Coverage Pointers - Volume II, No. 12

New Page 1

11/30/00: LEVIN v. INTERCONTINENTAL CASUALTY INS. CO.
New York Court of Appeals
Foreign Carriers Required to Post Bond before Moving to Dismiss Proceeding
New York’s highest court ruled that Insurance Law §1213(c), which requires an unauthorized foreign or alien insurance carrier to post bond before filing "any pleading" in a proceeding against it, also requires that a bond be posted before filing a motion to dismiss under CPLR §3211. In concluding that a motion to dismiss constitutes a "pleading" within the meaning of statute, the Court held that allowing foreign carriers to raise defenses without posting bond would undermine §1213(c)’s goal of assuring that funds are available in New York to satisfy any judgment in plaintiff’s favor.

12/07/00: AMERICAN TRANSIT INS. CO. v. BAEZ
New York State Supreme Court, Appellate Division, First Department
Arbitration of Uninsured Motorist Claim Stemming from Collision with Stolen Vehicle Proper
Court held that vehicle owner’s liability coverage could not be reached to satisfy injured party’s claim where the vehicle had been stolen and there is no evidence that vehicle had been left unattended. The injured party was entitled to proceed with arbitration of claim for uninsured motorist benefits accordingly.

12/04/00: SAASTOMOINEN v. PAGANO

New York State Supreme Court, Appellate Division, Second Department
Sanctions against Allstate Lifted -- Allstate is Not the Real Party in Interest when defending its Insured
In March, we reported that Allstate was sanctioned for maintaining a frivolous tort defense in a personal injury action pending in New York State Supreme Court, Nassau County (see, Vol. I, No. 20). The trial judge determined that where the insurer had controlled the defense on behalf of its insured, the liability carrier was the "real party in interest". That decision was reversed by the Appellate Division in two unanimous decisions. Holding that the liability carrier was not the real party in interest, the Appellate Court suggested that a trial court that believes a carrier is acting improperly should not sanction the carrier but instead refer the complaint to the state's insurance department.

12/04/00: STATE FARM INS. CO. v. LOFSTAD
New York State Supreme Court, Appellate Division, Second Department
Insured Claiming Improper Termination of Coverage Estopped from Claiming Benefit of his Error
Court held that carrier’s termination of coverage was proper despite allegations that the notice of termination contained the wrong vehicle identification number. The insured was responsible for the error because he supplied the wrong number on an application for insurance that he signed attesting to its accuracy. Although it was an "innocent misleading", the insured was estopped from claiming the benefits of his deception.

11/28/00: MURRAY v. NORTH COUNTRY INS. CO.
New York State Supreme Court, Appellate Division, Third Department
Mortgagee Entitled to Summary Judgment in Absence of Evidence that he knew of Increase in Risk or Participated in Arson
In an action to recover the proceeds of a fire insurance policy, the Court held that partial summary judgment in favor of the plaintiff-mortgagee was properly granted. The insurer refused to pay the mortgagee’s claim under the policy, alleging that the fire was the result of arson on the part of the property owner, mortgagee "and/or representatives thereof", and that plaintiff-mortgagee had failed to notify defendant of a change in ownership, occupancy or substantial change in risk known to him. The court found no evidence in the record that the mortgagee was ever on the premises or otherwise became aware of facts constituting a substantial increase in risk. Moreover, although the mortgagee knew the premises were unoccupied for a period in excess of 60 days, his only obligation under the policy was to notify the insurer of a change in occupancy and no such change occurred between the conveyance and the fire. Finally, the insurer’s contention that the fire was the result of arson and that the mortgagee and property owner were jointly involved was based on surmise, conjecture and speculation.

