OGC Op. No. 04-01-17
The Office of General Counsel issued the following opinion on January 16, 2004, representing the position of the New York State Insurance Department.
Re: Service of Process on an Unauthorized Alien Insurer Under N.Y. Insurance Law § 1213 - Marine Insurance
May an unauthorized alien insurer who has placed marine insurance in New York State be sued in New York State?
An unauthorized alien insurer who has placed marine insurance in New York State is subject to New York jurisdiction through personal service of process upon the Superintendent if, as to the specific contract of insurance which is the subject of the litigation, there are sufficient minimum contacts with New York State so as to support New Yorks long-arm jurisdiction under N.Y. Insurance Law § 1213(b)(1) (McKinney 2000). If the exception from § 1213 that is contained in subsection (e) is applicable, meaning that the contract of marine insurance was effectuated either in accordance with N.Y. Ins. Law § 2117(b) or § 2105 and the contract of insurance designates the Superintendent to accept service of process as the insurers attorney upon whom may be served all lawful process in any proceeding brought by or on behalf of an insured or beneficiary arising out of such contract, the insurer has thereby voluntarily submitted itself to New York jurisdiction under the contract of insurance.
No facts were presented.
The inquirer posed his question to include the phrase, "placed marine insurance in New York," but did not provide us with any of the facts surrounding any specific placement of which he inquired. Therefore, we are unable to provide the inquirer with an answer as to a particular contract of insurance. However, we will in this letter discuss the applicable law.
Where a resident of New York State is insured under a contract of insurance issued by an unauthorized alien insurer the question may arise whether such insurer is subject to the jurisdiction of the courts in New York.
Section 1213 of the New York Insurance Law is a special "long-arm jurisdiction" statute1 pursuant to which if specified contacts with New York State by an unauthorized alien or foreign insurer exist, as enumerated in subsection (b)(1), there is New York jurisdiction. Such jurisdiction is obtained through service of process upon the unauthorized foreign or alien insurer by serving the process upon the Superintendent of Insurance. Section 1213(b)(1) provides, as follows:
(b)(1) Any of the following acts in this state, effected by mail or otherwise, by an unauthorized foreign or alien insurer:
(A) the issuance or delivery of contracts of insurance to residents of this state or to corporations authorized to do business therein,
(B) the solicitation of applications for such contracts,
(C) the collection of premiums, membership fees, assessments or other considerations for such contracts, or
(D) any other transaction of business.
is equivalent to and constitutes its appointment of the superintendent, and his successors in office, to be its true and lawful attorney upon whom may be served all lawful process in any proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contract of insurance, and shall signify its agreement that such service of process is of the same legal force and valid as personal service of process in this state upon such insurer.
The statute only confers New York jurisdiction where the unauthorized insurer is actually doing business in New York State. See Arkwright Mut. Ins. Co. v. Scottsdale Ins.Co. 874 F. Supp. 601(S.D.N.Y. 1995).
Subsection (e) of § 1213 (McKinney 2000) provides for an exception to the statute with regard to unauthorized foreign or alien insurers who write marine insurance through a licensed broker under § 2117 or an excess line broker under § 2105. Subsection (e) provides, as follows:
(e) This section shall not apply to any proceeding against any unauthorized foreign or alien insurer arising out of any contract of insurance effectuated in accordance with subsection (b) or (c) of section two thousand one hundred seventeen of this chapter or in accordance with section two thousand one hundred five of this chapter where such contract designates the superintendent or his successors in office the insurers true and lawful attorney upon whom may be served all lawful process in any proceeding instituted by or on behalf of an insured or beneficiary arising out of such contract.
Thus, under subsection (e), the statute, including its special long-arm jurisdiction provision which is contained in subsection (b)(1), is not applicable either to: (1) any contract of insurance effectuated in accordance with a placement by a licensed New York insurance broker of a contract of marine insurance of the kind specified in § 2117(b)(3), or (2) any contract of marine and inland marine insurance effectuated in accordance with N.Y. Ins. Law § 2105 (McKinney Supp. 2004) as an excess line placement by a New York licensed excess line broker, and where the contract designates the Superintendent as the agent for service of process for actions arising out of said contract.
Only in the circumstances described in N.Y. Ins. Law § 2117(b)(3) (McKinney Supp. 2004) may the kinds of marine insurance that are specified in subparagraphs (A) and (B) thereof be negotiated by a licensed insurance broker. Paragraph (3) provides, as follows:
(3) marine insurance of the following kind or kinds, where it is reasonable so to do with due regard to the interests of all concerned and whether or not, at the time of such negotiation, the subject matter of such insurance is within or without this state:
(A) insurance against perils of navigation, transit or transportation upon hulls, freights or disbursements, or other shipowner interests, goods, wares, merchandise and all other personal property and interests therein, in course of exportation from or importation into any country, or transportation coastwise, including transportation by land or water from point of origin to final destination and including war risks and marine builders risks; and
(B) insurance in connection with ocean going vessels against any of the risks specified in paragraph twenty-one of subsection (a) of section one thousand one hundred thirteen of this chapter.
The kind of marine insurance that may be written under N.Y. Ins. Law § 2105 in the excess line market is the kind described in N.Y. Ins. Law § 1113(a)(20) as "Marine and inland marine insurance." Not included thereunder is "Marine protection and indemnity insurance " written under paragraph (21) of the statute.
If the subsection (e) exception contained in 1213 is applicable, meaning that the insurance contract in question contains a provision designating the Superintendent as its true and lawful attorney who may accept service of process in a proceeding arising out of said contract on its behalf, the insurer has thereby voluntarily submitted itself to the jurisdiction of New York courts. The Superintendent, under such circumstance, may accept service of process against the unauthorized insurer which is served upon him and thereby New York jurisdiction would be invoked pursuant to the contract.
The inquirer cited the case of Armada Supply Inc. v. Philip Gaybell Wright, et al., 858 F.2d 842 (2d Cir. 1988) in which the Second Circuit Court of Appeals allowed a lawsuit to proceed against an unauthorized alien insurer who issued a policy of marine insurance outside of the United States covering the interests of a New York business. The inquirer observed that the Court therein did not address subsection (e) of § 1213 in making its decision. The inquirer is apparently under the impression that the case should have been dismissed because of the exception contained in subsection (e).
The Armada case arose out of a claim made under an open cargo marine insurance policy covering a shipment of oil that was being sent from Brazil to New York. The policy itself was obtained through a Houston, Texas insurance broker who dealt with a London broker. However, the policy covered the interest of Armada Supply Inc. which was a New York corporation. The Second Circuit Court of Appeals found that there were sufficient contacts with New York under N.Y. Ins. Law § 1213(b)(1) to support New York jurisdiction for the legal proceeding against the unauthorized alien insurer. We surmise that the Court in the Armada case did not mention Subsection (e) of the statute because the policy does not appear to have been a policy procured under either § 2105 or 2117 of the N.Y. Ins. Law. Therefore, the exception was not applicable.
We also note that in shepardizing the Armada decision, although never overturned, it has received negative treatment from some courts that were subsequently faced with similar issues. The inquirer was directed to review the subsequent appellate history of the case and the citing decisions, and determine how the inquirers specific situation fits into the current judicial reasoning.
For further information you may contact Associate Attorney Barbara Kluger at the New York City Office.
1 New York Insurance Law, Wolcott B. Dunham, Jr., General Editor, Matthew Bender & Co., Inc. (2003), Vol. 1, §7.09.