Pre-Answer Security In New York Is No Joke

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New York, among several other states, protects its citizen policyholders in disputes with unauthorized foreign or alien insurance companies by requiring the insurance company to deposit security or obtain a licence to do an insurance business in the state before it can file any pleadings in an proceedings brought against it in New York.  This is to make sure that any judgment can be enforced without the New York policyholder chasing around the world to execute.  While there are limited exceptions, the general rule is before the defendant insurance company can appear and respond to a lawsuit, it has to post security.  When the insurance company fails to comply, its efforts to respond to the case will be limited.

In Jiang v. Ping An Insurance, No. 10806N (N.Y. App. Div. 1st Dep’t Jan. 16, 2020), several related insurance companies based outside the United States were sued in New York Supreme Court.  The insurers moved to dismiss the complaint for lack of personal jurisdiction and other relief, but failed to comply with New York Insurance Law 1213(c).  The policyholder moved to compel the companies to either procure a license to do an insurance business in New York or post a bond under 1213(c).  The motion court denied the motion to dismiss and granted the policyholder’s motion to compel the group insurer to comply with 1213 before the court would consider the remainder of the insurance companies’ motion.  The motion court also held in abeyance the policyholder’s 1213 motion for the related insurance companies pending a jurisdictional hearing.  The Appellate Division affirmed.

The court found that the group company waived any objection to jurisdiction by appearing in the case and by failing to file timely pre-answer motions to dismiss, and defending on the merits.  As to the related companies, the appellate court held that the motion court correctly ordered a traverse hearing on the effectiveness of the service of process and personal jurisdiction.  Finally, the appellate court held that the motion court appropriately imposed a bond requirement upon the group company, holding in abeyance its other motions pending the group’s compliance with 1213(c).

Without posting of security (or procuring a license) an unauthorized foreign or alien insurance company cannot seek to dismiss an action, other than make a jurisdictional challenge to the service of process under 1231(a).  Appearing even by a having counsel file a pro hac vice admission, which the court here held was akin to an appearance, waives the jurisdictional objection and requires the company to post security before the court will address any of its other arguments.

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