11/27/00: AMERICAN HOME ASSURANCE CO. v. STATE FARM AUTOMOBILE INS. CO.
New York State Supreme Court, Appellate Division, Second Department
Injured Party’s Seven-Month Delay in Providing Notice to Carrier deemed Unreasonable
Court held that an injured party’s seven-month delay in providing notice to the offending vehicle’s carrier was untimely. Under Insurance Law §3420(a)(3), written notice by or on behalf of an injured party is deemed notice to the carrier; however, notice must be given as soon as reasonably possible and the injured party has the burden of proving that he or counsel acted diligently in ascertaining the identity of the carrier. Here, the seven-month delay in obtaining a police report of the accident was unreasonable and no satisfactory explanation was provided for subsequent delay in contacting the New York State Department of Motor Vehicles for insurance information. The court rejected the argument that delay was excusable because no personal representative of the estate was appointed.

ACROSS BORDERS

We regularly feature cases of interest from other jurisdictions. This week we offer decisions from California and West Virginia:

12/07/00: BAXTER HEALTHCARE CORP. v. CALIFORNIA INS. GUARANTEE ASSOC.
California Court of Appeal, Second Appellate District, Division Six
When Insured Merges into Another Company, California Insurance Guarantee Association Not Liable to Surviving Company
This is a declaratory judgment action arising out of a silicon breast implant case. American Hospital Supply Company (AHSC) merged into Baxter Healthcare. Product liability insurers for AHSC became insolvent and were taken over by CIGA . Court holds that since survivor of merged company is not original claimant and since Guarantee Act specifically precludes claims by assignment, CIGA has no obligation to defend or indemnify Baxter.

12/05/00: CHANGE, INC. v. WESTFIELD INS. CO.
West Virginia Supreme Court
Property Policy Ambiguous as to Underground Water Damage
A water main owned by the City ruptured and damaged the offices of a non-profit organization. At the time, the premises were covered by a commercial property insurance policy. The policy provided that the insurer would pay for damage caused by "Specified Causes of Loss." "Specified Causes of Loss" were defined as "Fire, lightning, explosion . . . water damage." "Water damage" was defined as "accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam." Another portion of the policy excluded certain types of water damage. Specifically, the policy stated:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

The Court held that the policy was ambiguous because it was uncertain, and because reasonable minds might disagree as to it’s meaning. At one point the policy specifically provides that it will cover water damage resulting from the accidental discharge or leakage of water resulting from the breaking or cracking of any part of a system containing water. At another point, the policy specifically excludes coverage of damage from water under the ground surface pressing on, flowing or seeping through foundations, etc. In the Court's view, it is unclear whether the policy provides coverage resulting from the breaking or cracking of a system containing water which is wholly or partially underground. Because the policy is ambiguous, the policy must be construed strictly against the insurer.
 

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.


Newsletter Editor
Kevin T. Merriman
[email protected]

Insurance Coverage Team
Dan D. Kohane, Team Leader
[email protected]
Sheldon Hurwitz
Carolyn M. Henry
Kevin T. Merriman

Fire, First Party & Subrogation Team
James D. Gauthier, Team Leader
[email protected]
Donna L. Burden
Andrea Schillaci
Jody E. Briandi

© COPYRIGHT 2000 Hurwitz & Fine, P.C., ALL RIGHTS RESERVED.

 

REPORTED DECISIONS

AMERICAN TRANSIT INS. CO. v. BAEZ

Order, Supreme Court, New York County (Beverly Cohen, J.), entered September 9, 1999, denying petitioner's application for a permanent stay of arbitration of respondent Baez’s claim for uninsured motorist benefits, unanimously affirmed, with costs.

At common law , the owner of an automobile who leaves her keys in her car is not liable for the negligence of a thief (see, Phifer v State of New York, 204 AD2d 612, Epstein v Mediterranean Motors Inc ., 109 AD2d 340, 343, affd 66 NY2d 1018), and there is no demonstration that respondent owner Pauline Louzar left her vehicle "unattended" within the meaning of Vehicle and Traffic Law § 1210(a) on the occasion of its theft. Rather, she left the vehicle with her husband, who, at the time was seated in the right front passenger seat. Then her husband momentarily stepped away from the vehicle to prepay the pump attendant for refueling, at which time her car was stolen (see, Matter of Hartford Ins. Co. v Aquaviva, 179 AD2d 546; Simon v El Serv. Corp., 85 AD2d 556). Accordingly, the owner’s liability coverage, issued by respondent Travelers Insurance Company, may not be reached in satisfaction of respondent Baez’s claim stemming from Baez’s collision with the stolen vehicle, and the arbitration of such claim pursuant to the uninsured motorist indorsement of his policy with petitioner insurer was properly permitted to proceed .

