MacLaren Europe Ltd. v. Ace American Insurance

12-4844-cv
Maclaren Europe Ltd. v. ACE Am. Ins. Co.

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL
RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY
ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals
for the Second Circuit, held at the Thurgood Marshall United
States Courthouse, 40 Foley Square, in the City of New York, on
the 15th day of November, two thousand thirteen.

PRESENT: ROBERT D. SACK,
DENNY CHIN,
CHRISTOPHER F. DRONEY,
Circuit Judges.
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MACLAREN EUROPE LIMITED,
Plaintiff-Appellee,

-v- 12-4844-cv

ACE AMERICAN INSURANCE COMPANY, a/k/a ACE
USA,
Defendant-Appellant.

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FOR PLAINTIFF-APPELLEE: PAUL S. HUGEL, Clayman & Rosenberg
LLP, New York, New York.

FOR DEFENDANT-APPELLANT: JOSEPH K. POWERS (J. Gregory Lahr
and Thomas R. Orofino, on the
brief), Sedgwick LLP, New York,
New York.

Appeal from the United States District Court for the

Southern District of New York (Baer, J.).
 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is

AFFIRMED.

Defendant-appellant ACE American Insurance Company

("ACE") appeals from the district court's November 8, 2012

judgment entered pursuant to the court's November 5, 2012

opinion and order, which granted summary judgment to plaintiff-

appellee Maclaren Europe Limited ("Maclaren") and charged ACE

with receipt of the insurance premium Maclaren had paid to a

broker, Rana Sahni ("Sahni"), pursuant to New York Insurance Law

§ 2121. We assume the parties' familiarity with the facts,

procedural history, and issues on appeal.

"We review an order granting summary judgment de novo,

drawing all factual inferences in favor of the non-moving

party." Kwong v. Bloomberg, 723 F.3d 160, 164 (2d Cir. 2013)

(internal quotation marks omitted). Summary judgment shall be

granted "if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a

matter of law." Fed. R. Civ. P. 56(a). After an independent

review of the record, we conclude that Maclaren was entitled to

summary judgment on its claim for declaratory judgment and

affirm the judgment of the district court.

On appeal, ACE concedes that it is subject to New York

Insurance Law § 2121, but argues that the payment to the broker

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was not covered by Section 2121 because Maclaren made the

payment before ACE issued the policy. Because the broker

wrongfully converted the payment before the policy was issued,

ACE argues that it was entitled to cancel the policy for non-

payment of the premium. We reject this argument.

New York Insurance Law § 2121(a) provides in relevant

part:

Any insurer which delivers in this
state to any insurance broker . . . a
contract of insurance pursuant to the
application or request of such broker,
acting for an insured other than
himself, shall be deemed to have
authorized such broker to receive on
its behalf payment of any premium which
is due on such contract at the time of
its issuance . . . or any additional
premium which becomes due or payable
thereafter . . . , provided such
payment is received by such broker
within ninety days after the due date
of such premium . . . .

A literal reading of this provision supports Maclaren's

position. On its face, the statute merely requires the insurer

to deliver the policy to the broker for the broker to be deemed

the insurer's agent. Here, ACE delivered the policy to Sahni.

ACE argues that the plain language places temporal

limits on the broker-insured relationship. ACE asserts that the

phrase "at the time of its issuance" implies that an insured is

covered by Section 2121 only if the insurer has actually issued

the contract. Read in context, however, the phrase "at the time

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of its issuance" modifies the phrase "any premium," and was

therefore included to describe the type of payments covered

under Section 2121. Section 2121 could therefore protect

insureds for payments on premiums due: (1) in toto at the time

of issuance; (2) as an installment at the time of issuance; and

(3) later during the life of the contract, up to 90 days after

payment was due. ACE's argument requires words to be read into

the statute -- that only payments made after the policy is

delivered are covered.

