People ex rel. Sea Ins. Co. v. Graves

Decision Date25 May 1937
Citation274 N.Y. 312,8 N.E.2d 872
PartiesPEOPLE ex rel. SEA INS. CO., Limited, v. GRAVES et al.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Proceeding in certiorari by the People, on the relation of the Sea Insurance Company, Limited, against Mark Graves and others, constituting the State Tax Commission. From an order of the Appellate Division (248 App.Div. 255, 289 N.Y.S. 177) annulling the determination of the State Tax Commission assessing a franchise tax against the Sea Insurance Company, Limited, Mark Graves and others, constituting the State Tax Commission, appeal.

Order affirmed. Appeal from Supreme Court, Appellate Division, Third Department.

John J. Bennett, Jr., Atty. Gen. (Wendell P. Brown, of Albany, of counsel), for appellants.

John C. Crawley, Archibald G. Thacher, and A. Chalmers Charles, all of New York City, for respondents.

HUBBS, Judge.

The question presented is whether the relator, Sea Insurance Company, a foreign insurance company, was doing a marine reinsurance business in this state, and, therefore, subject to a tax under section 187 of the Tax Law (Consol.Laws, c. 60). The relator is an English company. Chubb & Son, a copartnership, of New York is its general agent. That firm is also general agent of several other insurance companies including the Hartford and Federal. All of the companies represented by Chubb & Son entered into an agreement to reinsure a certain percentage of any line taken by any one of the companies, parties to the agreement. The agreement was entered into in the state of New Jersey where the relator had an office for the transaction of business. The Hartford and Federal did business directly with the parties insured in New York. On such business done in New York, the relator by virtue of the contract entered into in New Jersey became a reinsurer for the percentage of the lines specified in the contract of reinsurance. Its portion of the premiums collected for the business written in New York by the Hartford and Federal was paid to the relator at its office in New Jersey. The Hartford and Federal paid the tax assessed against them in New York under section 34 of the Insurance Law (Consol.Laws, c. 28) based on the premiums collected on business which they did directly with parties insured in New York. The tax commission assessed the relator on the amount paid to it by checks sent to it in New Jersey by the Hartford and Federal for its charge for reinsurance on the business written by the Hartford and Federal directly in New York.

The question here is, Can such a tax for the privilege of doing business in New York be legally assessed against the relator? That depends upon whether the relator did business in New York. Was it in any way a party to the insurance contracts entered into in New York by the Hartford and Federal Insurance Companies directly with the parties to whom they issued policies? In actual practice, a line of insurance is frequently offered larger than any one company may desire to assume. In such a case, one method is to accept the line offered and reinsure the whole or a part of it with some other company or companies.

The contract made by the original insurance company with the other company or companies for its protection as to the whole or a portion of the risk is known as a reinsurance contract.

‘The contract that one insurer makes with another to protect the first from a risk he has already assumed.’ Iowa Life Ins. Co. v. Eastern Mut. Life Ins. Co., 64 N.J. Law, 340, 348, 45 A. 762, 765;London Assurance Corporation v. Thompson, 170 N.Y. 94, 99,62 N.E. 1066.

Of that form of reinsurance contract, Sandford, J., in Hone v. Mutual Safety Ins. Co., 3 N.Y.Super.Ct. (1 Sandf.) 137, 145, affirmed, 2 N.Y. 235, said: ‘for more than two centuries, the contract of re-insurance has been well known, and its principlesfirmly established. * * * The contract of re-insurance is described as a contract of indemnity to the party obtaining it.’

That practice is the usual practice and a contract so made is known as reinsurance. There is, however, another practice by which two or more companies enter into an agreement by which they agree that each will and does in advance reinsure any line taken by any one of the companies in the future to an amount equal to a certain per cent. of the line taken by that one of the original insuring companies. To illustrate, the Home, AEtna, and Hartford may agree that each will reinsure one-third of any line taken by each of the others. That is reinsurance in advance. The obligation attaches automatically upon the acceptance of a risk by any one of the three companies. The contract is a self-executing contract. It may provide and usually does that upon acceptance of a risk by one of the companies, notice shall be given to each of the reinsuring companies including a survey and a statement of all necessary information in regard to the risk. That was the method employed in the case at bar. 9 Cooley, Briefs on the Law of Insurance, 2d Ed., pp. 6741-6760; Imperial Fire Ins. Co. v. Home Ins. Co. (C.C.A.) 68 F. 698.

The agreement for the latter type of reinsurance is sometimes called a ‘reinsurance compact.’ German-American Ins. Co. v. Commercial Fire Ins. Co., 95 Ala. 469, 11 So. 117,16 L.R.A. 291.

It is also known as ‘open policy or contract of re-insurance.’ Continental Ins. Co. v. AEtna Ins. Co., 138 N.Y. 16, 17,33 N.E. 724, 725.

The similarity between the two types of reinsurance contracts is of importance because of the contention by appellant that reinsurance in the case at bar was effected when the principal risks insured directly in New York by the Hartford and Federal resulted in premiums being paid...

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13 cases
  • Connecticut General Life Ins Co v. Johnson
    • United States
    • U.S. Supreme Court
    • January 31, 1938
    ...928; Boseman v. Connecticut General Life Ins. Co., 301 U.S. 196, 57 S.Ct. 686, 81 L.Ed. 1036, 110 A.L.R. 732; People ex rel. Sea Insurance Co. v. Graves, 274 N.Y. 312, 8 N.E.2d 872; compare Provident Savings Life Assurance Society v. Kentucky, 239 U.S. 103, 36 S.Ct. 34, 60 L.Ed. 167, L.R.A.......
  • Christiania General Ins. Corp. of New York v. Great American Ins. Co.
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    ...Am. Life Ins. Co. v. Commissioner, 491 U.S. 244, 246-47, 109 S.Ct. 2408, 2411, 105 L.Ed.2d 199 (1989); People ex rel. Sea Ins. Co. v. Graves, 274 N.Y. 312, 315, 8 N.E.2d 872 (1937). Simply put, "[r]einsurance is a contract by which one insurer insures the risks of another insurer." People e......
  • Sears, Roebuck & Co. v. Roddewig
    • United States
    • Iowa Supreme Court
    • May 14, 1940
    ... ...          In the ... case of Connecticut General Life Ins. Co. v ... Johnson, 303 U.S. 77, 80, 58 S.Ct. 436, 438, 82 L.Ed ... 196, 57 S.Ct ... 686, 81 L.Ed. 1036, 110 A.L.R. 732; People" ex rel. Sea ... Ins. Co. v. Graves, 274 N.Y. 312, 8 N.E.2d 872.\" ...  \xC2" ... ...
  • O'Pry Heating & Plumbing Co. v. State
    • United States
    • Alabama Supreme Court
    • June 13, 1941
    ... ... States Supreme Court in Connecticut General Life Ins. Co. v ... Johnson, 303 U.S. 77, 58 S.Ct. 436, 438, 82 L.Ed. 673, as ... 196, 57 S.Ct. 686, 81 ... L.Ed. 1036, 110 A.L.R. 732; People, ex rel. Sea Ins. Co ... v. Graves, 274 N.Y. 312, 8 N.E.2d 872; compare ... ...
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