SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
715
CA 11-02521
PRESENT: SCUDDER, P.J., CENTRA, PERADOTTO, CARNI, AND LINDLEY, JJ.
JEFFREY CONSTANTINE, M.D., PLAINTIFF-RESPONDENT,
V MEMORANDUM AND ORDER
STELLA MARIS INSURANCE COMPANY, LTD.,
DEFENDANT-APPELLANT,
MARY SERIO, NICHOLAS SERIO, AS PARENTS AND
NATURAL GUARDIANS OF NICOLE SERIO, A MINOR,
DEFENDANTS-RESPONDENTS,
ET AL., DEFENDANTS.
PHILLIPS LYTLE, LLP, BUFFALO (KENNETH A. MANNING OF COUNSEL), FOR
DEFENDANT-APPELLANT.
BROWN & TARANTINO, LLC, BUFFALO (TAMSIN J. HAGER OF COUNSEL), FOR
PLAINTIFF-RESPONDENT.
PAUL WILLIAM BELTZ, P.C., BUFFALO (WILLIAM A. QUINLAN OF COUNSEL), FOR
DEFENDANTS-RESPONDENTS.
Appeal from an order of the Supreme Court, Erie County (Joseph R.
Glownia, J.), entered February 10, 2011 in a declaratory judgment
action. The order, among other things, denied the motion of defendant
Stella Maris Insurance Company, Ltd. to dismiss the complaint for lack
of personal jurisdiction.
It is hereby ORDERED that the order so appealed from is affirmed
without costs.
Memorandum: As limited by its brief, defendant-appellant, Stella
Maris Insurance Company, Ltd. (SMI), appeals from an order denying its
motion pursuant to CPLR 3211 (a) (8) seeking to dismiss the complaint
in this declaratory judgment action on the ground that New York lacks
personal jurisdiction over it. SMI is a single-parent captive
insurance company doing business in the Cayman Islands. Its sole
shareholder, Catholic Health East (CHE), a not-for-profit Pennsylvania
corporation that is authorized to do business in New York, has a joint
operating agreement with Catholic Health System, which is the sole
member of Sisters of Charity Hospital (Sisters Hospital) in Buffalo.
CHE and its affiliates, including Catholic Health System and, in turn,
Sisters Hospital, are named as “covered persons” in the professional
liability policy issued by SMI to CHE. In the underlying medical
malpractice action, defendant Nicholas Serio alleges medical
malpractice by, inter alia, plaintiff in connection with the birth of
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his daughter at Sisters Hospital. Plaintiff commenced this action
seeking a declaration that SMI is obligated to indemnify him in
connection with the underlying medical malpractice action, but the
sole issue before us is whether Supreme Court properly denied SMI’s
motion to dismiss the complaint for lack of personal jurisdiction.
CPLR 302 (a) provides in relevant part that “a court may exercise
personal jurisdiction over any non-domiciliary . . . who in person or
through an agent: (1) transacts any business within the state or
contracts anywhere to supply goods or services in the state” (emphasis
added). “While the ultimate burden of proof rests with the party
asserting jurisdiction, . . . in opposition to a motion to dismiss
pursuant to CPLR 3211 (a) (8), [plaintiff] need only make a prima
facie showing that the defendant [,here, SMI,] was subject to the
personal jurisdiction of the Supreme Court” (Cornely v Dynamic HVAC
Supply, LLC, 44 AD3d 986, 986). We conclude that plaintiff sustained
that burden here, and we therefore affirm.
