Excess Line Association of New York (ELANY), Appellant,v.Waldorf & Associates, et al., Respondents, et al., Defendants.BriefN.Y.September 7, 2017To be Argued by: MICHAEL D. BROWN (Time Requested: J 5 Minutes) Suffolk County Clerk's Index No. 35107/11 Appellate Division, Second Department Docket No. 2013-06615 C!!nurt nf Appeals of tqe &;tate nf New Jnrk ------~··._ ____ _ EXCESS LINE ASSOCIATION OF NEW YORK (ELANY), Plaintiff-Appellant, -against- WALDORF & ASSOCIATES, WALDORF RISK SOLUTIONS, LLC, WALDORF SPECIAL RISK, LLC, WALDORF SERVICING, LLC, WILLIAM G. WALDORF, STEPHEN M. WALDORF, PAMELA J. WALDORF, CHRISTOPHER V. WALDORF, SR., CHRISTOPHER V. WALDORF, JR. and THE WALDORF FAMILY FOUNDATION, INC., Defendants-Respondents. BRIEF FOR DEFENDANTS-RESPONDENTS WALDORF & ASSOCIATES, WALDORF RISK SOLUTIONS, LLC, WALDORF SPECIAL RISK, LLC, WALDORF SERVICING, LLC, WILLIAM G. WALDORF, STEPHEN M. WALDORF, CHRISTOPHER V. WALDORF, SR., CHRISTOPHER V. WALDORF, JR. and THEW ALDORF FAMILY FOUNDATION, INC. On the Brief MICHAEL D. BROWN MATTHEW BRYANT Date Completed: August 12, 2016 0HRENSTEIN & BROWN, LLP Attorneys for D~fendants-Respondents Waldorf & Associates, Waldorf Risk Solutions, LLC, Waldor:fSpecial Risk, LLC, WaldorfServicing, LLC, William G. Waldorf, Stephen M Waldorf, Christopher V. Waldoif, Sr., Christopher V. Waldorf, Jr. and The Waldorf Family Foundation, Inc. 1305 Franklin A venue, Suite 300 Garden City, New York 11530 Tel.: (516) 873-6334 Fax: (516) 873-8912 TABLE OF CONTENTS TABLE OF AUTHORITIES ..................................................................................... ii COUNTERSTATEMENT OF QUESTIONS INVOLVED ..................................... 1 PRELIMINARY STATEMENT ............................................................................... 2 COUNTERSTATEMENT OF FACTS AND THE NATURE OF THE APPEAL .. 6 A. INSURANCE REGULATION ....................................................................... 6 B. THEW ALDORF DEFENDANTS, THE LLOYD'S PLACEMENTS, AND ELANY'S UNPRECEDENTED COMPLAINT ................................................... 9 C. THE EXCESS LINE ASSOCIATION OF NEW YORK .............................. 12 ARGUMENT ........................................................................................................... 15 POINT I ................................................................................................................... 15 SCOPE ON APPEAL .............................................................................................. 15 POINT II .................................................................................................................. 16 ELANY HAS NO CAPACITY TO ACT INDEPENDENT OF THE DEPARTMENT OR ITS PLAN OF OPERATION ............................................... 16 POINT III ................................................................................................................. 23 THE LEGISLATURE DID NOT INTEND TO CREATE IMPLIED CAUSES OF ACTION OTHER THAN WHERE IT CREATED THEM EXPRESSLY ............ 23 POINT IV ................................................................................................................ 24 ELANY DOES NOT MEET THE TEST FOR IMPLYING PRIVATE STATUTORY CAUSES OF ACTION ................................................................... 24 POINTV .................................................................................................................. 27 THE SUPERINTENDENT'S SETTLEMENT WITH RESPONDENTS IS A RELEASE AGAINST ELANY'S CLAIMS BASED ON A FAILURE TO PAY STAMPING FEES AND FOR DENYING ELANY THE RIGHT TO EXAMINE RECORDS ............................................................................................................... 27 CONCLUSION ....................................................................................................... 28 TABLE OF AUTHORITIES Cases Burns Jackson Miller Summit & Spitzer v. Linder, 59 N.Y.2d 314 (1983) .......................................................................................... 24 Certain Underwriters at Lloyd's, London v. Plasmanet Inc., No. 01 CIV. 6023 (LLS), 2002 WL 1788020 (S.D.N.Y. Aug. 1, 2002) ............. 23 Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 N.Y.2d 148 (1994) .......................................................................................... 16 Excess Line Association of New York v. Curiale, 209 A.D.2d 365 (1st Dep't 1994) .......................................................................... 8 Excess Line Association of New Yorkv. Curiale, No. 134460/93 (Sup. Ct. Mar. 25, 1994) .............................................. 8, App'x A Graziano v. County of Albany, 3 N.Y.3d (2004) ................................................................................................... 21 Med. Malpractice Ins. Ass'n v. Superintendent of Ins. of State of N.Y., 72 N.Y.2d 753,533 N.E.2d 1030 (1988) ............................................................. 