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ASSOCIATED AVIATION UNDERWRITERS v. ARAB INSURANCE GROUP

April 15, 2003

ASSOCIATED AVIATION UNDERWRITERS AND ASSOCIATED AVIATION UNDERWRITERS, INC., PLAINTIFFS
v.
ARAB INSURANCE GROUP (B.S.C.) AND ARIG REINSURANCE COMPANY, DEFENDANTS



The opinion of the court was delivered by: George B. Daniels, United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs brought this diversity action against defendants alleging that defendants breached the terms of the parties' aviation reinsurance agreements. Defendants filed a motion to dismiss for lack of personal jurisdiction. For the following reasons, defendants' motion to dismiss is granted.

I. Background

Plaintiff Associated Aviation Underwriters ("Associated Aviation") is an unincorporated association of independent member insurance companies. The member insurance companies issue aviation and liability insurance policies to various airlines and product manufacturers. Associated Aviation has its principal place of business in New Jersey. All of the member insurance companies are licensed to do business in New York, and two of them are incorporated in New York.*fn1

Co-plaintiff Associated Aviation Underwriters, Inc. ("Underwriters") is a Delaware corporation with its principal place of business in New Jersey. Underwriters is the exclusive manager for underwriting and claims administration for Associated Aviation (collectively, plaintiffs may be referred to as "AAU").

Defendant Arab Insurance Group (B.S.C.) ("Arab Insurance") is a Bahrain corporation with its principal place of business in Bahrain. Co-defendant Arig Reinsurance Company ("Arig Reinsurance") is also a Bahrain corporation with its principal place of business in Bahrain. Arig Reinsurance is a wholly owned subsidiary of Arab Insurance (collectively, defendants may be referred to as "Arig").

The instant dispute arises out of a series of reinsurance contracts between the parties whereby defendants agreed to provide reinsurance to aviation and liability insurance policies that were issued to various airlines and product manufacturers for the 1996 through 2001 policy periods.*fn2 Under the reinsurance agreements, Arig accepted a fixed percentage share of the original insurance risks. AAU alleges that claims were paid to various insureds for losses incurred during the relevant period. A substantial portion of those losses include claims related to the terrorist attacks of September 11, 2001 and the November 12, 2001 airplane crash in Queens, New York. AAU contends, however, that Arig has failed to reimburse AAU for Arig's fixed percentage share of the claims. AAU brought this action against Arig seeking specific performance requiring Arig to increase the letter of credit to $30,761,400, damages in the amount of $3,989,000, declaratory relief, and reasonable attorneys' fees and costs.

II. Discussion

Federal Rule of Civil Procedure 12(b)(2) allows a party to move to dismiss a Complaint where the court lacks personal jurisdiction over the defendant. See FED. R. Civ. P. 12(b)(2). The burden of establishing personal jurisdiction lies with the party seeking to assert such jurisdiction. See Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). However, a court must construe all pleadings and affidavits in the light most favorable to the party asserting jurisdiction. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985). The law of the forum in which the district court sits determines a defendant's amenability to suit in that forum. See Klinghoffer v. S.N.C. Achillle Lauro, 937 F.2d 44, 50 (2d Cir. 1991). Consequently, New York law governs the analysis of this case.

A. New York Insurance Law § 1213(b) and C.P.L.R. § 302(a)

Plaintiffs assert that this Court has personal jurisdiction over defendants pursuant to New York Insurance Law § 1213. Section 1213 provides a method of substituted service of process upon unauthorized foreign insurers who issue or deliver policies of insurance in this state. Section 1213(b) of the statute enumerates a list of "acts in this state, effected by mail or otherwise, by an unauthorized foreign or alien insurer" which constitute the appointment of the New York Superintendent of Insurance as the unauthorized insurer's attorney for service of process. N.Y. Ins. Law § 1213(b). One of the acts identified by subsection (b)(1)(A) is:

[T]he issuance or delivery of contracts of insurance to residents of this state or to corporations authorized to do business therein[.]
Id. at § 1213(b)(1)(A). Section 1213(b), therefore, acts as an extension of New York's long arm statute. Personal jurisdiction may be asserted by a New York court over an unauthorized foreign insurer and the New York Superintendent of Insurance is appointed the insurer's attorney for service of process.

Section 1213 is a desirable statute by which to assert personal jurisdiction over a defendant because § 1213(c) requires all unauthorized alien insurers to file a security sufficient to secure payment of any final judgment before filing any pleadings.*fn3 See id. at § 1213(c). Further, § 1101(b)(2)(G) of the New York Insurance Law expressly makes § 1213 applicable to reinsurance contracts. See id. at § 1101(b)(2)(G); British Int'l. Ins. Co. Ltd. v. Seguros La Republica, S.A., 212 F.3d 138, 141 (2d Cir. 1990).

Defendants argue that this Court does not have personal jurisdiction over them pursuant to ยง 1213. Defendants contend that, in order for delivery of a reinsurance contract by mail to take place "in the state" for the purposes of subsection (b)(1)(A), it must be mailed within or into New York. Defendants contend that they never delivered anything into New York, but rather delivered the reinsurance contracts to plaintiffs' office in New Jersey. Plaintiffs, on the other hand, argue that delivery of policies into New York is not essential for jurisdiction under (b)(1)(A). Plaintiffs point out that the member insurance companies are all licensed to do business in New York, and that a substantial portion of the original insurance claims relate ...


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