As a preliminary matter, we agree with SMI that plaintiff failed
to make a prima facie showing that SMI transacts business within New
York State. Insurance Law § 1101 (b) (1) governs acts in this state
that constitute “doing an insurance business” for purposes of long-arm
jurisdiction. The record establishes that SMI and CHE negotiated the
insurance contract in the Cayman Islands; that the policy was issued
in the Cayman Islands, where it was delivered to CHE; and that CHE
retains the policy in Pennsylvania (see § 1101 [b] [1] [A]). Further,
CHE pays premiums to SMI; SMI does not collect premiums from CHE’s New
York affiliates (see § 1101 [b] [1] [C]). Thus, plaintiff failed to
present prima facie evidence that any of the enumerated activities
were conducted in this state, as required by Insurance Law § 1101 (b)
(1) (A) and (C) (cf. Caronia v American Reliable Ins. Co., 999 F Supp
299, 303 [ED NY]). We note that, in any event, under the facts
presented here, Insurance Law § 1101 (b) (2), which enumerates
activities that “shall not constitute doing an insurance business in
this state,” would apply inasmuch as the policy was “negotiated,
issued and delivered without this state in a jurisdiction in which
[SMI] is authorized to do an insurance business,” i.e., the Cayman
Islands (§ 1101 [b] [2] [E]). We therefore conclude that plaintiff
failed to make a prima facie showing that SMI transacts business in
New York State (see CPLR 302 [a] [1]).
We nevertheless conclude that plaintiff made a prima facie
showing that SMI contracted in the Cayman Islands to provide services
in New York (see CPLR 302 [a] [1]), and thus that the exercise of
long-arm jurisdiction is appropriate (see Insurance Co. of N. Am. v
Pyramid Ins. Co. of Bermuda Ltd., 1994 WL 88754, *2 [SD NY]; see
generally Armada Supply Inc. v Wright, 858 F2d 842, 849 [2d Cir 1988];
Twin City Fire Ins. Co. v Harel Ins. Co. Ltd., 2011 WL 3480948, *2 [SD
NY]; Caronia, 999 F Supp at 300-301). Although, by its nature, a
single-parent captive insurance company insures only its parent and,
indeed, CHE is named as the insured in the policy, here, the policy
itself states that the “persons insured” are the covered persons,
i.e., CHE and its named affiliates, which include Catholic Health
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System, the sole member of Sisters Hospital, as well as the employees
and contract physicians of the covered persons (see generally Hudson
Ins. Co. v Oppenheim, 35 AD3d 168). Further, plaintiff provided the
deposition testimony of CHE’s vice-president who also serves as SMI’s
president and CEO, who testified that the list of physicians who
contract with Sisters Hospital is provided to SMI’s broker and
actuary, and that SMI issues a certificate of insurance to him for CHE
and Catholic Health System. We therefore conclude that plaintiff made
a prima facie showing that SMI contracted with CHE to insure
professional liability risks in New York, and thus that it is subject
to the exercise of long-arm jurisdiction (see Armada Supply Inc., 858
F2d at 849; see generally Hudson Ins. Co., 35 AD3d at 168).
We further conclude that “the exercise of jurisdiction comports
with due process” (LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 214; see
Andrew Greenburg, Inc. v Sirtech Can., Ltd., 79 AD3d 1419, 1420),
i.e., that SMI has the requisite minimum contacts with New York (see
LaMarca, 95 NY2d at 216), and that the “prospect of defending [this
action] . . . comport[s] with traditional notions of fair play and
substantial justice” (id. at 217 [internal quotation marks omitted]).
Although SMI itself has no direct contacts with New York, we conclude
that, based on its policy language that the contract physicians of
Sisters Hospital, a “covered person,” are “insured,” the minimum
contacts requirement has been met (see generally Hudson Ins. Co., 35
AD3d at 168-169). We further conclude that permitting the action to
proceed in New York comports with notions of fair play and substantial
justice inasmuch as the remaining defendants, as well as plaintiff,
either are residents of New York or are authorized to do business in
New York, and the alleged basis for liability occurred in New York
(see generally Armada Supply Inc., 858 F2d at 849). Furthermore, we
note that, in connection with a declaratory judgment action that SMI
commenced against plaintiff in Federal District Court in Pennsylvania,
SMI requested as alternative relief that the matter be transferred to
Federal District Court in New York.