20 Parochial Bus Sys. v. Board ofEduc. of City of N.Y., 60 N.Y.2d 539 (1983) .......................................................................................... 15 Sheehy v. Big Flats Community Day, Inc., 73 N.Y.2d 629 (1989) .......................................................................................... 24 Varela v. Investors Ins. Holding Corp., 81 N.Y.2d 958 (1993) .......................................................................................... 23 Statutes CPLR § 213 ............................................................................................................. 28 McKinney's Statutes§ 73 ....................................................................................... 26 N.Y. Ins. Law: § 109 ....................................................................................... 8, 9, 15, 17, 18, 19, 23 § 301 ............................................................................................................ 15, 17,18 § 1101 .......................................................................................................... 2, 6, 7, 10 § 1102 ........................................................................................................................ 6 § 2105 .................................................................................................................. 8, 18 11 §2110 ........................................................................................................................ 8 §2117 ...................................................................................................................... 18 § 2118 ................................................................................................................... ibid. § 2123 ...................................................................................................... 9, 12, 15, 17 § 2130 ................................................................................................................... ibid. § 2319 ............................................................................................................ 9' 1 7' 23 § 4226 ............................................................................................................ 9, 15,23 § 7708 ............................................................................................................ 9, 17,23 Workers Comp. L. § 84 ............................................................................................. 9 Workers Comp. L. § 93 ............................................................................................. 9 Regulations 11 N.Y.C.R.R Part 27 (Reg 41) ............................................................................ ibid. 111 COUNTERSTATEMENT OF QUESTIONS INVOLVED May the Excess Line Association of New York ("ELANY") a legislatively created not-for-profit trade advisory association created under the supervision of the Superintendent of the Department of Insurance (now the Department of Financial Services and herein collectively, the "Department") act independently of the Department to enforce provisions of the Insurance Law? The courts below correctly held it may not. May ELANY act outside its current Plan of Operation established and approved by the Department? The Courts below correctly held it may not. Does ELANY have implied capacity or rights under Insurance Law§ 2130 to oversee member conduct and to sue them to compel compliance? The courts below correctly held it does not. Does the Settlement between Respondents and the Department bar further enforcement action against the Respondent and bar ELANY' s demand for a 20 year examination and accounting to recover stamping fees that it never earned or invoices to the Respondents? The courts below did not address this question. PRELIMINARY STATEMENT Respondents-Defendants ("Waldorfs") are a third-generation family-owned and operated insurance brokerage and consortium, which for many years had operated an "independent placement" insurance program for non-profit religious and educational entities placing insurance directly with syndicates at Lloyd's of London pursuant to Insurance Law § 1101(b)(2)(E). In 2010, the Waldorfs voluntarily subjected this program to a Department review, which determined the independent program should have been placed as an excess lines program. Following the Department investigation, the Waldorfs entered into and complied with a binding Settlement pursuant to which they agreed to conduct their Lloyd's placements pursuant to the excess line laws as of 2010, paid substantial back premium taxes and penalties. In exchange, the Department deemed them to be in full compliance with Insurance Law§ 2118 and Regulation 41 (11 N.Y.C.R.R. Part 27). (R. at 142-143.) The Settlement did not include any obligation to submit any documents retroactively to ELANY or to remit stamping fees associated with the back-taxes. Apparently dissatisfied with the Department's oversight, ELANY instituted the instant action for common law and statutory claims all