Court Opinion

ID: 5717857
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:05:04.563782+00
Date Added: 2024-06-11T08:40:39.161698
License: Public Domain

Eager, J.
(dissenting). The declaratory judgment sought herein has to do with the construction and effect of subdivision 3 of section 42 and subdivision 2 of section 193 of the Insurance Law upon the right of a foreign life insurance company to be licensed to do a life insurance, annuity, accident and health insurance business in New York where it has acquired and owns a controlling stock interest in one or more fire or casualty insurance companies.
Said subdivision 3 of section 42 and subdivision 2 of section 193 read together with other provisions of the Insurance Law therein referred to, expressly provide that a foreign life insurance company, licensed in this State, shall not, within or without the State, do any kind or kinds of business other than the business of life insurance, of annuities or of accident and health insurance. Coneededly, however, there is no provision in these sections or elsewhere in the Insurance Law expressly saying that such a company shall not acquire and own all or substantially all of the controlling stock in a corporation engaged in a fire or casualty insurance business.
The position of the respondent Superintendent of Insurance is that the control by a foreign life insurer of a fire or casualty insurance company, though not expressly proscribed by the statute, would have the effect of violating the business limitation provisions of said sections 42 and 193. Generally speaking, however, the acquiring and owning by a foreign life insurer of all or substantially all of the stock of a fire or casualty insurance company would not have the effect of placing the foreign life insurer, in the position of doing a fire or casualty insurance business. This follows, because it is well settled that in no legal sense can the business of a corporation be said to be that of its stockholders. (People v. American Bell Tel. Co., 117 N. Y. 241, 255; Matter of Green, 231 N. Y. 237, 246, 247. Also, People ex rel. Edison Light & Power Installation Co. v. Kelsey, 101 App. Div. 205; Conley v. Mathieson Alkali Works, 190 U. S. 406.)
The respondent Superintendent argues that foreign life insurers should not be allowed “ to evade ” the “ mandate ” of the provisions of sections 42 and 193 “ through the medium of a corporate subsidiary”, and that the “ public policy pronounced in those statutes” should not be permitted “to be subverted indirectly, through the use of a corporate device ’ ’. True, his general position in this connection is certainly to be supported, when applicable, but such position is not incompatible with the position of plaintiff in this action and is not applicable as a defense to this action. The Superintendent confuses the issues here when he talks generally about the evils of allowing *408life insurers to do a fire or casualty business. He is thus presupposing, without justification, that the plaintiff will utilize a fire or casualty subsidiary as a mere agent or tool to evade the provisions of said sections.
We are not now concerned with the question of whether or not the plaintiff will be permitted to deal directly through a subsidiary in violation of the statute. We are bound to assume that the mandate of the statute will be respected and that a subsidiary of plaintiff doing a fire or casualty business will carry on in the usual way, namely, as an independent corporate entity.
It is a special attribute of every corporation, firmly rooted in our law, that it is a separate legal entity. The corporate charter creates and constitutes it as a legal entity, distinct from its members and from other corporations. (Matter of Mount Sinai Hosp., 250 N. Y. 103, 111.) So considered is a corporation, the stock in which is entirely or principally owned by another corporation. The autonomy of a subsidiary corporation as a distinct legal entity engaged in business for itself is required to be recognized in the absence of special circumstances showing that the “ corporate veil” exists for fraudulent purposes or as a mere subterfuge. (See 11 N. Y. Jur., Corporations, § 15, and cases cited.) We have no right to assume here that the plaintiff will utilize a fire or casualty subsidiary fraudulently or as a mere subterfuge to circumvent the provisions of sections 42 and 193.
Public policy is not contravened or offended by the foreign life insurer’s ownership of the stock of a fire or casualty company. All that public policy requires is that there be adequate protection against insolvency of such insurer, and coricededly sufficient for this purpose are the safeguards imposed with respect to approved and admitted assets and the capital and surplus required of a licensed foreign insurer.
