Kidnap and Extortion Policy Claim May Proceed For Loss of Insured's Business Due to Uzbekistan Government Shakedown

Interspan Distribution Corp. v. Liberty Ins. Underwriters, Inc., #H-07-CV-1078 (S.D. Tex., March 31, 2008)

If you are planning to open a business in Uzbekistan, think again, or at least don't go there without a good kidnap/ransom and extortion insurance policy, as this case shows.  Interspan operated a profitable tea importation business in Uzbekistan that unfortunately drew the attention of the oldest daughter of Uzbekistan's authoritarian ruler, Islam Karimov (her name is Gulnara Karimova).  It is apparently well known in international circles that Gulnara has a sweet tooth for seizing profitable enterprises through misuse of government power.  Interspan alleged in its complaint against Liberty that in 2006, Gulnara abducted, held hostage and threatened Interspan personnel and their relatives as part of a scheme to obtain control over its business, seize its assets, and force the company out of Uzbekistan.

So what did gentle Gulnara do?  "Hooded men with machine guns" burst into the house of Eskender Kiamilev, father of Interspan's principal owner, and carried him the Uzbeki jail.  Allegedly, the perpetrators were members of the Committee for National Safety, Uzbekistan's version of the CIA.  The same day, armed government agents Interspan's offices and warehouses in Tashkent. 

Here is where kidnap policy comes into play.  Interspan reported the kidnapping to Liberty, which called on Corporate Risk International (CRI), a global crisis-management firm.  Think of CRI as Russel Crowe in the 2000 movie "Proof of Life" (we will get to the Meg Ryan character in a minute, who has the charming name of Natasha Matkarimova, no relation to Gulnara).  CRI slipped into the shadows of Uzbeki night life and emerge with the story that Gulnara had Eskender arrested and the property seized to frighten and intimidate Interspan into surrendering the entire business to her.  However, CRI, with the help of the US Embassy, managed to extract Eskender from jail due to his status as a former Soviet diplomat.

Not to be deterred, Gulnara went after Mikhail Matkarimova, brother-in-law of Interspan's owner, but he had gone underground.  So she arrested Mikhail's wife, Natasha and had her dragged to the dungeon where, CRI reported, torture and rape awaited her unless Mr. Matkarimova turned himself in.  We are left to speculate whether CRI's Russell Crowe and Natasha fell in love while Mikhail spent 6 months in prison and was denied medical care for a bleeding ulcer.  The complaint against Liberty doesn't go there.

So what has all this got to do with law and insurance?  Interspan ended up turning over the business to Gulnara, after which Mikhail was granted amnesty (he had been tried and sentenced to 3 years probation, fined $10,000, and forced to work for the government for 2 years, kicking back 20% of his salary to the government).  Interspan submitted a claim for "Loss" of the entire business.  Although the policy covered Loss caused by kidnap/ransom or extortion, Liberty denied the claim basically on grounds that Interspan could not sufficiently show that its loss of the business was the result of kidnap or extortion.

The case has some interest to lawyers because the court had to wrestle with the US Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007) to raise the pleading standard that a plaintiff must meet to avoid a motion to dismiss under Rule 12(b)6.  The old pleading standard, articulated in 1957 in Conley v. Gibson, was that a complaint should not be dismissed unless it appeared beyond doubt that the plaintiff could prove no set of facts supporting a claim for relief.  The Twombly Court said this standard was too lenient and held that a complaint must show enough facts to move the claim for relief from the merely "speculative" level to the "plausible."  Courts are now trying to figure out just what that means.

In this case, however, the court denied Liberty's motion to dismiss based in no small part of the ample allegations supplied by CRI's report of Gulnara's past seizures of other businesses using the same hard-knuckled tactics and its report to Interspan that the government would back off if Interspan turned over the business.  As the court observed:

An expert analysis by a crisis-management company specializing in kidnapping, ransom, and extortion, stating that those abducted would be released in exchange for payment in the form of relinquishing the business assets is neither "factually neutral" nor a "formulaic recitation of the elements of a cause of action" (quoting Twombly).

We are not told how much Interspan was seeking.  Perhaps Liberty choked on the number.  Perhaps Liberty was just taking its shot at raising the Twombly bar as high as possible.  Whatever the reason, Liberty was bound to lose.  This movie had to have a happy ending.  I am looking for a sequel that hooks up Russell Crowe with Gulnara.