Summary
explaining that section 1213(c) relieves an unauthorized foreign insurer from the requirement to post a bond "when it files a ‘motion’ to set aside service on the ground that the carrier, or the person upon whom service is made pursuant to section 1213(b), did not commit the acts in [New York] that form the predicate for the court's jurisdiction" contained in section 1213(b)
Summary of this case from MF Global Holdings Ltd. v. Allied World Assurance Co. (In re MF Global Holdings Ltd.)Opinion
Argued October 19, 2000.
Decided November 30, 2000.
APPEAL, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the First Judicial Department, entered January 4, 2000, which affirmed an order of the Supreme Court (Lorraine Stein Miller, J.,), entered in New York County, directing defendant to post a bond in the amount of $4,835,333.99 or, in the alternative, to provide a certification from the Commissioner of Insurance that defendant maintains within New York funds or securities in trust or otherwise sufficient and available to satisfy any final judgment against defendant, and the judgment entered thereon in favor of plaintiff in the sum of $4,835,333.99 upon the ground that defendant failed to post the required bond in that amount.
Robert F. Coleman Associates (Eugene J. Schiltz), of the Illinois Bar, admitted pro hac vice, of counsel, Wolff Samson, P.A. New York City ( Adam P. Friedman of counsel), and Piper Marbury Rudnick Wolfe, Chicago, Illinois, for appellant. Marilyn L. Lytle, New York City, Joseph A. DeMauro and Steven R. Harris for respondent.
Chief Judge Kaye and Judges Smith, Levine, Ciparick and Wesley concur.
Insurance Law § 1213(c) requires an "unauthorized foreign or alien" insurance carrier to post a bond before filing "any pleading" in a proceeding against it. In the case at hand, the carrier, after being sued in Supreme Court, did not interpose an answer but instead moved to dismiss the complaint as time barred and subject to a defense founded upon documentary evidence. We must decide whether the carrier's motion constitutes a "pleading" within the meaning of section 1213(c) so as to require it to post a bond. For the reasons that follow, we conclude that it does.
In 1980, defendant Intercontinental Casualty Insurance Company, a Cayman Islands insurance carrier, and Ideal Mutual Insurance Company, a New York insurance carrier, entered into a Quota Share Reinsurance Agreement to reinsure certain workers' compensation and employers' liability policies of Ideal and one of its subsidiaries. Ideal later became insolvent and the New York State Superintendent of Insurance brought a proceeding in Supreme Court to have Ideal placed in liquidation pursuant to Article 74 of the Insurance Law. Supreme Court granted the petition, appointed the Superintendent as liquidator, and vested the Superintendent with title to all of Ideal's property and rights of action.
In February 1998, the Superintendent, as liquidator, commenced an action in Supreme Court against Intercontinental. On behalf of Ideal's estate, the Superintendent sought to recover some $20.5 million in reinsurance proceeds allegedly outstanding under the Quota Share Reinsurance Agreement. Interposing no answer, Intercontinental moved to dismiss the complaint on statute of limitations and documentary evidence grounds (see, CPLR 3211[a][1] and [5]). Intercontinental also informed the court that it would not object if the court elected to treat its motion as one for summary judgment pursuant to CPLR 3211(c). Arguing that Intercontinental was defending the action on the merits, the Superintendent sought an order compelling Intercontinental to post a bond.
A carrier may comply with section 1213(c)(1)(A) by either putting up cash or securities or by posting a bond. The amount, to be fixed by the court, must be "sufficient to secure payment of any final judgment which may be rendered in the proceeding" (see, Insurance Law § 1213[c][1][A]).
Supreme Court granted the Superintendent's application and ordered Intercontinental "to post a bond in the amount of $4,835,333.99, or, in the alternative, to provide a certification from the Commissioner of Insurance that defendant maintains within New York funds or securities in trust or otherwise sufficient and available to satisfy any final judgment against [it]." After Intercontinental failed to post a bond, Supreme Court granted the Superintendent's motion for judgment, and a judgment in the amount of $4,835,333.99 was entered. Intercontinental appealed, contending that its motion to dismiss was not a pleading and therefore did not trigger the Insurance Law's requirement to post a bond. In the alternative, Intercontinental argued that Supreme Court set the bond too high. The Appellate Division affirmed. We granted Intercontinental leave to appeal and now affirm.
Insurance Law § 1213 has clear objectives. It imposes accountability on foreign or alien carriers who, although not authorized to do business in this State, issue or deliver insurance policies here (see, Insurance Law § 1213[a]). Moreover, the enactment provides a local forum for resolving disputes that arise out of those policies (including reinsurance treaties) (see, Insurance Law § 1213[b]; see generally, Curiale v. Ardra Ins. Co., 88 N.Y.2d 268, 275; Mem of N.Y. Law Rev Commn, at 25-26, Bill Jacket, L 1949, ch 826). Finally, by requiring a foreign carrier to post a bond at the outset of a proceeding, the statute seeks to assure that a foreign carrier's funds will be available in this State to satisfy any potential judgment against it from the proceeding (see, Insurance Law § 1213[c]; Curiale v. Ardra Ins. Co.,supra, 88 N.Y.2d, at 275).