Furthermore, the contention of the Superintendent with regard to his sought for effect of the provisions of sections 42 and 193 is not reconcilable generally with interpretation and construction of his office of the provisions of the Insurance Law as a whole with respect to the powers of foreign insurers to own stock in other insurance companies. His office has held inapplicable to foreign insurers the provisions of such law prohibiting domestic insurers from acquiring and owning substantial stock interests in other insurance companies. Consequently, the Superintendent has long acknowledged that many existing foreign insurers, including life insurers and fire or casualty insurers, licensed here, are entitled to own controlling stock interests in other insurance companies engaged in a different *409line of business. The plaintiff in its reply brief names 15 particular foreign insurers, licensed in this State, which own subsidiaries engaged in a different line of insurance business.
The fact is that the matter of stock ownership by a licensed foreign insurer has generally been considered and treated as a matter governed by provisions of law and regulations having to do with permitted investments and required capital and surplus of the insurer. There are statutory provisions in this State expressly having to do with stock ownership by foreign insurers, interlocking directors in insurance companies and the common management of insurance companies (see Insurance Law, § 67 and art. V, and particularly §§ 67, 90), but none of such provisions are construed to prohibit a foreign life insurer from owning the stock of a fire or casualty insurance company. In the application of the law, the assets of a foreign insurer which do not conform to the investment provisions of the Insurance Law relating to domestic companies of the same kind are disregarded as not within the category of ‘ ‘ admitted assets ’ ’ in determining whether the foreign insurer meets the asset, capital and surplus requirements in order to do business in the State. In following such practice, there is no unwarranted interference with the internal affairs of a foreign insurer; and there is nothing in such practice which is contrary to public policy where there is adequate safeguarding of the solvency of the foreign insurer.
The construction of subdivision 3 of section 42 and subdivision 2 of section 193 of the Insurance Law, sought by the Superintendent of Insurance and in effect approved by this court in affirmance of the order and judgment herein, has the effect of broadening these business limitation sections of the Insurance Law to prohibit foreign insurers from making certain kinds of investments. In my opinion, such broadening of the particular sections is unauthorized.
Much of the respondent’s brief is devoted to the argument that it was the intention of the Legislature that the provisions of sections 42 and 193 should be given the effect of prohibiting licensed foreign life insurers from owning the controlling stock interest in fire or casualty subsidiaries. Neither the Superintendent nor the court may, however, write affirmative provisions into these sections on the theory of construing them to give effect to such alleged legislative intention. (See McKinney’s Cons. Laws of N. Y., Book 1, Statutes, § 74.) To write into these particular sections provisions restricting foreign insurers in the matter of stock ownership and investments in independently managed subsidiary corporations would amount to the broaden*410ing of such sections to cover a matter not expressly mentioned therein and would in effect constitute an invasion of the province of the Legislature. The matter of restrictions as to stock ownership and investments by foreign insurers in other corporations, including subsidiary corporations, and regulations with respect to interlocking directors and common management of insurance corporations, are, as aforenoted, matters covered by section 67 and article V of the Insurance Law (see particularly §§ 67, 90); and it is reasonable to assume that, if the Legislature ' had intended to restrict foreign insurers in the matter of stock ownership and investments in subsidiary corporations as claimed here by the Superintendent, it would have inserted provisions to that effect in said section 67 or article Y, particularly in 1958 when the matter was under consideration and section 90 was amended.
The foregoing is, of course, not intended to impose any limitation upon the power of the Superintendent of Insurance to revoke a license or to refuse to issue a license to a particular life insurer where there exist special circumstances indicating that it is in fact operating in violation of the provisions of law prohibiting it from doing a fire or casualty insurance business.
Under the circumstances the plaintiff is entitled, in my opinion, to a declaratory judgment that the acquisition by plaintiff of a controlling stock interest in one or more fire or casualty insurance companies would not in and of itself constitute a legal basis under subdivision 3 of section 42 and subdivision 2 of section 193 of the Insurance Law for the Superintendent of Insurance to revoke or to refuse to renew or to threaten to revoke or to refuse to renew the plaintiff’s license to do in New York the business of life insurance, annuities and accident and health insurance.
The order and judgment of the court below should be' modified tó strike out the decretal paragraphs therein and to provide that the plaintiff is entitled to declaratory judgment as aforesaid and to provide that plaintiff’s motion is granted to such extent and that the defendant’s cross motion for summary judgment is denied.
Bobbin, P. J., Babin and Valente, JJ., concur with Bastow, J.; Eager, J., dissents and votes to reverse in dissenting opinion.
Order and judgment (one paper) and order affirmed, with costs to the respondent.