under its direct policies. In this case, Plaintiffs were the ceding companies and Defendants were the reinsurers. 14. In reinsurance parlance, a commutation is an agreement whereby existing reinsurance contracts are bought back and terminated. Under the typical commutation agreement, the reinsurer pays the cedent a negotiated amount, in exchange for the cedent s agreement that particular reinsurance contracts are terminated, such that the reinsurer will have no further liability to the cedent under those reinsurance contracts. The Commutation Agreement Negotiated by CNA and the SCOR Companies 15. In December 2006, CNA and the SCOR Companies entered into a Commutation Agreement & Release (the Commutation Agreement ). A copy of the Commutation Agreement & Release is attached hereto as Exhibit 1. 3

4 Case 1:07-cv Document 152 Filed 05/13/2009 Page 4 of The Commutation Agreement covered Reinsurance Agreements, which was defined in part as reinsurance agreements or contracts of reinsurance between the Parties, known or unknown, under which REINSURER assumes losses ceded by CNA to REINSURER. (Ex. 1 at 3.) at 3.) 17. Parties was defined as CNA and REINSURER, collectively. (Ex CNA was defined as CCC and CIC and their direct or indirect insurance subsidiaries, excluding certain specfically identified companies. (Ex. 1 at 2) (Ex. 1 at 3.) 19. REINSURER was defined as: SCOR Reinsurance Company, General Security National Insurance Company (f/k/a Sorema North America Reinsurance Company); General Security Indemnity Company of Arizona; Commercial Risk Re-Insurance Company, Commercial Risk Reinsurance Company Limited, GIE COLUMBUS, SCOR, Paris, France, including any of its direct or indirect non-life insurance and reinsurance subsidiaries and affiliates, including but not limited to SCOR Global P&C, but excluding Anglo-French Insurance Company, LTD., SAI-SOCIETA ASSICURATRICE INDUSTRIALE, (UK) and any of their subsidiaries. 20. The Commutation Agreement contains a merger and integration clause. Specifically, paragraphs 1 and 3 of Article 7 of the Commutation Agreement provide that: This Commutation & Release Agreement shall constitute the final, complete and entire agreement between the parties as respects its subject matter, and supersedes and replaces any prior oral or written understandings of the Parties. This Commutation & Release Agreement may not be amended except by written amendment executed by each of the Parties. * * * This Commutation & Release Agreement supersedes any and all other negotiations, discussions, promises, commitments, agreements and understandings, whether oral or written, express or implied, or made 4

5 Case 1:07-cv Document 152 Filed 05/13/2009 Page 5 of 8 (Ex. 1 at 11.) before or contemporaneous with the execution of this Commutation & Release Agreement, between the parties with respect to the subject matter[.] All such negotiations, discussions, promises, commitments, agreements, and understandings are deemed terminated or otherwise extinguished. 21. The Commutation Agreement was executed on behalf of all parties by December 28, (Ex. 1 at ) The Allstate Re Contracts and the Unity Fire Contracts 22. At various times, CNA purchased reinsurance contracts from Allstate Insurance Company and/or its affiliates (collectively, Allstate ) under which CNA ceded, and Allstate assumed, certain reinsurance business (the Allstate Re Contracts ). 23. The Allstate Re Contracts were issued by Allstate. 24. CNA has not agreed to any novation whereby any of the SCOR Companies replaced Allstate under the Allstate Re Contracts. 25. At various times, CNA purchased reinsurance contracts from Unity Fire and General Insurance Company, now known as Unitrin Preferred Insurance Company ( Unity Fire ) under which CNA ceded, and Unity Fire assumed, certain reinsurance business (the Unity Fire Contracts. ) 26. The Unity Fire Contracts were issued by Unity Fire. 27. CNA has not agreed to any novation whereby any of the SCOR Companies replaced Unity Fire under the Unity Fire Contracts. 5

6 Case 1:07-cv Document 152 Filed 05/13/2009 Page 6 of 8 The Present Dispute 28. On its face, the Commutation Agreement does not apply to the Allstate Re Contracts or the Unity Fire Contracts. 29. The Commutation Agreement is limited to reinsurance contracts under which REINSURER assumes losses ceded by CNA. 30. The terms REINSURER and CNA are plain and unambiguous. 31. Neither Allstate nor Unity Fire falls within the definitions of REINSURER or CNA under in the Commutation Agreement: (a) Neither Allstate nor Unity Fire was a direct or indirect subsidiary or affiliate of the SCOR Companies as of the execution date of the Commutation Agreement. (b) Neither Allstate nor Unity Fire was a direct or indirect subsidiary or affiliate of CNA as of the execution date of the Commutation Agreement. 32. Neither Allstate nor Unity Fire was a signatory to the Commutation Agreement. 33. Neither Allstate nor Unity Fire was a party to the Commutation Agreement. 34. Nevertheless, over the past 11 months, the SCOR Companies have claimed to owe certain responsibilities under the Allstate Re Contracts and the Unity Fire Contracts, and assert that those responsibilities were extinguished by the Commutation Agreement. Specifically, the SCOR Companies claim that the Allstate Re Contracts and the Unity Fire Contracts were terminated by the Commutation Agreement. 35. As a result, over $1.7 million billed by CNA under the Allstate Re Contracts and/or the Unity Fire Contracts has gone unpaid. 6

7 Case 1:07-cv Document 152 Filed 05/13/2009 Page 7 of Under Paragraph 8 of the Commutation Agreement, the Parties agreed to submit to the exclusive jurisdiction of the state and federal courts in the State of Illinois any dispute arising under or relating to the Commutation Agreement. Paragraph 8 also provides that Illinois law shall govern the interpretation and enforcement of the Commutation Agreement. COUNT I DECLARATORY JUDGMENT 37. CCC and CIC restate and reallege the allegations set forth in Paragraphs 1-36 above, as if set out in full herein. 38. CCC and CIC contend that the Commutation Agreement does not apply to reinsurance contracts issued by Allstate Re, or by Unity Fire, or by any companies other than those identified as REINSURER under the Commutation Agreement. 39. The SCOR Companies dispute the position of CCC and CIC described in Paragraph 38 above. 40. Pursuant to 28 U.S.C. 2201(a), an actual controversy exists between CCC and CIC, on the one hand, and the SCOR Companies, on the other hand, respecting the scope of the Commutation Agreement. 7

8 Case 1:07-cv Document 152 Filed 05/13/2009 Page 8 of 8 PRAYER FOR RELIEF WHEREFORE, Plaintiffs respectfully request that this Court enter judgment in their favor and against Defendants, awarding: (a) A declaration that the Commutation Agreement does not apply to reinsurance contracts issued by Allstate, Unity Fire or any companies other than those identified as REINSURER under the Commutation Agreement; and (b) Such other relief as the Court deems just, including any further relief authorized under 28 U.S.C. 2201(a). Dated: May 13, 2009 By: /s/ Serena B. Lee Serena B. Lee William M. Sneed Thomas D. Cunningham Serena B. Lee SIDLEY AUSTIN LLP One South Dearborn Street Chicago, IL Attorneys for Plaintiffs Continental Casualty Company and Continental Insurance Company CH v.1 8