New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on July 18, 2003, representing the position of the New York State Insurance Department.

Re: Satellite insurance

Questions Presented

1. Are satellites treated as "aircraft" under the New York Insurance Law?

2. May an unauthorized insurer write insurance in New York to cover physical damage to a satellite and legal liability arising out of the launch and orbit of a satellite on an excess (surplus) line basis? If so, what are the applicable licensing requirements?

3. Does insurance coverage for physical damage to a satellite or insurance for legal liability arising out of the launch and orbit of a satellite come within the limited aircraft exemption under N.Y. Ins. Law § 2117(c)(1) (McKinney 2000 & Supp. 2003) discussed in OGC Opinion No. 89-56 (NILS)?

4. May a broker that is not licensed as an insurance broker in New York sell this type of insurance in New York by associating with a New York licensed insurance broker?

Conclusions

1. The term "aircraft," as used in N.Y. Ins. Law § 1113(a)(19) and § 2117(c)(1) (McKinney 2000 & Supp. 2003) includes satellites.

2. An unauthorized insurer may write insurance in New York to cover physical damage to the satellite and legal liability arising out of the launch and orbit of satellite through an excess line broker, in accordance with New York’s excess line laws, including N.Y. Comp. Codes R. & Regs. Tit.11, § 27 (2001) (Regulation 41).

3. While coverage for legal liability comes within the exemption under N.Y. Ins. Law § 2117(c)(1), coverage for physical damage to the satellite itself does not.

4. No, a broker that is not licensed as an insurance broker in New York may not sell insurance in New York by associating with a New York licensed insurance broker.

Facts

The inquirer’s company is a New York authorized insurer. It is looking into writing primary insurance for a satellite arising out of the launch and orbit of that satellite. ABC wants to write the insurance in New York through an alien (U.K.) insurer it owns that is not authorized in New York to do an insurance business. It would like to use XYZ, an Italy based broker to write the policy. XYZ is not a New York licensed insurance broker. The inquirer did not indicate what role ABC itself would play in this placement.

Analysis

Question 1: Are satellites treated as "aircraft" under the New York Insurance Law?

The Department has taken the position in OGC Opinion No. 89-56 (NILS, October 1989) that the term "aircraft," as used in N.Y. Ins. Law § 1113(a)(19) and § 2117(c)(1), includes missiles, launch vehicles, spacecraft, and satellites.

Question 2: May an unauthorized insurer write insurance in New York against physical damage to the satellite itself and legal liability arising out of the launch and orbit of a satellite on an excess (surplus) line basis? If so, what are the applicable licensing requirements?

N.Y. Ins. Law § 2105(a) (McKinney 2000 & Supp. 2003) authorizes the issuance of an excess line broker’s license for specified kinds of insurance, including in relevant part, N.Y. Ins. Law § 1113(a)(13), (14), and (19). N.Y. Ins. Law § 1113(a)(13) applies to personal injury liability insurance; N.Y. Ins. Law § 1113(a)(14) applies to property damage liability insurance; and N.Y. Ins. Law § 1113(a)(19) applies to aircraft physical damage insurance. The Department has previously concluded in OGC Opinion No. 89-56 (NILS, October 1989) that the term "aircraft" in § 1113(a)(19) includes satellites. Therefore, an unauthorized insurer may write insurance against physical damage to the satellite and legal liability arising out of the launch and orbit of a satellite through an excess lines broker, in accordance with New York’s excess line laws, including N.Y. Comp. Codes R. & Regs. Tit.11, § 27 (2001) (Regulation 41).

N.Y. Comp. Codes R. & Regs. Tit.11, § 27.13(a)(1) and § 27(a)(2) requires that an alien insurer, such as the one that would be used, must satisfy the National Association of Insurance Commissioners (NAIC) requirements for alien insurer’s inclusion on the NAIC International Insurers Department (IID) list and requires the excess line broker to obtain, review and retain evidence that the alien insurer appears on the most recent NAIC IID list in addition to the other eligibility requirements prescribed by Regulation 41.

Question 3: Does coverage for physical damage to a satellite and legal liability arising out of launch and orbit of a satellite come within the limited aircraft exemption under N.Y. Ins. Law § 2117(c)(1) discussed in OGC Opinion No. 89-56?

While N.Y. Ins. Law § 2117(a) generally prohibits a person, firm, association, or corporation from acting as an agent or broker for an insurer not licensed or authorized to do business in New York, or in any other manner aiding such an insurer in doing such business in New York, subsections (b) and (c) thereof contain certain limited exceptions to this general prohibition.

N.Y. Ins. Law § 2117(c)(1) permits a licensed insurance broker to negotiate insurance from an unauthorized insurer for, among other things, legal liability arising out of the ownership, operation or maintenance of any aircraft that is neither principally garaged nor principally used in this state, arising out of any activity carried on wholly outside of this state or arising out of the ownership, operation and maintenance of any property having a permanent situs outside of this state. This exception applies only if the insurer is authorized to do such business in such state or if such state permits an insurance broker it licensed to lawfully place such insurance.

N.Y. Ins. Law § 2117(b)(2) permits, among other things, a licensed insurance broker to negotiate insurance with an unauthorized insurer for, among other things, against loss of or damage to property having a permanent situs outside of this state.

The Department has previously concluded that aircraft, by their nature, cannot have a permanent situs outside of this state because the Department interprets the word permanent to mean fixed.

Based upon the Department’s previous conclusion that the term "aircraft" includes satellites, insurance for legal liability arising out of the ownership, operation or maintenance of the satellite may legally be negotiated by a licensed insurance broker with an insurer not authorized to do business in this state provided, that the satellite is also not principally garaged nor principally used in this state. However, no exception in § 2117 would apply for the physical damage insurance for the satellite because it does not have a permanent situs outside of New York and an excess line broker would need to used to procure this insurance.

Question 4: Would a broker that is not licensed as an insurance broker in New York be permitted to sell this type of insurance in New York by associating with a New York licensed insurance broker?

No. There is no provision in the law that would permit a broker that is not licensed in this state, to place any kind of insurance coverage. To use the provisions of N.Y. Ins. Law § 2117(b)(2) and § 2117(c)(1), a licensed insurance broker must be used. Otherwise, a licensed excess line broker must be used. Because the Italian broker is not licensed in New York, any activity conducted by it within this state would violate N.Y. Ins. Law § 2102 (acting as an agent or broker without a license) and § 2117 (acting on behalf of an unauthorized insurer.)

Please note that ABC, being an authorized insurer and not a licensed insurance broker or excess line broker, may not engage in any activity in this State in regard to solicitation or procurement of insurance on behalf of an unauthorized insurer.

For further information one may contact Special Counsel Athanasios M. Shinas at the Albany Office.