premised on alleged violations of the Insurance Law seeking, inter alia, punitive and treble damages, and to enforce its own purported right to conduct an examination and accounting 2 independent of the Department going back to 1989 to discover and assess stamping fees. The Second Department affirmed the Supreme Court, Suffolk County's dismissal for lack of capacity, standing, and private Insurance Law claims, as well for failure to state a claim for its common law and General Business statutory claims arising from alleged violations of the Insurance Law. The basic question on appeal is whether the Excess Line Association of New York ("ELANY") may act independent of Departmental supervision and ultra vires to the statutorily-mandated Plan of Operation established and approved for it. The Legislature created ELANY as a non-profit trade advisory association expressly, and as relevant here, to facilitate and encourage member compliance with the excess lines laws by providing various clerical and statistical functions to be reported to the Department and to provide members with the services necessary to do so. ELANY now disregards its founding statute and Plan of Operation and argues the implied right to sue to enforce provisions of the Insurance Law independent of the Department - - and in derogation of a Settlement Respondents made with the Department. ELANY itself points out that as recently as 2013 the Legislature extended its statutory life - - making no changes in the statute (Insurance Law§ 2130) save for the expiration date. What ELANY misses is that prior suing the Waldorfs for Insurance Law violations, ELANY had never sued a single member to collect stamping fees. Yet the Legislature extended ELANY's 3 existence as is and extended its life, not to sue members or enforce the Insurance Law, but to continue its role as an assistant to the Department as it has done since 1989. ELANY likewise incorrectly argues that the lower courts erred because its charter includes the "oversight" of its members. (App. Br. At 17 ("ELANY is seeking to enforce its statutory obligations to oversee the conduct of its members")). This is false. Its founding statute does not vest it with any oversight authority let alone enforcement. Instead, the Legislature mandates, in addition to serving its members, that ELANY act only pursuant to a Plan of Operation established and approved by the Department. By the plain language of the statute, ELANY may take no ultra vires action outside of its current Plan of Operation. That document provides ELANY an express remedy for members that do not pay stamping fees: report such members to the Department. (R. 55.) Likewise, the Superintendent has provided an express remedy for ELANY to deal with members who violate the excess line laws: report them. Reg 41 §27.7(a)(2) (mandating ELANY report violations of any part of Reg 41 or Ins. L. § 2118) . Finally, ELANY ask this Court to allow it to rewrite history. ELANY brought five causes of action against the Waldorfs: Consumer Protection, Donnelly Act, common law negligence and fraud claims It tacitly concedes this was improper while pretending that this action was simply about enforcing its implied 4 right to collect fees to compel compliance with non-existent procedures in the Plan of Operation. Contrary to ELANY' s present contrition, its Complaint in fact sought punitive and treble damages. (R. at 101.) This cannot be construed as an action simply to enforce collection procedures and rights that do not exist in the Plan of Operation. This case is not merely about collecting fees due, but first compelling and examination of a license independent of and contrary to the Department. This was an action, by definition, to assume for itself the enforcement and regulatory powers belonging exclusively to the Department, it was brought to punish a Department licensee for what ELANY believed was bad behavior and to remedy its perceived Departmental oversight by not including stamping fees in its Settlement. ELANY now asks this Court to allow it, not just to collect fees due, but to commence a legal action to compel the Respondents to comply with a proposed 20 year examination to assess stamping fees independently of the Department going back from 1989. On its face, the Department's Settlement released the Respondents from any such obligation from 1995-2009 and any claims arising before that are now time-barred. Even if, under a future Plan of Operation, the Department allowed it to maintain collection actions against membership, this Complaint must still be dismissed because ELANY in fact seeks "constructive stamping fees". Under its current Plan of Operation, a member must submit documents for stamping. 