Federico and Company LLC v. Zurich General Insurance Malaysia Berhad

Background

Federico and Company LLC, doing business as M&W Suppliers (M&W), sued Zurich General Insurance Malaysia Berhad (Zurich) for breach of contract and declaratory judgment. Zurich moved to dismiss for lack of personal jurisdiction. The court considered the complaint’s well-pleaded allegations as true for purposes of the motion and also considered supporting materials submitted by the parties.

Zurich entered an open cargo insurance policy with UGC Asia Sdn Bhn, a Malaysian insurance agency. UGC could accept cargo-insurance applications, determine whether they were covered by Zurich’s policy, and issue insurance certificates. UGC issued six certificates for a shipment of nitrile gloves from Malaysia to the United States. Five certificates listed a New York destination, and one listed a California destination. The certificates identified Zurich as the insurer.

The cargo did not arrive as expected. Two containers arrived in California with empty boxes and trash, while the other thirty containers arrived empty and were seized by U.S. Customs authorities. M&W alleged that it notified Zurich of the loss. Zurich investigated through adjusters but declined to indemnify M&W after a two-year investigation.

Personal Jurisdiction for the New York Certificates

M&W conceded that Zurich was not subject to general personal jurisdiction because Zurich was domiciled in Malaysia. M&W instead relied on New York’s insurance and long-arm statutes, which can allow New York courts to exercise specific personal jurisdiction over an out-of-state defendant for claims connected to the defendant’s activities involving New York.

The court rejected jurisdiction under New York Insurance Law § 1213(b)(1)(A). That provision applies when a foreign insurer issues insurance contracts to New York residents or corporations authorized to do business there. The insurance policy was issued to CRY Respond Sdn Bhd, which M&W conceded was not registered or authorized to do business in New York. The destination company listed on the certificates was also not registered or authorized to do business in New York.

The court nevertheless found jurisdiction under New York’s long-arm statute, which covers a nonresident who transacts business in New York or contracts anywhere to supply goods or services in New York, when the claim arises from those activities. Relying on Second Circuit precedent, the court held that contracting to insure property destined for New York can satisfy the statute even if the property’s presence in New York would have been temporary and even if the property never ultimately arrives there.

The court found a substantial relationship between Zurich’s contracts to insure goods headed to New York and M&W’s claims based on the alleged breach of those same contracts. Zurich had allowed an agent to issue the five New York certificates and retained 85% of the premiums for them. The court concluded that it had a statutory basis to exercise personal jurisdiction over claims related to those certificates and that exercising jurisdiction complied with constitutional due-process requirements.

California Certificate and Jurisdictional Discovery

The court treated the California certificate as a closer question. Because that certificate insured goods destined for California, it did not satisfy the long-arm statute’s provision concerning contracts to supply goods or services in New York. M&W argued, however, that Zurich transacted business in New York through W K Webster, which M&W described as Zurich’s New York agent.

M&W asserted that W K Webster surveyed the cargo, investigated and adjusted the loss, and that its New York branch performed an underwriting function. The court noted that M&W had not mentioned W K Webster in its complaint, that the submitted affidavits did not fully establish W K Webster’s role or agency relationship with Zurich, and that M&W had not provided direct evidence such as a contract or coverage-related correspondence between Zurich and W K Webster.

Zurich disputed M&W’s description of W K Webster’s role. Zurich asserted that W K Webster did not perform underwriting functions, that its California and London offices adjusted claims related to the contracts, and that W K Webster had limited authority and could not settle claims or make coverage decisions for Zurich.

The court found a genuine issue of jurisdictional fact—whether Zurich’s agent conducted substantial activities in New York directly related to the California certificate. It therefore authorized jurisdictional discovery concerning W K Webster’s role. The court deferred the constitutional due-process analysis for the California certificate until after that discovery.

Disposition

The court denied Zurich’s motion to dismiss with respect to the New York certificates and denied the motion without prejudice with respect to the California certificate. The parties were directed to conduct jurisdictional discovery. M&W could serve no more than ten document requests and ten interrogatories related to that discovery, and it could later file an amended complaint containing additional jurisdictional allegations and evidence concerning the California certificate. Zurich could then renew its motion to dismiss as to that certificate. The court stated that the rest of discovery was not stayed.

This was a procedural ruling about whether the court could exercise personal jurisdiction; it did not decide the underlying breach-of-contract or declaratory-judgment claims.