Finally, we agree with SMI that plaintiff failed to make a prima
facie showing that jurisdiction exists on the alternative theories
that it is a “mere department” of CHE, or that CHE is SMI’s agent, and
thus that CHE’s actions may be attributed to SMI. Although CHE is the
sole shareholder of SMI, and the two corporations share certain
executive personnel and one board member, those are “factors [that]
are intrinsic to the parent-subsidiary relationship and, by
themselves, [are] not determinative” (Porter v LSB Indus., 192 AD2d
205, 214). Here, the record establishes that SMI and CHE maintain
corporate formalities inasmuch as the policy was negotiated between
CHE and the management company with which SMI contracts to run its day
to day operations; that CHE does not have access to SMI’s bank
accounts; that there is no commingling of funds or investments; and
that SMI’s board, although appointed by CHE, owes a fiduciary duty to
SMI. We therefore conclude that plaintiff has failed to make a prima
facie showing that CHE’s “control over [SMI’s] activities ‘[are] so
complete that [SMI] is, in fact, merely a department of [CHE]’ ” (id.
at 213). Further, we reject plaintiff’s contention that CHE, the
parent corporation, acted as an agent of its wholly owned subsidiary
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SMI with respect to doing business in New York in connection with
Catholic Health System and Sisters Hospital (see generally Frummer v
Hilton Hotels Intl., 19 NY2d 533, 537-538, rearg denied 20 NY2d 758,
remittitur amended 20 NY2d 737, 759, cert denied 389 US 923; Jazini v
Nissan Motor Co., Ltd., 148 F3d 181, 184-185).
All concur except PERADOTTO, J., who concurs in the result in the
following Memorandum: I respectfully concur in the result reached by
the majority, namely, the affirmance of the order denying the motion
of defendant-appellant, Stella Maris Insurance Company, Ltd. (SMI), to
dismiss the complaint on the ground that New York lacks personal
jurisdiction over it. I agree with the majority that plaintiff made a
prima facie showing that SMI contracted in the Cayman Islands to
provide services in New York State within the meaning of CPLR 302 (a)
(1), and thus that the exercise of long-arm jurisdiction is
appropriate. I write separately, however, because I further conclude
that plaintiff also made a prima facie showing that SMI transacts
business within New York pursuant to CPLR 302 (a) (1) and Insurance
Law § 1101 (b) (1).
As set forth by the majority, SMI is a single-parent captive
insurance company domiciled in the Cayman Islands. SMI issued a
professional liability insurance policy to its sole shareholder,
Catholic Health East (CHE), a not-for-profit Pennsylvania corporation
authorized to do business in New York. CHE has a joint operating
agreement with Catholic Health System, which is the sole member of
Sisters of Charity Hospital (Sisters Hospital) in Buffalo. Both
Catholic Health System and Sisters Hospital are “covered persons”
under the SMI policy issued to CHE. Plaintiff commenced this action
seeking a declaration that SMI is obligated to indemnify him in
connection with the underlying medical malpractice action. The
underlying action arises from plaintiff’s provision of obstetrical
services at Sisters Hospital. As noted by the majority, the sole
issue before us is whether Supreme Court properly denied SMI’s motion
to dismiss the complaint for lack of personal jurisdiction.
Although it is well established that “the burden of proving
jurisdiction is on the party asserting it” (Roldan v Dexter Folder
Co., 178 AD2d 589, 590), a plaintiff opposing a pre-answer motion to
dismiss pursuant to CPLR 3211 (a) (8) for lack of jurisdiction “need
only make a prima facie showing that personal jurisdiction exists”
(Opticare Acquisition Corp. v Castillo, 25 AD3d 238, 243). As
relevant here, CPLR 302 (a) (1) provides that a New York court may
exercise personal jurisdiction over a non-domiciliary who, in person
or through an agent, “transacts any business within the state.” With
respect to foreign insurance companies, Insurance Law § 1101 (b) (1)
expressly provides in pertinent part that “any of the following acts
in this state, effected by mail from outside this state or otherwise,
. . . shall constitute doing business in the state within the meaning
of [CPLR 302]: (A) making, or proposing to make, as insurer, any
insurance contract, including either issuance or delivery of a policy
or contract of insurance to a resident of this state or to any firm,
association, or corporation authorized to do business herein . . . ;
[or] (C) collecting any premium . . . for any policy or contract of
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insurance.”
