Merritt-Chapman & Scott Corp. v. N.Y. Superintendent of Insurance, 43 N.Y.2d 961 (1978)
The term “risk” in the context of the New York Property and Liability Insurance Security Fund refers to the physical property or person insured, and the fund only covers risks located within New York State.
Summary
Merritt Division of Murphy Pacific Marine Salvage Corporation (Merritt) sought reimbursement from the New York Property and Liability Insurance Security Fund after its insurer became insolvent and Merritt had to pay a judgment itself. The Superintendent of Insurance denied the claim because the incident giving rise to the liability occurred in Virginia waters, while the fund covers only risks located or resident in New York. The New York Court of Appeals affirmed the denial, holding that the term “risk” refers to the physical property or person insured, which in this case was not located in New York.
Facts
Merritt had a liability insurance policy with Interstate Insurance Company. Interstate Insurance Company became insolvent. Merritt was forced to pay a judgment from its own assets due to an incident occurring in Virginia waters. Merritt then filed a claim with the Superintendent of Insurance seeking reimbursement from the New York Property and Liability Insurance Security Fund.
Procedural History
The Superintendent of Insurance denied Merritt’s claim. Merritt filed a special proceeding to compel payment. Special Term denied the relief requested by Merritt. The Appellate Division affirmed the Special Term’s decision. The New York Court of Appeals affirmed the Appellate Division’s order.
Issue(s)
Whether the term “risk,” as used in the New York Property and Liability Insurance Security Fund statute, includes liability stemming from an accident outside of New York State when the insured is a New York company.
Holding
No, because the term “risk” in the statute refers to the physical property or person insured, and the incident occurred outside of New York.
Court’s Reasoning
The Court of Appeals relied on the commonly accepted meaning of “risk” in the insurance business, citing Matter of Guardian Life Ins. Co. v Chapman, 302 NY 226, 243. The court stated that a “‘risk’ is the physical property or person insured.” Because the New York Property and Liability Insurance Security Fund covers only “risks” located in New York, liability stemming from an accident on a ship off the coast of Virginia could reasonably be deemed nonreimbursable. The court emphasized the location of the risk, i.e., the location of the insured property or person, as the determining factor for coverage under the fund. The decision emphasizes a strict interpretation of the statute, limiting the fund’s liability to risks physically situated within New York. The court did not elaborate on any dissenting or concurring opinions. The court reasoned that because the incident occurred outside of New York State it was not covered by the fund because the fund only covers risks within New York State.