5 ELANY then must actually stamp the documents and invoice the member for payment and report delinquencies to the Department. That didn't happen here: the Waldorfs originally placed the policies directly with Lloyd's of London and submitted nothing to ELANY because they believed the program did not require such pursuant to Insurance Law § 1101(b)(2)(E). After submitting requested documents to the Department for review, Respondents paid back taxes and a penalty directly to the Department in exchange for a release. ELANY could have commenced an Article 78 proceeding against the Department for not including back stamping fees in the Waldorf settlement. It did not. Six years later it seeks to justify an admittedly improper action for punitive and treble damages as one to collect fees that it never earned and never invoiced under collection rights that do not exist in the Plan of Operation or the statute. The lower courts must be now affirmed. COUNTERSTATEMENT OF FACTS AND THE NATURE OF THE APPEAL A. INSURANCE REGULATION Under the New York Insurance Law, all insurance companies "doing an insurance business" in New York must be licensed. See N.Y. Insurance Law ("Ins. L.") § 1101, 1102, et seq. Likewise, a broker receiving a commission for placing insurance for a New York insured must be licensed. Ins. L. § 2201, et seq. Insureds may . also procure "unauthorized" insurance from qualified unauthorized 6 insurers through certain insurance brokers licensed as "excess line brokers." Ins. L. § 2118; 11 N.Y.C.R.R. Part 27 ("Reg. 41")1 Notwithstanding the above, all New York residents have a right, through a "direct placement" under New York's "mail-in" statute to "principally" negotiate and purchase insurance coverage without the state from "unauthorized" insurers, lawfully avoiding various state laws and regulations. Ins. L. § 1101 (b )(2)(E), the statute pursuant to which the Waldorfs conducted their Program prior to 2010. The Legislature has created a regulatory scheme for implementing the 1 Thus, following licensing by the Superintendent, an excess line broker may place excess line insurance if it: (1) diligently searches unsuccessfully the authorized (licensed) domestic insurance market for similar coverage, id. § 2118, Reg. 41 § 27.3(a); (2) submits affidavits to ELANY affirming that the insured was advised that the excess line insurer is not regulated by New York and has no access to the New York guarantee fund in case of insolvency, id. § 2118, Reg. 41 § 27.5(e); (3) allocate premium taxes to New York risks, submit a premium tax statement to the Superintendent, and pay premium taxes in the amount of 3.6% of the gross premiums to the Superintendent, id. § 2118, Reg. 41 §§ 27.8, 27.9; (4) present all documents required under Insurance Law§ 2118 and Regulation 41 to ELANY for "stamping" within 45 days of the placement but prior to delivery to the insured to secure ELANY's form-stamp disclosure that the excess line coverage is not subject to state regulation or entitled to guaranty fund coverage, Reg. 41 §§ 27.6, 27.17, 27.18; ( 5) maintain records for excess line placements required under § 2118 for no less than five years after policy expiration and make such records available to the Department and ELANY, § 2118(c)(2), Reg. 41 § 27.21; and ( 6) may not advertise or publicly announce an unauthorized market pursuant to § 2122(a), Reg. 41 § 27.11(b). 7 Insurance Law which vests in the Superintendent, both the sole authority to enact regulations explicating various requirements for its licensees to follow, together with the sole and exclusive power of enforcement of the Insurance Laws and regulations. Ins. L §§ 109 (Penalties civil actions), 301 (Regulations by Superintendent); see also ELANY v. Curiale, 209 A.D.2d 365 (1st Dep't 1994) (affirming for the reasons stated below in ELANY v. Curiale, No. 134460/93 (Sup. Ct. Mar. 25, 1994) (a copy of which is attached hereto as Appendix A). Indeed, the Legislature provided that, with regard to insurance brokers the Superintendent: "may refuse to renew, revoke, or may suspend for a period the Superintendent determines the license of any insurance producer ... if, after notice and a hearing, the Superintendent determines that the licensee ... has: (1) violated any insurance laws, or violated any regulation, subpoena or order of the superintendent or of another state's insurance commissioner, or has violated any law in the course of his or her dealings in such capacity; *** (4)(A) used fraudulent, coercive or dishonest practices; *** (4)(C) demonstrated untrustworthiness; or *** (8) admitted or been found to have committed any insurance unfair trade practice or fraud .... Ins. L. § 2110(a). In addition, with specific reference to excess line brokers, the Legislature gave the power to "suspend or revoke" such license as the Superintendent believes in "his or her judgment ... will best promote the interests of the people of this state." Ins. L. § 2105(a). Further, if the threat of license suspension or revocation is insufficient to obtain a licensee's "consensual" agreement to a remedy "suggested" by the Superintendent, the Legislature empowered the Superintendent to Impose various statutorily set monetary 8 penalties, which, if not paid, he or she may enforce by an action in court as