New York laws relating to marine insurance

    The common law of marine insurance in New York antedates the U.S. general maritime law, and is largely based on the work of American lawyers and judges in the 18th century, a group that included Alexander Hamilton. See Charles M. Hough, Reports of Cases in the Vice-Admiralty of the Province of New York (Yale Univ. Press: 1925) at xiii, 252-53.

Judge Hough noted in his Introduction to that casebook that "a simple American admiralty practice had been developed in New York at least as early as 1760." Id. at xiv. In the 1780s, the court was known as the Court of Admiralty of the State of New York.

However, in 1789, New York ratified the United States Constitution, the United States District Court for New York City (now the Southern District of New York) was organized, and the general maritime law became federalized. See Norfolk Southern Ry. v. James N. Kirby, Pty Ltd., 543 U.S. 14, 23 (2004)(locating the source of the federal courts' power to make decisional law in maritime cases in the Article III grant of admiralty and maritime jurisdiction).

Very little changed after the federal courts took over. The federal practice drew from the practice in New York, and when necessary, the U.S. general maritime law largely followed English law, see New England Marine Ins. Co. v. Dunham, 78 U.S. 1 (1871).

 This does not mean that New York law has no effect on marine insurance today. Unlike federal law, New York law regulates the business of insurance, although New York exempts marine insurance from most of the pro-consumer regulation that is antithetical to the laissez-faire market philosophy underlying the Anglo-American common law of marine insurance. Much of the legislation in New York relating to marine insurance was passed first to enable the formation of the American Club in 1917 and the American Hull Insurance Syndicate in 1920, and then to preserve their operations, rather than to protect insureds and their creditors, like most of the subsequent legislation.

The New York legislation that differentiates marine insurance from more closely regulated forms of insurance is not easy to locate. Most of it is scattered like Easter eggs throughout the Insurance Law, a compendium that principally dates to 1909, and has never been completely overhauled, despite attempts at recodification in 1939 and 1984. Think of this article as an Easter egg hunt.

N.Y. Ins. L. § 1113(a)(20) defines "marine and inland marine insurance" as "insurance against any and all kinds of loss of or damage to:

(A) Vessels, hulls, craft, aircraft, cars, automobiles, trailers and vehicles of every kind, and all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment, or reshipment incident thereto, including marine builder's risks and all personal property floater risks;

(B) Person or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to the person arising out of ownership, maintenance or use of automobiles);

(C) Precious stones, jewels, jewelry, gold, silver and other precious metals, whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise; and (D) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their improvements and betterments, furniture and furnishings, fixed contents and supplies held in storage), including auxiliary facilities and equipment attendant thereto; piers, wharves, docks and slips; other aids to navigation and transportation, including dry docks and marine railways.

In this chapter "inland marine" insurance shall not include insurance of vessels, crafts, their cargoes, marine builders' risks, or other similar risks, commonly insured only under ocean marine insurance policies."

N.Y. Ins. L. § 1113(a)(21) defines "marine protection and indemnity insurance" as (21) "insurance against, or against legal liability of the insured for, loss, damage or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person."

Despite the separate enumeration, the state regulators consider P&I insurance to be a subset of marine insurance, deeming that insurers licensed to write marine insurance also have the power to write marine P&I insurance. The separate enumeration was intended to permit an insurer to qualify to write P&I insurance alone. See Opinion letter dated April 16, 1946, quoted in "Application of Excess Line Taxes and Rate Filing Requirements to Excess Line Marine Insurance Placements", Op. Gen. Counsel's Office, Mar. 20, 2003.

N.Y. Ins. L. § 1115 exempts marine insurance from the requirement that an insurer assume no single risk greater than 10% of its policyholder surplus.

N.Y. Ins. L. § 1209 restricts the use of certain types of management agreements to "domestic mutual companies organized before 1940 to write only marine protection and indemnity insurance."

N.Y. Ins. L. § 2105 exempts "ocean marine" insurance from the excess line premium tax and the requirements of § 2118 and Regulation 41. "Ocean marine" insurance is not defined in the Insurance Law, but is generally understood to include what "inland marine" excludes: in particular, the insurance of vessels, crafts, their cargoes, and marine builders' risks. See N.Y. Ins. L. § 1113(a)(20); "Application of Excess Line Taxes and Rate Filing Requirements to Excess Line Marine Insurance Placements", Op. Gen. Counsel's Office, Mar. 20, 2003; Circular Letter No. 28 (1999), "Ocean Marine Insurance Placements".

N.Y. Ins. L. § 2108 requires that all insurance adjusters be licensed, either as "independent adjusters" or as "public adjusters". However, "average adjusters and adjusters of maritime losses" are exempt from the licensing requirement. Ins. L. § 2101(g)(1)(I).

N.Y. Ins. L. § 2117 permits insurance brokers to  place hull, cargo, or P&I insurance (at least with respect to ocean-going vessels) with insurers that are not licensed to do insurance business in New York ("unauthorized insurers").

N.Y. Ins. L. § 2125 provides that an insurer may not knowingly provide, and a broker may not knowingly place, marine insurance for a person who does not have an insurable interest in the safety of the subject matter insured. 

N.Y. Ins. L. § 2302 exempts marine (other than inland marine) insurance from the article regulating rates.

N.Y. Ins. L. § 2324 exempts marine insurance from the prohibitions on rebating and discrimination.

N.Y. Ins. L. § 3103(b) exempts marine insurance from the requirement that New York law govern the rights and obligations of the insured in all policies issued in the state.

N.Y. Ins. L. § 3106 provides that a breach of warranty shall not avoid an insurance contract or defeat recovery unless the breach materially increased the risk of loss, damage, or injury. However, it exempts marine insurance. See Star City Sportswear, Inc. v. Yasuda Fire & Marine Ins. Co. of America, 1 A.D.3d 58, 765 N.Y.S.2d 854 (1st Dept 2003), aff'd, 2 N.Y.3d 789, 781 N.Y.S.2d 255 (2004); Kron v. Hanover Fire Ins. Co., 20 A.D.2d 670, 246 N.Y.S.2d 848 (2d Dept 1964); 69 N.Y. Jur.2d § 1224.

N.Y. Ins. L. § 3420 prescribes certain standard provisions for liability policies to protect insureds and their creditors, and gives creditors of the insured a direct right of action against insurers. However, § 3420 expressly states [in § 3420(i)] that it does not apply to the kinds of insurances set forth in Ins. L. § 2117(b)(3), which are:

See, e.g., Cowan v. Continental Ins. Co., 86 A.D.2d 646, 446 N.Y.S.2d 412 (2d Dept. 1982)(Section 167 [now § 3420] of Insurance Law prohibited plaintiff from filing a declaratory judgment action after her decedent perished aboard a tug which was covered by a marine protection and indemnity policy issued by defendant insurer to decedent's employers). See also Dunn v. American Home Assur.Co., 158 A.D.2d 505, 551 N.Y.S.2d 268 (2d Dept. 1990)(dismissing declaratory judgment action against issuer of yacht hull and P&I policy).

N.Y. Ins. L. § 3426 prescribes certain procedures for the cancellation and renewal of commercial risk policies, but expressly excludes "policies principally marine insurance." N.Y. Ins. L. § 3426(l)(2). Not all marine insurance is deemed to be commercial risks, however; personal lines marine insurance, such as yacht policies, is subject to different rules. See N.Y. Ins. L. § 3425; "Applicability of N.Y. Ins. L. § 3425(d) & (e) to Marine (Yacht) Insurance", (Op. Gen. Counsel, May 12, 2003).