Section 1213(c)(1) requires any unauthorized foreign or alien carrier to post a bond before it "files any pleading in any proceeding against it." At the same time, section 1213(c)(3) excuses a foreign carrier from the bond posting requirement when it files a "motion" to set aside service on the ground that the carrier, or the person upon whom service is made pursuant to section 1213(b)(3), did not commit the acts in this State that form the predicate for the court's jurisdiction (see, Insurance Law § 1213[c][3]).
Intercontinental argues that pre-answer motions to dismiss are not "pleadings." In support of its position, Intercontinental relies onAllstate Ins. Co. v. Administratia Asigurarilor De Stat ( 948 F. Supp. 285, 295 [S.D.N.Y.]). There, the court allowed a carrier to file a motion for summary judgment without a bond. The court relied in part on CPLR 3011, entitled "Kinds of Pleadings." The court noted that "[s]ection 3011 provides for a complaint, an answer, a cross-claim against plaintiff, a counterclaim or cross-claim against a not-yet-joined party, interpleader pleadings, third party pleadings, a reply to counterclaim, and a reply to a reply" (id.). Because a motion for summary judgment was not on the list, the court concluded that it was not a "pleading" for purposes of Insurance Law § 1213(c).
We disagree with the holding in Allstate. CPLR 3011 is essentially a "labeling provision" (see, Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 3011:1, at 625-626). In concluding that a bond is required, we are guided not by nomenclature but by the realities of litigation. We are unwilling to import CPLR 3011's labeling function into Insurance Law § 1213. To do so would impede section 1213's objectives.
The Legislature's choice of words in the exception carved out by subsection (c)(3) is revealing. By carving out certain "motions" to set aside service, the Legislature obviously contemplated that other "motions" may qualify as pleadings under subsection (c)(1). Whether any particular motion to dismiss — other than the one carved out — falls within the category of a "pleading" must be determined in accordance with the Legislature's objectives in enacting the statute.
Section 1213's legislative history indicates that defending on the merits requires the posting a bond (see, Mem of N.Y. Law Rev Commn, at 26-27, Bill Jacket, L 1949, ch 826 [explaining that "defendant should be permitted to appear specially to set aside the service without depositing security" (emphasis added)]; 1949 New York State Legislative Annual, at 252 ["Before an unauthorized insurer may come into the state to defend the action, it must (post a bond)"]; see also, Biging, Tactical Use of State Laws Requiring Unauthorized Insurers to Post Preanswer Security, 31 Tort Ins L J 767, 767 [1996] [explaining that the carrier "may be required to post money, bonds or other security equal in amount to the insurer's potential exposure before it will be permitted to defend the case on its merits"]).
Intercontinental argues that allowing it to file a motion to dismiss without posting a bond would not compromise section 1213(c)'s goals. It contends that "[i]f a complaint is so flawed that it cannot survive a motion to dismiss, there is no possibility that a judgment [for plaintiff] will be entered and no need to ensure that funds are available to satisfy one." Thus, according to Intercontinental, allowing foreign carriers to forestall filing a bond until they interpose a formal answer is consistent with section 1213(c)'s objective. We disagree.
Allowing Intercontinental to raise its defenses without posting a bond would compromise section 1213(c)'s goal of assuring that funds are available in New York to satisfy any judgment in plaintiff's favor. A foreign carrier could wage extensive, costly motion practice, and yet avoid the bond requirement by simply advancing a host of defenses before interposing a formal answer. If defeated, the carrier could simply ignore the remainder of the proceedings and relegate the plaintiff to a default judgment with no in-State collateral. This is what the Legislature sought to avoid by enacting section 1213(c). We therefore read the term "pleading" to include Intercontinental's motion to dismiss.
For example, in Curiale v. Ardra Ins. Co. ( 88 N.Y.2d, at 272,supra), where we held that section 1213 satisfies procedural due process, the parties had conducted six years of pre-answer litigation.
The grant of this motion to dismiss would cut the heart out of the plaintiff's case, while a denial could advance it substantially. Moreover, CPLR 3211(c) allows a trial court to treat a motion to dismiss as one for summary judgment. In doing so, it allows the court to order an "immediate trial of the issues raised on the motion." Thus, the motion to dismiss in this case pursuant to CPLR 3211(a)(1) and (5) could give Intercontinental the practical equivalent of a complete victory — or a severe setback — in the litigation.
Finally, Intercontinental argues that Supreme Court erred in calculating the amount of the bond that Insurance Law § 1213(c) requires in this case. The statute requires a bond that is "sufficient to secure payment of any final judgment which may be rendered in the proceeding" (Insurance Law § 1213[c][1][A]). The task of fixing the amount necessarily falls within the trial court's discretion (see,Curiale v. Ardra Ins. Co., 189 A.D.2d 217, 221, affd, 88 N.Y.2d 268). The calculation must be made at an early stage of the litigation, prior to the resolution of potentially complex factual and legal issues. We conclude from the record that the trial court did not abuse its discretion in setting the amount of the bond that section 1213 would require.
Accordingly, the order of the Appellate Division should be affirmed, with costs.
Order affirmed, with costs.