STATE FARM INS. CO. v. LOFSTAD

In a subrogation action, in effect, to recover the benefits paid to Salvatore Sammartino pursuant to a policy of insurance , the third-party defendant appeals from an order of the Supreme Court, Suffolk County (Werner, J.), dated September 10, 1999, which denied its motion pursuant to CPLR 3211 to dismiss the third-party complaint and granted the cross motion of the defendant third-party plaintiff for summary judgment on the third -party complaint.

ORDERED that the order is reversed, on the law, with costs, the motion is granted, the cross motion is denied, and the third-party complaint is dismissed.

The defendant third-party plaintiff David Lofstad (hereinafter Lofstad) obtained a policy of insurance from the third-party defendant Continental Insurance Co. (hereinafter Continental). The term of the policy was from August 26, 1994, to August 25, 1995. On December 20, 1995, after the term had expired, Lofstad struck a vehicle owned and operated by Salvatore Sammartino. The plaintiff, as subrogee of Sammartino, commenced an action, in effect, to recover the benefits that it paid pursuant to a policy of insurance, and Lofstad commenced a third-party action to compel Continental to defend and indemnify him.

Continental established that, after Lofstad failed to pay his premiums, it properly terminated his policy of insurance under Vehicle and Traffic Law § 313 by mailing him a notice of termination and transmitting similar notice to the Department of Motor Vehicles (hereinafter the DMV). In response, Lofstad failed to raise an issue of fact that the notice of termination was insufficient. While the notice of termination to the DMV contained the wrong vehicle identification number, Lofstad was responsible for the error since he supplied the number to Continental on an application for insurance that he had signed, attesting to its accuracy (see, DiGrazia v United States Life Ins. Co. in City of New York, 170 AD2d 246, 247; Bloom v Mutual of Omaha Ins. Co., 161 AD2d 1047, 1049). An innocent misleading of another party may estop one from claiming the benefits of his or her deception (see, Bucon, Inc. v Pennsylvanie Mfg. Assn. Ins. Co., 151 AD2d 207, 211).

AMERICAN HOME ASSURANCE CO. v. STATE FARM MUTUAL AUTOMOBILE INS. CO.

In an action for a judgment declaring, inter alia, that State Farm Mutual Automobile Insurance Company has an obligation to defend and indemnify the defendants Aysha Z. Siddiqui and Michelle V. Weithers in a wrongful death action entitled Goshin v Siddiqui pending in the Supreme Court, Queens County, the defendant Arnold Goshin appeals, as limited by his brief, from so much of a judgment of the Supreme Court, Nassau County (Shifrin, R.), dated January 12, 2000, as declared that State Farm Mutual Automobile Insurance Company is not obligated to defend or indemnify Aysha Z. Siddiqui and Michelle V. Weithers in the wrongful death action.

ORDERED that the judgment is affirmed insofar as appealed from, with costs.

The decedent Harry Fisher was killed when he was struck by a car in Queens on November 3, 1993. The offending vehicle was insured by State Farm Mutual Automobile Insurance Company (hereinafter State Farm). The defendant Arnold Goshin, Fisher's relative, was advised in October 1994 of a potential wrongful death action by an attorney , Lance Harris, who was retained to probate Fisher's estate. The wrongful death action was also discussed in October 1994 with a second attorney, David Gendelman. Goshin eventually retained Gendelman to commence the wrongful death action. Goshin was issued letters of administration for Fisher's estate in September 1995, and Gendelman notified State Farm of the wrongful death action in October 1995. State Farm disclaimed coverage on November 8, 1995, on the ground that the notice of the accident was untimely.