expressly authorized by the Legislature. Ins. L. § 1 09( c) and (d). As discussed, infra, because of the legislative scheme placing enforcement of the Insurance Law and Regulations with the Superintendent, violation of the Insurance Law does not generally give rise to a private right of action. Accordingly, when the Legislature intends for there to be private rights of action for such violations, it has done so expressly. For example, the Legislature provided by statute: Any agent or representative of an insurer or health maintenance organization, insurance broker, person who has received a grant from and has been certified by the health benefit exchange established pursuant to section 1311 ofthe affordable care act, 42 U.S.C. § 18031, to act as a navigator . . . shall violate any of the provisions of this section and shall knowingly receive any compensation or commission for the solicitation, sale or negotiation of any insurance policy, health maintenance organization or annuity contract induced by a violation of this section shall also be liable for a civil penalty in the amount received by such violator as compensation or commission, which penalty may be sued for and recovered for his, her, or its own use and benefit by any person induced to purchase an insurance policy[.] Ins. § 2123 (emphasis added); see also Id. §§ 4226(d), 2319(c)(2), 7708; and Workers' Compensation Law§§ 84, 93, and 109-a. B. THE WALDORF DEFENDANTS, THE LLOYD'S PLACEMENTS, AND ELANY'S UNPRECEDENTED COMPLAINT Lloyd's of London ("Lloyd's") is a historic world leader in the insurance industry and is well known to the Department and the State Legislature, which by 9 statute in 1940 "grandfathered in" extant Lloyd's syndicates, qualified others as reciprocal insurers under Article 61 of the Insurance Law, and required new Lloyd's syndicates to insure New York insureds either through a "direct placement," see Ins. L. § 1101 (b )(2)(E), or pursuant to its excess line laws, see Ins. L. § 6116(a)-(c). The decision to qualify unauthorized insurers as permitted excess line insurers is exclusively the province of the Superintendent. See, e.g., Ins. L. § 2130(h). The Waldorfs have operated for generations vanous commonly-owned licensed and unlicensed entities engaged in the businesses of insurance consulting, broking, and servicing and specialize in placing coverage for religiously oriented not-for-profit entities. (R. at 137.) For reasons neither pertinent here nor on the Record, in 2010 the W aldorfs sought the Department's review and approval for their Lloyd's placement program and provided all the documentation requested. (R. at 138.) Following examination of those records, the Department determined that certain of these placements should be properly classified as excess line placements. (!d.) While the Waldorfs believed the program was proper they elected not to contest the Department's conclusion and agreed to operate the Lloyd's program as an excess line program commencing in 2010 and paid stipulated amounts for premium taxes, penalties and interest. (R. 142-143.) In exchange, the Department recognized W aldorfs good-faith belief that the 10 placements had been made directly, (R. 139), agreed to forego any disciplinary action or fines, and deemed them to be in full compliance with Reg 41 and Insurance Law § 2118: Full compliance with this agreement [which is not disputed] will also be accepted by the Department in lieu of any disciplinary action that could be taken by the Department against the W aldorfs or any sublicensee thereof in connection with the failure to pay premium taxes or otherwise comply with the provisions of Section 2118 of the Insurance Law and Department Regulation 41 (11 NYCRR Part 27) on the Lloyd's Placements from 1995 through 2009. (R. 142-1473 (emphasis added)). Notwithstanding the Settlement with the Superintendent, ELANY subsequently issued a demand upon the W aldorfs for an examination of its records and an "accounting" dating back to 1989, (R. 139), well beyond both the five (5) year period brokers are required to retain records, Ins. L. § 2118( c )(2); Reg. 41 § 27.21; and the applicable six (6) year statute of limitations, (compare R. 91 (purporting to allege fraud damages commencing in 1989), with R. 353 (arguing fraud damages would go as far back as records would allow)). Notwithstanding what was required under the Settlement, the Waldorfs voluntarily provided ELANY with more financial information that they gave to the Superintendent. (R. 139.) ELANY refused the proffer, and rather than reporting to the Superintendent, commenced this action setting forth its novel view that it has broad enforcement authority independent of the Superintendent, contrary to its own Plan of Operation, 11 to sue Department licensees in court, in its own name, for violations of laws regulated only by the Superintendent. C. THE EXCESS LINE ASSOCIATION OF NEW YORK The Legislature created ELANY to assist the Department as an industry advisory association under