Download PDF - Goodmans

jurisdictions that did find associations liable for such funds would allocate
such liability only under a statutory provision or specific policy language.
New York
Frialtor v. Guaranty Fund Management Services, 590 N.Y.S. 989 (Sup. Ct. Erie
County 1992). Defendants, a New Hampshire Guaranty Association and its
managers, moved to dismiss claims against it by plaintiff, the insured of an
insolvent insurer, on the basis of a lack of personal jurisdiction. The New
York Supreme Court found that jurisdiction did not exist because the
guaranty association had not "transacted business" under New York's long
arm statute, even if the insolvent insurer had been transacting business in
New York.
Gold Fields American Corporation v. Aetna Casualty and Surety Company,
(Sup. Ct. N.Y. Cty. 1997). In an action in New York, plaintiffs who were found
liable by the United States Environmental Protection Agency for
environmental damage involving property in Oklahoma, Kansas, Illinois and
Missouri named the Insurance Guaranty Funds of those four states in this
action on the basis of the plaintiffs’ claim that the Funds stand in the shoes
of two insolvent insurance companies for which the Funds may be obligated
to pay claims. The court granted the Funds’ motion to dismiss for lack of
personal jurisdiction, finding that Guaranty Funds such as the defendants do
not transact business within the State of New York and do not contract to
supply goods or services in New York and ruling that “(e)ven though the
Funds had members which did business in New York that does not allow a
finding that the Funds themselves did business in New York.”
In The Matter of the Liquidation of Midland Insurance Company, Bayly,
Martin & Fay v. Curiale, 199 A.D.2d 207, 605 N.Y.S.2d 300 (1st Dept. 1993). As
part of an unusual program of liability insurance for the County of
Westchester, the insurance broker agreed to pay the County’s attorneys
fees and carried its own “attorney‐fee‐only” insurance policy issued by
Midland to cover the fees. The broker, Bayly, Martin & Fay, filed a claim with
the New York Superintendent of Insurance as Administrator of the New York
Property/Casualty Insurance Security Fund, seeking coverage from the Fund.
The Court found, however, that the “attorney‐fee‐only” policy is not a
liability policy of the type covered by the Property/Casualty Insurance
Security Fund, which covers “legal liability of the insured and . . . loss,
damage, or expense incident to a claim of such liability.” The court upheld
dismissal of the claim against the Fund.
In the Matter of the Liquidation of Union Indemnity Insurance Company of
New York‐ Manufacturers and Traders Trust Company v. Superintendent of
Insurance, 234 A.D.2d 70, 650 N.Y.S.2d 227 (1 st Dept.1996). In a claim against
the New York Property/Casualty Insurance. Security Fund, the court found
that bonds issued by an insolvent insurer to secure loans by the plaintiff
bank were to secure loans to companies that were not located or resident in
New York. The Fund was found not liable because none of the defaulting
parties resided in New York. Plaintiff Manufacturers Traders and Trust
company made loans to two out of state companies and to an individual
residing out of state. Union Indemnity Insurance Company issued a bond on
each loan. After all three principals had defaulted on their loans,
Manufacturers made a timely demand on Union Indemnity for payment as
surety. By then, an Order of Liquidation had been issued as to Union
Indemnity. The court ruled that under Insurance Law § 7602(g), both the
insured risk and the covered risk had to be located or resident in New York
for the claims against the Fund to be allowed. Although the “covered risk”,
the making of loan payments in New York was located in New York, the
court found that the “insured risk”, the failure to make payment was not