Pursuant to Insurance Law § 3420(a)(3), written notice by or on behalf of the injured party shall be deemed notice to the carrier. The notice must be given as soon as reasonably possible (see, Insurance Law § 3420[a][4]), and the injured party has the burden of proving that he or she, or counsel acted diligently in attempting to ascertain the identity of the insurer and, thereafter, expeditiously notified the insurer (see, Serravillo v Sterling Ins. Co., 261 AD2d 384; Eveready Ins. Co. v Chavis, 150 AD2d 332).

We agree with the Supreme Court that Goshin failed to meet his burden of proving that he or the attorneys he consulted in this matter acted diligently in identifying State Farm as the insurance carrier of the offending vehicle and thereafter expeditiously notifying State Farm of the accident. Assuming that the initial delay in providing notice was excusable because Goshin was a Florida resident and was unaware of the particulars of the accident , he knew by October 1994 of the potential for a wrongful death action. The delay of seven months thereafter in obtaining the police report of the accident was unreasonable, and no satisfactory explanation was provided for the subsequent delay in contacting the New York State Department of Motor Vehicles for insurance information (see, State Farm Mut. Auto. Ins. Co. v Romero, 109 AD2d 786; Eveready Ins. Co. v Chavis, supra). The Supreme Court properly rejected the argument that the delay was excusable because no personal representative of Fisher's estate was appointed until September 1995 (see, Kramer v Government Empls. Ins. Co., 269 AD2d 567). Accordingly, the notice to State Farm was untimely, and the Supreme Court properly declared that State Farm was not obligated to defend or indemnify its insureds in the pending wrongful death action.

The appellant's remaining contentions are without merit.

MURRAY v. NORTH COUNTRY INS. CO.

Cross appeals from an order of the Supreme Court (Dawson, J.), entered July 26, 1999 in Clinton County, which, inter alia, granted plaintiff's motion for partial summary judgment.

On April 1, 1993, property owned by Roland Senecal (hereinafter Senecal) and Pamela Senecal, his wife, was heavily damaged by fire. Senecal purchased the subject property on November 24, 1992 from plaintiff for the sum of $80,000. In connection with the purchase, plaintiff took back a purchase money mortgage in the sum of $76,000. Prior to the closing, defendant issued a special multiperil policy to Senecal covering the premises for the period November 24, 1992 to November 24, 1993. In the application for this insurance policy, defendant was informed that the property would undergo renovation and that the restaurant was expected to be open for business no later than December 20, 1992.

On February 3, 1993, Alan Sobol, to whom plaintiff had previously issued a limited power of attorney , contacted defendant requesting that plaintiff's name be added to the policy as the holder of a first mortgage lien on the property. Defendant complied with this request and, on March 3, 1993, issued an endorsement adding plaintiff as a loss payee under the mortgage clause of the policy. On April 1, 19 93, the property was heavily damaged by fire. Defendant refused to pay plaintiff's claim under the policy , alleging that the fire was the result of arson on the part of Senecal, plaintiff "and/or representatives thereof", and that plaintiff had failed to notify defendant of any change in ownership, occupancy or substantial change in risk known to him. Defendant informed plaintiff that Senecal's policy of insurance had been suspended prior to the date of the fire because the building had remained vacant or unoccupied for a period in excess of 60 consecutive days, that this fact was known to plaintiff and that plaintiff had failed to advise defendant thereof.

Plaintiff commenced this action seeking compensatory damages for breach of contract and punitive damages for "bad faith". After issue was joined , plaintiff moved for partial summary judgment on his breach of contract claim which originally was denied without prejudice to renewal after discovery was complete. Following the completion of discovery , plaintiff again sought partial summary judgment seeking payment of his claim, plus interest, costs , and counsel fees. Supreme Court, concluding that no triable issue of fact existed, granted plaintiff partial summary judgment on its breach of contract cause of action. With respect to damages, Supreme Court directed that an inquest be conducted. Additionally, the court, sua sponte, dismissed plaintiff 's second cause of action sounding in "bad faith" as being "without a legal foundation ". Defendant appeals from that portion of Supreme Court's order which granted plaintiff partial summary judgment and plaintiff cross-appeals with respect to that portion of the order which denied counsel fees.