Contrary to the conclusion of the majority, I conclude that SMI
is subject to long-arm jurisdiction pursuant to Insurance Law § 1101
(b) (1) (A) because it “ma[d]e . . . an[] insurance contract” covering
a New York risk. Insurance Law § 1101 (a) (1) broadly defines
“insurance contract” as “any agreement or other transaction whereby
one party, the ‘insurer,’ is obligated to confer benefit of pecuniary
value upon another party, the ‘insured’ or ‘beneficiary,’ dependent
upon the happening of a fortuitous event in which the insured or
beneficiary has, or is expected to have at the time of such happening,
a material interest which will be adversely affected by the happening
of such event.” Here, it is undisputed that Catholic Health System
and Sisters Hospital, as well as their New York employees, are
“covered persons” under the SMI insurance policy and, thus, they are
insureds or beneficiaries within the meaning of Insurance Law § 1101
(a) (1).
The majority concludes that Insurance Law § 1101 (b) (1) (A) is
inapplicable under the circumstances of this case because the record
establishes that the SMI policy was negotiated and delivered to CHE in
the Cayman Islands and was thereafter retained in Pennsylvania. I
disagree. There is no question that, had SMI mailed the insurance
policy to Catholic Health System or Sisters Hospital in New York or to
CHE, which is authorized to do business in New York, section 1101 (b)
(1) (A) would apply. The statutory language does not, however, limit
its application to policies physically delivered into New York. The
statute provides that “any of the following acts in this state,
effected by mail from outside this state or otherwise . . . shall
constitute doing business in the state” for purposes of long-arm
jurisdiction, including “making . . . any insurance contract” (§ 1101
[b] [1] [A] [emphases added]). In my view, the “or otherwise”
language broadens the statute’s applicability to any manner of making
a contract in this state, not simply to “mail order” insurance
arrangements. Inasmuch as one of the primary purposes of Insurance
Law § 1101 is to protect New York insureds from foreign insurance
companies not licensed in New York, I conclude that the statute can
reasonably be interpreted as “any of the following acts in this state,
effected by mail from outside this state or [in any other manner from
outside this state]” (§ 1101 [b] [1] [emphasis added]). Thus, where
an insurance company makes an insurance contract covering a New York
risk, the applicability of Insurance Law § 1101 should not turn on
whether the insurance company mails the contract to the insured in New
York or delivers the contract to the New York insured in some other
manner. Here, SMI issued a policy covering a New York risk, i.e.,
malpractice claims stemming from medical incidents at Sisters Hospital
and other New York health care facilities. It is therefore, in my
view, subject to jurisdiction pursuant to Insurance Law § 1101 (b) (1)
(A).
The fact that CHE retained the policy in Pennsylvania and did not
send a copy of the policy to the covered persons in New York should
not alter the jurisdictional analysis. “It has long been recognized
that, ‘[I]t is the intention of the parties and not the manual
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possession of a policy which determines whether there has been a
delivery thereof. There must be an intention to part with the control
of the instrument and to place it in the power of the insured or some
person acting for [it]. Manual delivery to the insured in person is
not necessary’ ” (Ecstasy Limousine Inc. v Lancer Ins., 8 Misc 3d
1025[A], 2005 NY Slip Op 51285[U], *4-5). “Delivery . . . primarily
concerns an insurer’s intent; if an insurer has put the policy outside
of its legal control, even if not outside its actual possession,
delivery has occurred” (6 Thomas, New Appleman on Insurance Law
Library Edition § 61.04 [7] [a], at 61-59 [2011]). Here, it is
undisputed that the SMI policy covers Sisters Hospital and its
employees in New York and, in my view, once SMI turned the policy over
to CHE, the policy was no longer within SMI’s legal control (see
generally Wanshura v State Farm Life Ins. Co., 275 NW2d 559, 564
[Minn]).