Nevertheless, there is some ambiguity in Section 2121

because it is silent on the issue of pre-payment. We discern

two possible interpretations. First, the statute arguably sets

forth a risk-shifting scheme: an insurer who delivers a policy

to a broker assumes the risk of loss for any payment the insured

makes to the broker for the policy, and is therefore liable

under Section 2121 for the broker's misappropriation. See

Greater N.Y. Mut. Ins. Co. v. Axentiou, 597 N.Y.S.2d 401, 401

(1st Dep't 1993) (quoting Bohlinger v. Zanger, 306 N.Y. 228, 237

(1954) (Fuld, J., dissenting)). Second, however, the statute

could set forth a rule governed by agency principles. Under

this framework, advance payment of premiums to a broker would be

imputed to the insurer for purposes of Section 2121 only if some

kind of relationship exists between the insurer and the broker,

such that the payment was "in return for, or referable to," the

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policy at issue. See 18th Ave. Realty Corp. v. Aetna Cas. &

Sur. Co., 659 N.Y.S.2d 17, 18 (1st Dep't 1997).

We need not reach the question of whether Section 2121

is a strict loss-allocation rule or a rule governed by agency

principles, however, because Maclaren prevails under either

scenario. A risk-shifting scheme would mean that ACE assumed

the risk when it submitted the policy to Sahni, regardless of

when Maclaren remitted payment. Because ACE delivered the

policy to Sahni, ACE is deemed to have authorized Sahni to

receive payment on its behalf, and ACE bore the risk that Sahni

would fail to turn over the funds he had earlier collected. Cf.

Globe Indem. Co. v. Gilligan, 341 N.Y.S.2d 18, 20 (Dist. Ct.

Suffolk County 1973) (money insured paid to broker before

insurer issued policy to broker "constituted a credit to the

[insured's] account held by the broker and should be deemed as

payment under [Section 2121]").

If the statute is interpreted according to traditional

agency principles, the undisputed facts establish that Sahni was

ACE's agent for purposes of payment and that therefore ACE was

properly charged with having received payment. For three

policies covering three consecutive years, Sahni was an

intermediary between ACE and Maclaren. In March 2004, ACE

invoiced Sahni for payment, which Sahni received from Maclaren

and then forwarded to ACE (through a wholesale broker). Sahni

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served as the intermediary for successfully concluded insurance

contracts between ACE and Maclaren in 2004 and 2005. In 2006,

the third year of the parties' relationship, Maclaren and Sahni

followed the steps they had taken to renew Maclaren's policy

with ACE the prior year: Sahni was going to go back to the same

insurer, without any suggestion that Sahni was considering

looking at other companies.

The record thus contains undisputed facts showing that

when Maclaren transmitted its prepayment to Sahni, it believed

that Sahni would apply these funds toward the renewal of the

existing policy, as he had done in 2005. Although Maclaren

later considered quotes from other insurers as well, ACE

extended the 2005 policy for 30 days while the renewal policy

was being negotiated. ACE ultimately proceeded to issue

Maclaren a new policy for 2006. In light of this ongoing

relationship between the parties and ACE's history of

authorizing Sahni to act as its agent for collection purposes,

there can be little doubt that the premiums Maclaren advanced to

Sahni were "referable to" the policy ACE issued for 2006. See

18th Ave. Realty Corp, 659 N.Y.S.2d at 18 (protection under

section 2121 can be triggered only when a broker possesses funds

of the insured that "were payments in return for, or referable

to," the policy in dispute). Hence, the only conclusion a

reasonable factfinder could reach is that Sahni was ACE's agent

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for purposes of receiving payment. As a result, ACE can be

charged with the receipt of the premiums that Maclaren had

advanced to Sahni.

We have considered ACE's remaining arguments and find

them to be without merit. Accordingly, we AFFIRM the judgment

of the district court.

FOR THE COURT:
Catherine O'Hagan Wolfe, Clerk

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