The policy provisions which are germane to the issues raised herein are those which advise the insured:

(1) Your insurance is suspended when any hazard is increased by any means within your knowledge or control.

(2) Your insurance is suspended while a described building is vacant or unoccupied beyond a period of [60] consecutive days.

Equally germane is the following provision:

The insurance for the mortgagee continues in effect even when your insurance may be void because of your acts, neglect or failure to comply with policy terms, provided that the mortgagee:

* * *

(3) Notifies us of any change in ownership, occupancy or substantial change in risk known to the mortgagee .

Defendant makes three arguments, two of which can be summarily resolved. First, defendant argues that by reason of the insured's use of a salamander heater and his spilling of kerosene while filling it, the mortgagee knew of a substantial increase in the risk. There is no evidence in this record that the mortgagee was ever on the premises or otherwise became aware of these facts. Second , defendant argues that since plaintiff conveyed the premises to Roland Senecal and Pamela Senecal, and since he knew that the insurance policy had been issued to "Ronald" Senecal, he was therefore aware of a change in ownership. It is undisputed that plaintiff sold the premises to the Senecals and that there was no subsequent conveyance. As a result, there is no merit to defendant's argument that there was a change in ownership.

Defendant's third argument is that plaintiff is precluded from recovering under this policy because he knew the premises were vacant or unoccupied for a period in excess of 60 days. Although plaintiff admits to this knowledge, his only obligation, by the plain language of the policy, was to notify defendant of any change in occupancy. No change with respect to occupancy or vacancy occurred between the conveyance and the fire.

Plaintiff, because of the existence of the mortgage clause, has a contractual relationship with defendant independent of that of the insured (see, Agriculver Profit Sharing Plan v Dryden Mut. Ins. Co., 145 AD2d 811, 813). Under familiar rules, plaintiff has submitted admissible competent evidence entitling him to judgment as a matter of law (see, Alvarez v Prospect Hosp., 68 NY2d 320, 324; Winegrad v New York Univ. Med . Ctr., 64 NY2d 851, 853; Zuckerman v City of New York, 49 NY2d 557, 562). The burden, therefore , shifted to defendant to submit evidence sufficient to raise a triable issue of fact. Despite the fact that arson may be proved by circumstantial evidence (see, Weed v American Home Assur. Co. , 91 AD2d 750) and that hearsay evidence that is excludable at trial may be presented in opposition to a motion for summary judgment, so long as it is not the only proof submitted (see, Guzman v L.M.P. Realty Corp., 262 AD2d 99, 100; Di Veronica Bros. v Basset, 213 AD2d 936, 938-93 9), defendant has failed to meet its burden of raising a triable issue of fact.

We concur with Supreme Court that defendant's contention that the fire was the result of arson and that plaintiff and Senecal were jointly involved therein is based merely on surmise, conjecture and speculation insofar as plaintiff is concerned. First, there is no persuasive evidence that plaintiff had a motive to burn the premises. Defendant makes no claim, and no evidence has been submitted, that plaintiff was experiencing financial difficulties. The fact that plaintiff has experienced other fire losses and therefore that this loss was an arson planned by him is an inference based upon speculation, insufficient to create a genuine issue of fact, particularly where plaintiff established that the other losses were either voluntarily paid by the insurer or that he successfully brought suit against the insurer. Moreover , while the financial difficulties of Senecal may support an issue of fact as to his involvement in the fire, the loan history between Senecal and plaintiff does not raise an issue of fact as to whether plaintiff was his accomplice.

As a final matter, we find no merit to plaintiff's cross appeal with respect to his application for counsel fees. We find no legal basis upon which to award counsel fees and plaintiff points to none. Neither the policy of insurance nor the mortgage which plaintiff is foreclosing contains a provision authorizing the recovery of counsel fees in this action.

SAASTOMOINEN v PAGANO

In an action to recover damages for personal injuries, the defendants and the nonparty, Allstate Insurance Company, appeal, from an order of the Supreme Court, Nassau County (Winslow , J.), entered February 17, 2000, which, upon a prior order of the same court dated June 25, 1999, granting that branch of the plaintiff's motion which was to impose a sanction and costs pursuant to CPLR 8303- a against Allstate Insurance Company, imposed a sanction in the amount of $5,000 and costs in the sum of $6,730.64 against the nonparty appellant.