the supervision of the Superintendent, see Ins. L. § 2130(a), L. 1988, c. 630 (referring to "Excess Line Advisory Organization"), and authorized ELANY to perform such ministerial tasks as receiving and recording various insurance documents, reporting to the Superintendent and stamping declaration pages, which excess line brokers are statutorily required to submit to ELANY, see Ins. L. § 2118(b). As the First Department upheld in ELANY v. Curiale: " ... ELANY's principal role is to act as a record keeper for excess line transactions." ELANY v. Curiale, App'x A, at 2-3. ELANY has no independent authority to determine which excess line insurers are eligible and it is explicitly constrained to report to the Superintendent when it believes a non-licensed insurer previously approved for excess line placements does not meet the Superintendent's criteria for eligibility. Ins. L § 2130(a)(2). Notably, the Legislature created no private right of action for anyone, including ELANY, under§§ 2118 or 2130, but only authorized private rights of action in specific other sections areas of the Insurance Law including against agents or brokers hy insureds aggrieved by certain specific conduct. !d. §2123( d). 12 Additionally, the Legislature requires ELANY to act through a Board of Directors and to submit to the Superintendent a Plan of Operation for approval. /d. 2130(a)(b),(c). While the Legislature provided that, subject to the Superintendent's approval, ELANY shall receive a stamping fee for "each declarations page, cover note or other premium bearing document submitted" to ELANY, it did not require the payment of a fee with regard to documents that were not "submitted" to ELANY, such as those excused by the Superintendent. /d. § 2130(f) (emphasis added). Indeed, the sole approved remedy for member delinquencies in paying the stamping fees is for ELANY to report the delinquent member to the Superintendent. (R. 55.) While ELANY has the right to inspect documents required by § 2118 and Regulation 41, the Legislature gave it no authority to enforce compliance with the Insurance Laws or Regulations other than by reporting those violations to the Superintendent. Indeed, pursuant to the regulatory scheme for enforcing the Insurance Laws and Regulations, ELANY is required to report bi-monthly to the Superintendent, "identifying excess line brokers that fail to comply with any of the provisions of this Part or section 2118 of the Insurance Law[.]" Reg. 41 § 27.7(a)(2). Further, no authority is granted to ELANY to subpoena any documents or place its members under oath. By contrast, when the Department audits ELANY, the Legislature explicitly authorized the Department's 13 appointed examiner to administer oaths to ELANY and its members. Compare Ins. L. § 2118(c)(2), with§ 2130(d)(1). ELANY' s powers are enumerated and include neither express enforcement powers nor the capacity to sue in court. Rather, ELANY is only empowered to: ( 1) receive and record all excess line insurance documents which excess line brokers are required to file with ELANY under[§ 2118]; (2) notify the superintendent or his designee prior to stamping submitted insurance documents ... if ELANY believes that the unauthorized insurer does not meet the standards of eligibility imposed by the superintendent pursuant to § 2118 together with any rules and regulations promulgated pursuant to said section; (3) stamp all excess line insurance documents which excess line brokers are required to file with ELANY; (4) prepare [premium data] reports to be provided to the superintendent; ( 5) prepare and deliver to each licensee and to the superintendent annually the reports of excess line business; ( 6) deliver to each licensee standard forms for affidavits required under § 2118; (7) employ and retain such persons as are necessary to carry out the duties ofELANY set forth in Ins. Law§ 2130; (8) borrow money as necessary to effect the purposes ofELANY; (9) enter contracts as necessary to effect the purposes ofELANY; (10) perform such other acts as will facilitate and encourage compliance by its members with the excess line law of this state and rules promulgated thereunder; and ( 11) provide such other services to its members as are incidental or related to the purposes of ELANY. Ins. L. § 2130(a). 