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

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on April 27, 2005, representing the position of the New York State Insurance Department.

RE: Foreign Arbitration Clause

Question Presented:

May an insurer domiciled in Delaware and authorized in New York include an English law arbitration clause in a policy it has issued to a California-domiciled insured, insuring the liability risks of transporting cargo by truck in the United States and warehousing in California?

Conclusion:

The Insurance Law does not prohibit an insurer domiciled in Delaware and authorized in New York from including an English law arbitration clause in a policy it has issued to a California-domiciled insured, insuring the liability risks of transporting cargo by truck in the United States and warehousing in California.

Facts:

An insured is located in California and is in the business of providing the services of transporting cargo by truck in the United States and warehousing in California. The policy that covers the liability risks arising from the insured’s operations is written by a New York authorized insurer and written through a New York licensed broker. It was not stated whether the broker is licensed in other states as well, or where, and it is not clear where the sale of the insurance was transacted. The policy contains an English law arbitration clause, which includes, among other things, the following language:

This policy is subject to English law. Except where inconsistent with the terms of this Policy, the English Marine Insurance Act of 1906 shall apply to this Policy . . . . Any claim by Us for premium due may be made at Our option either under the Arbitration Clause below, or in any Court having jurisdiction over any of You. You submit to the jurisdiction of the Commercial Court in London as regards such claims . . . . The arbitration shall take place in London and be subject to English procedural law. The Arbitration Acts of England in force when the arbitration begins shall apply to the arbitration.

Analysis:

N.Y. Ins. Law § 1113(a)(20) (McKinney Supp. 2005) defines marine and inland marine insurance, in pertinent part, as follows:

(20) "Marine and inland marine insurance," means insurance against any and all kinds of loss of or damage to:

(A) Vessels, hulls, craft, aircraft, cars, automobiles, trailers and vehicles of every kind, and all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment, or reshipment incident thereto, including marine builder's risks and all personal property floater risks;

(B) Person or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to the person arising out of ownership, maintenance or use of automobiles);

* * * *

In this chapter "inland marine" insurance shall not include insurance of vessels, crafts, their cargoes, marine builders' risks, or other similar risks, commonly insured only under ocean marine insurance policies. (emphasis added.)

Hence, with regard to the insured’s liability risks associated with transporting cargo by truck, it appears that the insurance is most likely written as "marine and inland marine insurance."

N.Y. Ins. Law § 3103(b) (McKinney 2000) states:

(b) No policy of insurance or contract of annuity delivered or issued for delivery in this state shall provide that the rights or obligations of the insured or of any person rightfully claiming thereunder, with respect to:

(1) a policy of life, accident and health insurance or contract of annuity upon a person resident in this state,

(2) a policy of insurance upon property then in this state, or

(3) the liabilities to be incurred by the insured as a result of activity then carried on by the insured in this state, shall be governed by the laws of any jurisdiction other than this state. This subsection shall not apply to policies of marine insurance. (emphasis added.)

The insured’s warehouse is located in California; thus, liability arising from the warehouse operations would not be a result of activity carried on in New York, and § 3103(b) would not apply to such operations.

Section 3103(b) also would not apply to the insured’s trucking operations if the policy covering the liability risks arising therefrom constitutes marine insurance, which is specifically excepted from the applicability of § 3103(b).

Moreover, from the facts provided, it is not clear whether the policy was delivered or issued for delivery in New York. If such was not the case, then § 3103(b) would not apply.

The California Department of Insurance should be contacted regarding this matter since it appears that they would have jurisdiction over this matter.

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.