ORDERED that the appeal by the defendants Nicholas Pagano and Franco Pagano is dismissed, without costs or disbursements, as they are not aggrieved by the order appealed from (see, CPLR 5511); and it is further,

ORDERED that the order is reversed, on the law, without costs or disbursements.

The order imposing a sanction and costs against the nonparty Allstate Insurance Company must be reversed in light of our determination in Saastomoinen v Pagano, AD2d [Appellate Division Docket No. 1999-06332, decided herewith].

RITTER, J.P., H. MILLER, FEUERSTEIN and SMITH , JJ., concur.

SAASTOMOINEN v PAGANO

In an action to recover damages for personal injuries, the defendants and the nonparty, Allstate Insurance Company, appeal, as limited by their brief, from so much of an order of the Supreme Court, Nassau County (Winslow, J.), dated June 25, 1999, as granted that branch of the plaintiff 's motion which was to impose a sanction and costs against the nonparty Allstate Insurance Company pursuant to CPLR 8303-a.

ORDERED that the appeal by the defendants is dismissed, without costs or disbursements, as the defendants are not aggrieved by the order appealed from (see, CPLR 551 1); and it is further,

ORDERED that the order is reversed insofar as appealed from by the nonparty, Allstate Insurance Company, on the law, without costs or disbursements, and that branch of the plaintiff's motion which was to impose a sanction and costs against it is denied.

The Supreme Court erred in imposing a sanction and costs against the nonparty Allstate Insurance Company (hereinafter Allstate) based upon its conclusion that Allstate was the "real party in interest". The Supreme Court relied upon CPLR 8303-a and 22 NYCRR 130-1.1 as authority for the imposition of a sanction against Allstate. CPLR 8303-a and 22 NYCRR 130-1.1 provide that the court may impose a sanction and costs against a party or the attorney for a party for frivolous conduct (see, CPLR 8303- a[b]; 22 NYCRR 130-1.1[b]). Statutes authorizing an award of costs and sanctions are in derogation of common law and, therefore must be strictly construed (see, Gottlieb v Laub & Co., 82 NY2d 457; Ocasio v City of Middletown, 148 AD2d 431; see also, McKinney's Cons Laws of NY, Book 1, Statutes § 301 [a]). Because CPLR 8303-a and 22 NYCRR 130-1.1 do not include a nonparty or a "real party in interest " as a person against whom a sanction and costs may be imposed, the Supreme Court had no authority to impose a sanction and costs against Allstate. If the Supreme Court believed that Allstate's settlement practices were improper, the correct course would have been to refer the matter to the Superintendent of Insurance (see, Insurance Law § 2601).

RITTER, J.P., H. MILLER, FEUERSTEIN and SMITH , JJ., concur.

LEVIN v. INTERCONTINENTAL CASUALTY INS. CO.

ROSENBLATT, J.:

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.[1]

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 NY2d 268, 275; Mem of NY 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 NY2d, 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 & sect; 1213[c][3]).

Intercontinental argues that pre-answer motions to dismiss are not & quot;pleadings." In support of its position, Intercontinental relies on Allstate 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. [2]

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.[3] 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.

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 AD2d 217, 221, affd, 88 NY2d 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 1 213 would require.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

* * * * *

Order affirmed, with costs. Opinion by Judge Rosenblatt. Chief Judge Kaye and Judges Smith, Levine, Ciparick and Wesley concur.

Decided November 30, 2000

**FOOTNOTES**

[1]: 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]).

[2]:Section 1213's legislative history indicates that defending on the merits requires the posting a bond (see, Mem of NY 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"]).

[3 ]:For example, in Curiale v Ardra Ins. Co. (88 NY2d, at 272, supra), where we held that section 1213 satisfies procedural due process, the parties had conducted six years of pre-answer litigation.

Newsletter Sign-up

Fill in the form to register to receive any of our free electronic newsletters: