Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York has held that a Bermuda insurer must post a bond pursuant to N.Y. Ins. Law § 1213 after it filed a motion to compel arbitration. MF Global Holdings Ltd. v. Allied World Assur. Co., Ltd., 2017 WL 2533353 (Bankr. S.D.N.Y. June 12, 2017).
A Bermuda-based insurer issued a policy to a New York-based insured. The insurer delivered the policy to the insured’s Bermuda-based broker, which sent the policy to the insured at its New York address. After a coverage dispute, the insured ultimately filed a complaint initiating coverage litigation against the insurer. In response, the insurer filed a motion to compel arbitration in Bermuda pursuant to the alternative dispute resolution clause in its policy. Thereafter, the insured filed a motion to compel compliance with N.Y. Ins. Law § 1213, which requires unauthorized foreign insurers to post a bond “sufficient to secure payment of any final judgment which may be rendered in [a] proceeding” prior to “filing any pleading in any proceeding.” The insurer opposed the motion, arguing that its motion to compel arbitration was not a “pleading,” and that the policy was not “issued or delivered” in New York. The insurer also argued that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) preempted enforcement of the statute.
The court granted the insured’s motion to compel compliance with N.Y. Ins. Law § 1213, rejecting all of the insurer’s arguments. First, the court noted that courts have interpreted the term “pleading” broadly as it appears in § 1213, including to encompass motions to compel arbitration. Second, the court held that the policy was “issued” and “delivered” to the insured in New York, noting that the insurer “fully expected that the [policy] would ultimately be delivered to New York” when it sent the policy to the Bermuda-based broker. Third, the court held that the New York Convention did not preempt enforcement of the statute, because the statute was not an “impediment” to arbitration. Rather, the court viewed the bond provision as a “security device in aid of the arbitration.” The court required the insurer to post a bond in the amount of the limit of liability of the policy.