Connecticut General Life Insurance v. Superintendent of Insurance

Bastow, J.

Plaintiff, a Connecticut life insurance company admitted to do business in this State, appeals from a judgment dismissing its complaint on motion of the defendant. The issue presented is posed in the prayer for relief in the complaint. Therein a declaratory judgment is sought that ‘1 the acquisition by plaintiff of a controlling stock interest in one or more fire or casualty insurance subsidiaries would constitute no legal basis under Sections 42(3) and 193(2) of the Insurance Law for the Superintendent to revoke or to refuse to renew * * * plaintiff’s license to do in New York the business of life insurance, annuities, and accident and health insurance ”.

It is conceded that under other provisions of the Insurance Law domestic life insurance companies are forbidden, to write fire or casualty insurance and domestic fire and casualty insurance companies are forbidden to write life insurance. It folloAvs and is similarly conceded that the plain intendment of subdiAdsion 3 of section 42 and subdivision 2 of section 193 is to forbid foreign life insurance companies to write fire and casualty insurance and foreign fire and casualty companies to write life insurance. The narrow issue presented is whether or not plaintiff by acquiring a controlling stock interest in one or more fire or casualty insurance subsidiaries would be engaged in an insurance business other than that for which it is now licensed in this State in violation of the pertinent statutes.

While the Insurance Law in a general proAdsion recognizes the right of domestic and foreign insurers to acquire subsidiaries (§ 67, subd. 1), section 90 of the same law, prior to 1958, precluded investments by a foreign insurer which did “ not comply in substance with the investment requirements and limitations imposed by this chapter upon like domestic insurers ”. At the same time subdivision 13 of section 81 prohibited a domestic life insurer from owning more than 2% of the outstanding common stock of any one company.

The present disagreement between the parties has been alive at least since 1956. In that year the attorneys for the respective parties submitted substantially this identical issue to the Attorney-General. It was the latter’s opinion, among other things, that by reason of subdiAdsion 1 of section 90 the proposed acquisition by the present appellant of a controlling interest in a fire insurer was 11 so disproportionate to the common stock acquisition limit imposed upon domestic life insurance companies by Section 81, suM. 13 (80% as against 2%), that it must be regarded as altogether outside the contemplation of the Legislature, latitude notwithstanding.” (1956 Atty. Gen. 177, 180.) In the light of subsequent events it is interesting to note that the Attorney-General went on to state (p. 181) that “ [i]f foreign life insurance companies believe the time has come to relax the common stock investment restrictions now imposed upon them by reason of the statute’s direction that they ‘ comply in substance ’ with the investment requirements and limitations imposed upon domestic life insurers, that is a matter for the Legislature’s attention. ’ ’

In 1958 the Legislature did undertake to amend section 90 and to liberalize its provisions (L. 1958, ch. 981). The amendments, however, are here immaterial and it is not contended that they improved or materially altered appellant’s position. To the contrary, a new subdivision 3 was added providing that “ Nothing in this section shall be construed to relieve any foreign or alien insurer from compliance with any other provision of this chapter.” Moreover, in view of the fact that the lines of battle-had long since been drawn the pertinent legislative documents furnish ample proof that there was no intent to nullify such prohibitions as are to be found in section 193, but instead such prohibitions were expressly recognized and reserved. (See N. Y. Legis. Annual, 1958, pp. 268, 500; N. Y. Legis. Annual, 1957, p. 577.)

Thus, subdivision 1 of section 193, when considered together with the investment limitations of section 90, has the effect of prohibiting domestic life insurers from even raising the question of whether they might escape the prohibition of the former section through the device of a subsidiary. It is equally plain that the Legislature intended that the similar prohibition in subdivision 2 of section 193 should be construed together with the investment limitations of section 90. Thus considered each complements the other — the latter dealing with investments and the former with doing business. We conclude that while section 90 after its amendment in 1958 permitted wider latitude in investments there was no intention that a foreign insurer should be-permitted to acquire a controlling interest in a fire or casualty-insurer. Furthermore, the 1958 amendment showed legislative-intent that the prohibition of section 193 should remain in full force and effect. Having reached these conclusions we agree that Special Term was correct in denying the declaration requested in the complaint.

In our view of the issues presented it is not necessary to reach the question of whether or not public policy is offended by a statutory prohibition that a foreign life insurer seeking to do business in this State may not acquire a controlling interest in a fire or casualty insurer. Neither is inquiry relevant whether the licensed insurer and subsidiary might or could operate as separate legal entities. There is presented a question of statutory construction — whether the pertinent statutory provisions constitute a legal basis for respondent to revoke or refuse to renew appellant’s license to operate in this State if it acquired controlling interests in one or more fire or casualty insurance subsidiaries. That issue we have passed upon in the light of the suggested rule that “ statutes granting powers to administrative agencies should receive a reasonable interpretation, and where the statute has as its aim a system of public regulation that can be administered efficiently and properly only by a group of qualified experts a liberal interpretation to effectuate the purposes and objectives of the statute should be preferred.”

(3 Sutherland, Statutory Construction, § 6604, p. 288.)

Lastly, the appellant stresses the fact that several licensed fire and casualty insurers own life insurance subsidiaries most of which are not licensed in this State. It is unnecessary to here elaborate upon the proof in the record of the basic difference between life insurance on the one hand and fire and casualty insurance on the other. Neither are we required to make a finding on the claimed fact that the risk involved in life insurance is reasonably predictable whereas fire and casualty insurance is written on a short-term basis and the risk is less generalized and less predictable. Neither should the issue be decided on the conceded fact that for more than 50 years two foreign life insurers have been permitted to operate in this State while owning subsidiary fire or casualty insurers.

In this action for declaratory judgment the granting of the - relief requested in the complaint would be appropriate only because of the in terrorem effect of a revocation or refusal to renew appellant’s license. (Cf. New York Foreign Trade Zone Operators v. State Liquor Auth., 285 N. Y. 272, 278.) Moreover, plaintiff did not seek in its complaint and would not be entitled to a declaration that because two others similarly situated operated in this State while owning subsidiaries appellant is thereby denied equal protection of law. The authorities relied on by plaintiff such as Yick Wo v. Hopkins (118 U. S. 356) are distinguishable. Conventional remedies exist for any party claiming to be aggrieved by the action of the respondent in continuing to renew the licenses of the two foreign insurers in question.

The judgment should be affirmed.