Serio v. ARDRA INSURANCE COMPANY, LTD.

• Decision Date: 08 April 2003
• Citation: 761 N.Y.S.2d 1,304 A.D.2d 362
• Parties: GREGORY V. SERIO, Superintendent of Insurance of the State of New York, as Liquidator of NASSAU INSURANCE COMPANY, Respondent,<BR>v.<BR>ARDRA INSURANCE COMPANY, LTD., Defendant, and<BR>RICHARD A. DILORETO et al., Appellants.
• Court: New York Supreme Court — Appellate Division

304 A.D.2d 362

761 N.Y.S.2d 1

GREGORY V. SERIO, Superintendent of Insurance of the State of New York, as Liquidator of NASSAU INSURANCE COMPANY, Respondent,

v. ARDRA INSURANCE COMPANY, LTD., Defendant, andRICHARD A. DILORETO et al., Appellants.

Decided April 8, 2003.

Concur — Tom, J.P., Andrias, Rosenberger and Williams, JJ.

Under the facts presented, the trial court properly concluded that New York law governed disposition of the issue of whether the corporate veil of Ardra Insurance Company (Ardra), a reinsurance company, should be pierced to hold the individual defendants liable for a corporate debt (see Intercontinental Planning v Daystrom, Inc., 24 NY2d 372, 380-381 [1969]; Curiale v Tiber Holding Corp., 1997 WL 597944, 1997 US Dist LEXIS 14563 [ED Pa, Sept. 18, 1997]; Foster v Berwind Corp., 1991 WL 21666, 1991 US Dist LEXIS 1988 [ED Pa, Feb. 13, 1991]). Although incorporated in Bermuda, Ardra's contacts with that jurisdiction were minimal. It was not authorized to sell insurance in Bermuda or to do business with Bermuda residents. It was controlled by defendant Richard DiLoreto from New York and all the transactions complained of occurred in New York.

Defendants-appellants' claim that the Liquidator is equitably estopped from asserting that Ardra was a controlled person under the Insurance Law is without merit. It is established that the doctrine of equitable estoppel will not bar a governmental agency from changing its position in the exercise of a governmental function (see Matter of New York State Med. Transporters Assn. v Perales, 77 NY2d 126, 130 [1990]; Matter of Parkview Assoc. v City of New York, 71 NY2d 274, 282 [1988], cert denied and appeal dismissed 488 US 801; Matter of People [International Workers Order], 199 Misc 941, 977-978 [1951], affd 280 App Div 517 [1952], affd 305 NY 258 [1953], cert denied 346 US 857 [1953]).

Contrary to defendants-appellants' claim, the evidence provided ample support for the jury's finding that the transactions at issue between Ardra and Nassau Insurance Company, pursuant to which Ardra undertook to reinsure Nassau against certain risks for which it, Nassau, had provided coverage, were unfair and inequitable to Nassau, a controlled insurer within the meaning of the Insurance Law (Insurance Law § 1505 [a]). In this connection, the proof showed that the DiLoretos, through their control of Ardra, deprived it of the funds needed to meet its reinsurance obligations, and that that circumstance rendered the agreements at issue inequitable. Given the sequence of the transactions, in which premiums paid by Nassau were immediately transferred to other DiLoreto-owned entities, the jury was entitled to consider the sequential transfers as part of an integrated transaction (see Orr v Kinderhill Corp., 991 F2d 31, 35 [1993]; Salomon, Inc. v United States, 976 F2d 837, 842 [1992]) designed to benefit DiLoreto entities by...