OGC Op. No. 04-09-04

The Office of General Counsel issued the following opinion on September 7, 2004, representing the position of the New York State Insurance Department.

Re: Certification of Insurers Acting as Sureties for Lien Discharge

N.Y. Ins. Law § 1111 (McKinney 2000) and N.Y. Lien Law § 21 (McKinney Supp. 2004).

Question Presented

May a "Certificate of Solvency" issued by the New York State Insurance Department pursuant to N.Y. Ins. Law § 1111 (McKinney 2000) and on behalf of an insurer serve as a "Certificate of Qualification" for the purposes of N.Y. Lien Law § 21 (5)(a) (McKinney Supp. 2004)?


Yes. In fact, the aforementioned Certificate of Qualification and Certificate of Solvency are essentially identical.


No facts were presented. The inquiry is general in nature.


According to New York State’s Lien Law, both the state and a public corporation may discharge any lien against the construction or demolition of a public improvement by "executing a bond or undertaking in an amount equal to one hundred and ten percent of such lien conditioned for the payment of any judgment…" See, N.Y. Lien Law § 21 (McKinney Supp. 2004). N.Y. Lien Law § 21(5)(a) (McKinney Supp. 2004) further states that:

The execution of any such bond or undertaking by any fidelity or surety company authorized by the laws of this state to transact business shall be sufficient; and where a certificate of qualification has been issued by the superintendent of insurance under the provisions of section one thousand one hundred and eleven of the insurance law, and has not been revoked, no further justification is required…If a certificate of qualification issued pursuant to subsections (b), (c) and (d) of section one thousand one hundred and eleven of the insurance law is not filed with the undertaking, a party may except to the sufficiency of a surety. Id.

Accordingly, a Certificate of Qualification can provide conclusive evidence of an insurer’s ability to act as a surety in reference to discharging a lien against a public work. In operation, a Certificate of Qualification must include a record of the surety company’s capital and surplus as shown by its last annual statement and that such capital and surplus complies with the provisions of this chapter. See N.Y. Ins. Law § 1111(b)(2) (McKinney Supp. 2004). Also, "the certificate must indicate the limitation upon the amount of a single risk which such company is authorized to assume." Id.

The General Counsel’s Office was given a copy of the Certificate of Solvency and asked whether such Certificate of Solvency issued by the Superintendent may provide the same conclusive evidence of an insurer’s capacity to conduct surety transactions as that demonstrated by the Certificate of Qualification. While the subject Certificate is indeed entitled "Certificate of Solvency," it nonetheless possesses all the features of the Certificate of Qualification as articulated in N.Y. Ins. Law § 1111(b)(2) (McKinney 2000). Specifically, the document contains the capital surplus information as well as the single risk limitations described in relation to the Certificate of Qualification found above. Moreover, within the text of the Certificate, the Superintendent of the Insurance Department states that the insurance company "is qualified" to conduct surety transactions. As such, while not literally entitled "Certificate of Qualification," the subject Certificate of Solvency attests to both solvency and qualification of the insurance company for the purposes of N.Y. Lien Law § 21 (McKinney Supp. 2004).

The Office of General Counsel has previously opined that "…a Certificate of Solvency shall be deemed conclusive evidence of the qualification of the [insurance] company." See OGC opinion dated January 21, 1955 (copy attached). The General Counsel’s Office issued the above cited opinion regarding the use of Certificates of Solvency to satisfy the qualification issues raised by Section 327 of the New York Insurance Law (now N.Y. Ins. Law § 1111 (McKinney 2000)).

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.