The Office of General Counsel issued the following informal opinion on December 7, 2001, representing the position of the New York State Insurance Department.

Re: Service of Process/Unauthorized Insurer.

Question Presented:

Is an unauthorized foreign or alien insurer required by N.Y. Ins. Law § 1213(c)(1) (McKinney 2000) to file with the court clerk a bond when such insurer is the plaintiff in a lawsuit?


No. The statute applies only when the unauthorized insurer is the defendant in the proceeding, not when it is the plaintiff.


The inquirer represents a defendant, an errors and omissions policyholder, based in New York State, sued by an unauthorized alien insurer in a New York State Court.


N. Y. Ins. Law § 1213(c)(1) (McKinney 2000) provides for certain obligations that an unauthorized foreign or alien insurer must perform before it can file "any pleading in any proceeding against it. . ." (emphasis added). It can either obtain an insurance license in New York or it must "deposit with the clerk of the court in which the proceeding is pending, cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure payment of any final judgment which may be rendered in the proceeding. . ." (Supra).

The inquirer contends that even though the facts are different than prescribed by the language of the statute (here, an unauthorized alien insurer, is the plaintiff instead of being the defendant), N.Y. Ins. Law § 1213(c)(1) (McKinney 2000) would still apply. The inquirer asserts that it is more logical to apply the statute to an unauthorized insurer acting in the capacity of plaintiff than in the statutory case of an insured seeking to sue such unauthorized insurer as defendant. The inquirer’s theory is that the defendant would be forced to "expend time, resources and attorneys’ fees in responding" to the insurer’s complaint without the assurance that if the defendant wins, there would be money to compensate him. The inquirer makes no reference to any case law, statute, or regulation to support this theory.

Although the inquirer postulates that the policyholder, when sued by an insurer, "almost always counterclaims," the inquirer does not indicate that its client has, in fact, filed such counterclaim. The statute requires that there be a proceeding against such unauthorized insurer.

As N.Y. Ins. Law § 1213(a) (McKinney 2000) states, the purpose of this section is to subject certain unauthorized insurers to the jurisdiction of New York State courts so that insureds or beneficiaries could sue them on certain insurance contracts. If the facts are not compatible with the statutory framework, then a special "long-arm" statute such as N. Y. Ins. Law § 1213 (McKinney 2000) is inapplicable. In any event, it is the court which would fix the amount of the bond and which may make an order to dispense with such bond if the Superintendent certifies that the insurer maintains sufficient funds in trust in New York (N.Y. Ins. Law § 1213 (c)(1)(A) (McKinney 2000)). Since the amount of necessary funds cannot be determined in advance of the bringing of the claim against the insurer, the statute as the inquirer would construe it would be unworkable and contrary to its clear language.

For further information, you may contact Associate Attorney Jeffrey A. Stonehill at the New York City office.