David A. Paterson
Kermitt J. Brooks
The Office of General Counsel issued the following opinion on August 5, 2009 representing the position of the New York State Insurance Department.
RE: Acceptance of Third-Party Subpoena by the Superintendent
May the Superintendent accept service of a subpoena on an authorized insurer when the insurer is not a defendant in the underlying legal action (“a third-party subpoena”)?
No. The Superintendent is not authorized to accept such a subpoena, because N.Y. Ins. Law
Pursuant to a longstanding interpretation of the Insurance Law, the Department returned a subpoena duces tecum that it received, supposedly on behalf of ABC Insurance Company, because the insurer was not a defendant in the underlying legal action. The inquirer asserts that the Superintendent may accept the subpoena. The inquirer asserts that N.Y. Civil Practice Law and Rules (“CPLR”)
No domestic, foreign or alien insurer, including a fraternal benefit society, shall be or continue to be authorized to do an insurance business in this state unless there shall be filed in the office of the superintendent a power of attorney, executed by such insurer, appointing the superintendent and his successors in office, and authorized deputies, as its true and lawful attorney in and for this state, upon whom all lawful process in any proceeding against it on a contract delivered or issued for delivery, or on a cause of action arising, in this state may be served. (Emphasis added.)
The inquirer relies on the statute’s use of the phrase “on a cause of action” to assert that the Superintendent may accept a third-party subpoena. But that phrase must be read in conjunction with the rest of the statutory provision, which clearly limits the Superintendent’s authority to accepting lawful process in a proceeding against the insurer that is (1) on a contract delivered or issued for delivery in this state, or (2) on a cause of action arising in this state. Thus, in context, the “cause of action” phrase is limited to causes of actions in proceedings brought against the insurer. Such a reading is consistent with the Department’s longstanding interpretation of the statute and its predecessors. See Opinion of the Office of General Counsel (“OGC”) dated June 18, 1952.
The doctrine of the last antecedent confirms the Department’s reading of the statute. According to that canon of statutory interpretation, “relative and qualifying words, phrases and clauses are to be applied to the words or phrases immediately preceding and not to be construed as extending to or including others more remote . . . .” McKinney’s Cons. Laws of NY, Book 1, Statutes
Further, contrary to the inquirer’s assertions, CPLR
Even if Insurance Law
There have been only two reported court cases considering service of a subpoena on an insurer by delivery to the Superintendent, both dating from 1939. Both cases implicate what was then Section 30 of the Insurance Law of 1909, which is a predecessor section to the current Insurance Law
No foreign insurance corporation shall transact any business of insurance in this state until it has executed and filed in the office of the superintendent of insurance a written appointment of the superintendent to be the true and lawful attorney of such corporation in and for this state, upon whom all lawful process in any action or proceeding against the corporation may be served with the same effect as if it was a domestic corporation. (Emphasis added.)
The first of the two 1939 cases construing this provision, Broderick v. Shapiro, 172 Misc. 28 (Sup. Ct. N.Y. Co. 1939), supports the Department’s interpretation. That case concerned a subpoena duces tecum on John Hancock Life Insurance Company, which was a licensed foreign insurer in New York, for examination of the insurer as a witness. The subpoena was served on the Department, and apparently forwarded to John Hancock by the Department. John Hancock moved to quash the subpoena on the grounds it had not been properly served. The court quoted from Section 30 of the Insurance Law of 1939 and noted:
Under that section and the written appointment executed by the company and filed with the Superintendent of Insurance pursuant thereto the company has clearly undertaken to subject itself to the jurisdiction of our courts only in actions or proceedings “against the corporation.” It has not undertaken to subject itself to the service of process in proceedings against other persons. The Superintendent is given a limited power of attorney to act for it, and he cannot exceed that power by accepting service of a subpoena in a proceeding brought against Shapiro.
172 Misc. at 29.
The other 1939 case is National City Bank of New York v. Desz, 281 N.Y. 430 (1939), which the inquirer cites as controlling authority. In Desz, the Court of Appeals held that a judgment creditor’s service of a third-party subpoena on a “managing agent” of a foreign life insurer was not sufficient service because the judgment creditor could have served the subpoena by delivering it to the Superintendent of Insurance. At that time, Civil Practice Act
Desz may appear at first blush to contradict the Department’s position on third-party subpoenas. But Section 30 of the Insurance Law of 1939 clearly limited the Superintendent’s authority to accept legal process to process connected with an action against the insurer. The result in the Desz case, thus, must derive from the then-existing idiosyncrasies of the CPA.
Under CPA Article 45, a “third party” was any person who possessed property of the judgment debtor exceeding ten dollars in value, or who was indebted to the judgment debtor in an amount more than the ten dollars, or who there was reason to believe possessed such property, or was so indebted. See CPA
Given that the subpoena on the insurer in Desz would have commenced a proceeding pursuant to which a court could order remedies in favor of the judgment creditor against the insurer, the Desz court may have viewed the proceeding as an action against the insurer. Indeed, in an OGC opinion dated January 17, 1947, which cited the holding in Desz, OGC stated the following:
Service of a third party order or subpoena apparently satisfies the requirement that there be a proceeding against the insurer and the entry of a judgment satisfied the requirement that it be on a cause of action arising in this State.
The outcome in Broderick may have differed, however, because the insurer was not subpoenaed as a third party, but as a witness. A witness was a person with information about assets owned by the judgment debtor, not a person indebted to or holding assets of the debtor. See CPA
CPLR Article 52, which replaced CPA Article 45, currently provides a different procedure for examining a third person who may be in possession of a judgment debtor’s property or be indebted to the judgment debtor, and for obtaining possession of such property or payment of debt. To examine the third party, the judgment creditor may issue a subpoena. The subpoena does not commence a special proceeding or an action against the third party. Rather, it is considered an “adjunct of the action that gave rise to the judgment, and ordinarily bears its caption.” Siegel, Practice Commentaries to CPLR
Accordingly, based upon the clear meaning of Insurance Law
For further information you may contact Associate Attorney Patrick Harrigan at the Albany Office.