Air-Sea Packing Grp., Inc. v. Applied Underwriters, Inc.
| Decision Date | 21 May 2020 |
| Docket Number | Index Number 711035 2019 |
| Citation | 2020 NY Slip Op 32254 (U) |
| Parties | AIR-SEA PACKING GROUP, INC., Plaintiff(s) v. APPLIED UNDERWRITERS, INC., APPLIED UNDERWRITER CAPTIVE RISK ASSURANCE COMPANY, INC., APPLIES RISK SERVICES, INC., APPLIES RISK SERVICES OF NEW YORK, INC.,NORTH AMERICAN CASUALTY COMPANY, CONTINENTAL INDEMNITY COMPANY, AND CALIFORNIA INSURANCE COMPANY Defendant(s) |
| Court | New York Supreme Court |
Short Form Order
Present: HONORABLE MARGUERITE A. GRAYS Justice
Motion Date November 19, 2019
Motion Cal No.
The following papers EF15-EF24 read on this motion by the defendants for, inter alia, an Order pursuant to CPLR §3211(a)(1) dismissing the complaint against them, and on this cross-motion by the plaintiff for an Order: (1) pursuant to Insurance Law §1213(c), compelling defendant Applied Underwriters Captive Risk Assurance Company, Inc. and any of the other defendants that are not licensed to do business in New York to post a bond and (2) striking defendants' motion to dismiss, or, alternatively, staying consideration of defendants' motion to dismiss until a bond is posted.
PapersNumbered Notice of Motion - Affidavits - Exhibits EF12-EF15 Notice of Cross Motion - Affidavits - Exhibits EF17-EF20 Answering Affidavits - Exhibits EF22 Reply Affidavits EF23-EF24
Upon the foregoing papers it is ordered that the branch of the defendants' motion which is for an Order dismissing the complaint pursuant to CPLR §3211(a)(1) because of the forum selection clause in the Reinsurance Participation Agreement (RPA) is denied. The branch of the motion which is for an Order pursuant to CPLR §3211(a)(7) dismissing the Third Cause of Action is granted. The branch of the motion which is for an Order pursuant to CPLR §3211(a)(7) dismissing the Seventh Cause of Action is granted. The remaining branches of the defendants' motion are denied. The plaintiff's cross-motion is granted to the extent that defendant Applied Underwriters, Inc. and defendant Applied Underwriters Captive Risk Assurance Company, Inc. shall each post a $1,000,000 bond.
Plaintiff Air-Sea Packing Group, Inc. (Air-Sea) provides moving, packing, shipping, storage, and transportation services. Defendant Applied Underwriters, Inc. is a Nebraska Corporation which allegedly does business in New York State as an underwriter, issuer, reinsurer, claims handler, and administrator of worker's compensation insurance policies. Defendant Applied Underwriters Captive Risk Assurance Company, Inc (AUCRA), an Iowa corporation headquartered in Nebraska, allegedly does business in New York State as a reinsurer.
Defendant Applied Underwriters, Inc., defendant AUCRA, and related defendants run a worker's compensation insurance program known as EquityComp which provides loss-sensitive worker's compensation insurance coverage to businesses. Plaintiff Air-Sea participated in the program from April, 2014 to October, 2016.
As part of its insurance transactions with the defendants, plaintiff Air Sea entered into a Reinsurance Participation Agreement (RPA) with AUCRA. The plaintiff alleges that reinsurance agreements are lawful only between insurance companies under New York Law. The defendants allegedly did not inform the plaintiff that it was illegal for it to purchase reinsurance and did not inform the plaintiff that AUCRA was not licensed in New York State to write insurance or reinsurance policies. Moreover, the plaintiff alleges that the EquityComp program does not provide actual worker's compensation for the insured, but through the RPA, which was not approved by the New York Compensation Insurance Rating Board, shifts all risk of loss back to the insured.
The RPA between AUCRA and plaintiff Air Sea contains a forum selection clause which provides: "Any legal suit, action or proceeding arising out of, related to or based upon this agreement, or the transactions contemplated hereby or thereby must only be instituted in *** the State of Nebraska *** and each party irrevocably submits to the exclusive jurisdiction of such Courts ***."
Plaintiff Air Sea began the instant action on June 25, 2019 for the purpose of, inter alia, obtaining a judgment declaring the RPA to be void and unenforceable under Insurance Law § 2347. The First Cause of Action asserts that the RPA violates New York Insurance Law §2347, the Second Cause of Action asserts that the RPA is a reinsurance agreement, theThird Cause of Action alleges misrepresentations concerning the RPA, the Fourth Cause of Action seeks the equitable rescission of the RPA, the Fifth Cause of Action alleges that the RPA was, inter ala, prohibited by law, the Sixth Cause of Action alleges misrepresentations concerning the RPA, and the Seventh Cause of Action alleges negligence in the handling of worker's compensation claims.