Unlike the majority, I further conclude that SMI collected
premiums from Catholic Health System and/or Sisters Hospital in New
York within the meaning of Insurance Law § 1101 (b) (1) (C). The
record establishes that CHE collected funds from the “covered
persons,” including Catholic Health System and Sisters Hospital, to
pay the premiums due to SMI under the policy. Catholic Health System
received a bill for premiums due under the policy and remitted payment
to CHE. CHE then paid SMI for the premiums owed under the policy.
Although it appears that CHE collected premiums on behalf of SMI, that
arrangement does not alter the fact that premiums collected from
Catholic Health System and Sisters Hospital were paid to SMI for the
policy. Moreover, the terms of the policy specifically provide that
SMI has the right to assess additional premiums against all “covered
persons,” thereby including Catholic Health System and Sisters
Hospital, and SMI directly issued certificates of insurance to
Catholic Health System. I thus conclude that plaintiff made a prima
facie showing that SMI “collect[ed] a[] premium . . . or other
consideration [from the New York entities] for [the] policy or
contract of insurance” issued to CHE (§ 1101 [b] [1] [C]).
I disagree with the majority’s alternative conclusion that
Insurance Law § 1101 (b) (2), the statutory exception to Insurance Law
§ 1101 (b) (1), applies to this case. Insurance Law § 1101 (b) (2)
(E) provides that, “[n]otwithstanding the foregoing, the following
acts or transactions, if effected by mail from outside this state by
an unauthorized foreign or alien insurer duly licensed to transact the
business of insurance in and by the laws of its domicile, shall not
constitute doing an insurance business in this state, but section [
1213] of this chapter shall nevertheless be applicable to such
insurers: . . . (E) transactions with respect to policies of
insurance on risks located or resident within or without this state .
. . , which policies are principally negotiated, issued and delivered
without this state in a jurisdiction in which the insurer is
authorized to do an insurance business” (emphasis added). Insurance
Law § 1213, entitled “Service of process on superintendent as attorney
for unauthorized insurers,” provides that its purpose is “to subject
certain insurers to the jurisdiction of the courts of this state in
suits by or on behalf of insureds or beneficiaries under certain
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insurance contracts. The legislature declares that it is a subject of
concern that many residents of this state hold policies of insurance
issued or delivered in this state by insurers while not authorized to
do business in this state, thus presenting to such residents the often
insuperable obstacle of resorting to distant forums for the purpose of
asserting legal rights under such policies. In furtherance of such
state interest, the legislature herein provides a method of
substituted service of process upon such insurers and declares that in
so doing it exercises its power to protect its residents and to
define, for the purpose of this section, what constitutes doing
business in this state” (§ 1213 [a]).
The statute goes on to provide that “[a]ny of the following acts
in this state, effected by mail or otherwise, by an unauthorized
foreign or alien insurer . . . is equivalent to and constitutes its
appointment of the superintendent . . . 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 validity as
personal service of process in this state upon such insurer” (§ 1213
[b] [1] [emphasis added]). The acts include, in language closely
mirroring Insurance Law § 1101 (b) (1), “the issuance or delivery of
contracts of insurance to residents of this state or to corporations
authorized to do business therein,” “the collection of premiums,
membership fees, assessments or other considerations for such
contracts,” or “any other transaction of business” (§ 1213 [b] [1]
[A], [C], [D]).