This Court acknowledges that after the submission of the instant motion on November 19, 2019 it received a letter dated December 10, 2019 from plaintiff Air-Sea's attorney and a letter dated December 16, 2019 from the defendants' attorney. The letters concern a Conservation Order issued on November 4, 2019 by the Superior Court for San Mateo County California that appointed a conservator for the California Insurance Company (CIC), one of the defendants in this case. The parties in this action dispute whether the Conservation Order has, or even can have, a staying effect on this action. The letters raise many complex issues which should be the subject of a motion for a stay, if necessary. These issues cannot be effectively resolved on the basis of letters which do not treat the issues with sufficient depth. Moreover, since the instant motion and cross- motion have already been fully briefed and submitted by the parties, no one would be prejudiced by their disposition at this time.
1. The Forum Selection Clause
The instant motion by the defendants first seeks the dismissal of this action pursuant to the forum selection clause in the RPA."[A] contractual forum selection clause is documentary evidence *** that may provide a basis for dismissal pursuant to CPLR §3211(a)(1) ***" (Lischinskaya v. Carninval Corp., 56 AD3d 116, 123 [2008]).
A "forum selection clause is prima facie valid and enforceable unless it is shown by the challenging party to be[, inter alia,] unreasonable, unjust, [or] in contravention of public policy " (Erie Ins. Co. of New York v. AE Design, Inc., 104 AD3d 1319, 1320 [2013]). In determining whether a forum selection clause is valid and enforceable, New York Courts will apply New York Law (). In order to escape a forum selection clause a plaintiff must demonstrate that its enforcement "would be unreasonable, unjust, or would contravene public policy, or that the clause is invalid because of fraud or overreaching ***" (Koko Contracting, Inc. v. Cont'l Envtl. Asbestos Removal Corp., 272 AD2d 585, 586, [ 2000]; Boss v. Am. Exp. Fin. Advisors, Inc.,15 AD3d 306 [2005], aff'd 6 NY3d 242 [2006]).
In arguing that the forum selection clause compels the dismissal of this entire New York action because it is valid and enforceable, the defendants rely heavily on Milmar Food Grp. II, LLC v. Applied Underwriters, Inc., 61 Misc.3d 812 [(N.Y. Sup. Ct. 2018]) where affiliated New York employers insured under a RPA brought an action against Applied Underwriters, Inc. and related insurance companies for, inter alia, a declaratory judgment that their RPA with the Nebraska insurer was void and unenforceable. As in the case at bar, Milmar participated in the EquityComp program, and, as in this case, the RPA contained a forum selection clause broadly requiring disputes arising under the RPA to be resolved in Nebraska. The Milmar Court held that the forum selection clause in the RPA was valid and enforceable. The Milmar Court found that "[t]here is no evidence that it would be unreasonable, unjust, or in contravention of New York public policy to require Milmar to abide by its agreement to litigate its claims against AUCRA in Nebraska" ( Milmar Food Grp. II, LLC v. Applied Underwriters, Inc., supra, 820). "Moreover," the Milmar Court continued, "the RPA's Nebraska forum selection clause may be invalidated due to fraud or overreaching only if the fraud/overreaching is specific to the forum selection clause itself," (Milmar Food Grp. II, LLC v. Applied Underwriters, Inc., supra, 821), and "Milmar's claim of fraud and overreaching is directed to the RPA as a whole, and not specifically to the forum selection clause"( Milmar Food Grp. II, LLC v. Applied Underwriters, Inc., supra, 821).
Plaintiff Air Sea argues that this court should not follow Milmar because of a prior case brought in Nebraska by AUCRA against Air-Sea ( Applied Underwriters Captive Risk Assurance Company, Inc. v. Air-Sea Packing Group, Inc., District Court of Douglas County, Nebraska Cl 18-4125). There, AUCRA brought an action in the Nebraska District Court to recover money allegedly owed under the parties' RPA. AUCRA asserted that the Nebraska Court had jurisdiction over Air-Sea pursuant to the state's long-arm statute and pursuant to the choice of forum clause in the RPA. Noting many similar cases brought in the Douglas District Court where a lack of personal jurisdiction had been found and the affirmance of one of those cases by the Nebraska Court of Appeals (Applied Underwriters Captive Risk Assurance Co., Inc. v. E.M. Pizza, Inc., 923 NW2d 789 [2019]), the District Court dismissed the Nebraska action against Air Sea. Finding that "there is no need to rehash the facts and the law," the District Court concluded : "Nebraska courts do not have personal jurisdiction over Air-Sea Packing, and the Choice of Forum clause does not give Nebraska personal jurisdiction over it."
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