As an initial matter, I question whether the exception set forth
in Insurance Law § 1101 (b) (2) is even triggered inasmuch as it is
limited by its terms to acts or transactions “effected by mail from
outside this state,” which did not occur here. In any event, I
conclude that the exception applies only to shield foreign insurance
companies from the licensing requirements set forth in Insurance Law §
1102, and does not limit the exercise of long-arm jurisdiction
pursuant to CPLR 302. That conclusion is supported by the difference
in the meaning and usage of the phrases “doing business in the state”
and “doing an insurance business in this state” (see e.g. Insurance
Law § 1101 [b] [1]; § 1102 [a]; § 1213 [a]). As used in the Insurance
Law, the phrase “doing business in the state” relates to the predicate
for the exercise of long-arm jurisdiction pursuant to CPLR 302 (a) (1)
(see Insurance Law § 1101 [b] [1] [“(A)ny of the following acts in
this state . . . shall constitute doing an insurance business in this
state and shall constitute doing business in the state within the
meaning of (CPLR 302)” (emphasis added)]; Insurance Law § 1213 [a]
[defining “what constitutes doing business in this state” for the
purpose of “subject(ing) certain insurers to the jurisdiction of the
courts of this state” (emphasis added)]; see generally CPLR 302 [a]
[1] [court may exercise personal jurisdiction over any non-domiciliary
who “transacts any business within the state”]). By contrast, “doing
an insurance business” refers to state licensing requirements (see
Insurance Law § 1102 [a] [“No person, firm, association, corporation
or joint-stock company shall do an insurance business in this state
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unless authorized by a license in force pursuant to the provisions of
this chapter” (emphasis added)]). I thus conclude that the exception
set forth in Insurance Law § 1101 (b) (2) (E), which provides that
certain acts “shall not constitute doing an insurance business” does
not exempt SMI from personal jurisdiction (emphasis added). Any other
interpretation of the statute would render meaningless the language in
the exception that “section [1213] of this chapter shall nevertheless
be applicable to such insurers,” i.e., unauthorized foreign insurers
licensed to transact insurance business in their place of domicile (§
1101 [b] [2]). In my view, the quoted language means that, even
though foreign insurers transacting business in New York may be exempt
from the licensing requirements of New York Law, they are nevertheless
subject to jurisdiction in New York courts. Indeed, the language in
Insurance Law § 1213 is the equivalent of consent to personal
jurisdiction.
In sum, I conclude that plaintiff made a prima facie showing not
only that SMI contracted in the Cayman Islands to provide services in
New York State within the meaning of CPLR 302 (a) (1), but also that
it transacted business in this state pursuant to CPLR 302 (a) (1) and
Insurance Law § 1101 (b) (1).
Finally, contrary to the conclusion of the majority, I conclude
that plaintiff made a prima facie showing that jurisdiction exists on
the alternative theories that SMI is a “mere department” of CHE, or
that CHE is SMI’s agent, and thus that CHE’s actions may be attributed
to SMI (see generally Porter v LSB Indus., 192 AD2d 205, 212-213;
Turbon Intl., Inc. v Hewlett-Packard Co., 769 F Supp 2d 259, 260-261).
As noted by the majority, CHE is the sole shareholder of SMI, and the
two corporations share certain executive personnel as well as one
board member. Furthermore, the record establishes that SMI’s sole
function is to provide insurance to CHE and its affiliates, that SMI
is financially dependent on premiums paid by CHE and its affiliates,
and that CHE controls many of the insurance-related activities of SMI
(see generally Delagi v Volkswagenwerk AG of Wolfsburg, Germany, 29
NY2d 426, 431-432, rearg denied 30 NY2d 694; Volkswagenwerk
Aktiengesellschaft v Beech Aircraft Corp., 751 F2d 117, 120-122;
National Union Fire Ins. Co. of Pittsburgh v Ideal Mut. Ins. Co., 122
AD2d 630, 631-633; Dorfman v Marriott Intl. Hotels, Inc., 2002 WL
14363, *7-8). Among other things, plaintiff submitted evidence that
CHE and/or its agents: (1) drafted the insurance policy at issue and
reviewed the policy; (2) determined the risks to be covered; (3)
collected premiums from its affiliates for the professional liability
coverage; (4) provided Catholic Health System and/or Sisters Hospital
with any information regarding the professional liability coverage;
(5) established the policy for making claims; and (6) received all
notices of claims under the policy. Thus, given the foregoing
interrelationship between SMI and CHE, I further conclude that there
is at least an issue of fact whether SMI is subject to long-arm
jurisdiction pursuant to an agency or “mere department” theory.
Entered: July 6, 2012 Frances E. Cafarell
Clerk of the Court