14 Noticeably absent is the grant of authority to commence suit, or supervise or oversee Department licenses. These are rights only given to the Superintendent and to insureds in their own right to address certain specific conduct of brokers and agents. Ins. L. §§ 109(d); 301; 2123(d), 4226(d). ARGUMENT POINT I SCOPE ON APPEAL The principal issue on this appeal is whether ELANY has implied capacity and implied rights as against its membership to compel compliance with implied collection claims for constructive stamping fees under its current Plan of Operation. Defendants' motion was not so limited and included CPLR § 3211(a)(1), documentary evidence, (3) capacity, (5) release and statute of limitations, and (7) failure to state a claim, including a lack of standing. (R. at 30.) The Courts below did not reach what impact the Department's Settlement had on ELANY' s purported claims. It is well settled that on an appeal from a final order "brings up for review any determination of the court below 'which was adverse to respondent."' Parochial Bus Sys. v. Board of Educ. of City of N.Y., 60 N.Y.2d 539, 545 (1983) (citations omitted). To the extent the court below denied by its silence that part of the motion based on documentary evidence, statute of limitations, lack of standing, and release, the W aldorfs are entitled to raise the error now.Id. 15 POINT II ELANY HAS NO CAP A CITY TO ACT INDEPENDENT OF THE DEPARTMENT OR ITS PLAN OF OPERATION In dismissing the Complaint, the lower courts noted the holding of the Court of Appeals that artificial entities created by statute, such as ELANY, '" ... have neither an inherent nor a common law right to sue. The right of such entities to sue, if it exists at all, must be derived from the relevant enabling legislation or some other concrete statutory predicate."' (R. 12, 35 (citing to Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 N.Y.2d 148, 155-156 (1994).) As this Court noted in Community Bd. 7, this: ... principle is a well known one, originating in the more general canon that a creature of the State ... has no power other than that given it by the Legislature, either explicitly or by necessary implication (citation omitted). Community Bd. 7, 84 N.Y.2d at 156 (emphasis added). In that case, this Court concluded that the petitioner community board lacked "capacity" to bring suit to seek production of documents from the City Planning Department in connection with its "statutorily mandated responsibility" to study land use proposals because its enabling legislation neither granted such an express right, nor did it by "'necessary implication"' provide such capacity since there were "clear indications" that no authority to sue was intended by the Legislature. !d. at 157.2 2 Such clear indications that no such capacity was intended to be granted are present here, including: a comprehensive legislative scheme giving the Superintendent the sole responsibility 16 ELANY's principal arguments on this appeal are: (1) that the capacity to sue its members is necessarily implied from, and within, the functional responsibility of a hodge-podge of language cobbled from § 2130, (see, e.g., App. Br. at 16 ("ELANY has been given the responsibility to review excess line policies, to assess the stability of unauthorized insurers, and to "facilitate and encourage compliance" with the excess line law by its members, as well as compliance with ELANY's Plan of Operation")); and (2) because ELANY's stamping fees are the only source of its funding and never payable to the Superintendent. Both arguments fail. What is missing is that ELANY may only act in accordance with its current Plan of Operation under the supervision of the Department. N.Y. Ins. Law § 2130(a). Its current Plan of Operation mandates that it report to the Department member stamping fee delinquencies. (R. 55.) Outside of reporting delinquencies to the Department, neither the Plan of Operation that binds ELANY nor the statute that created it affords it any right of independent recovery. Even if such rights could be implied from § 2130(f), the Department would first have to establish for regulating and enforcing the Insurance Laws, including those dealing with excess line regulation, Ins. L §§ 109, 301; the statutory command that ELANY is supervised by the Department, Id § 2130(a); Reg. 41's mandate to and must report violations to the Superintendent; Reg. 41 § 27(a)(2); the Legislature's express grant of capacity to sue in other areas of the law when it so intended Ins. Law§§ 2123(d), 2319(c)(2), and 7708; the legislature's express grant of authority to sue to other legislatively created entities, (see R. 368); and as the lower court noted, it is hardly likely the Legislature intended to allow one group of competitors to sue another competitor regarding areas over which the Superintendent was the only statutorily created person authorized to go to court, (R. 38). 17 procedures and approve them in the Plan of Operation. The mere fact that ELANY has never needed to sue its members for fees, and only discovered the necessity of this need until its action for punitive and treble damages was dismissed, demonstrates the powers are neither necessary nor implied. ELANY trumpets a 2013 amendment to§ 2130 (L. 1988, ch. 630, Sec. 5, as amended by L. 2013, ch. 20,§ 1), as apparent proof that the Legislature implicitly intended ELANY to have regulatory enforcement powers and the capacity to sue in court. (App. Br. at 17). Appellant fails to address the inconvenient facts that the 2013 change to § 2130 was only to extend ELANY's "sunset" provision until 2019, and ignores its silence on the issue of capacity - notwithstanding the Waldorfs' then outstanding court challenge to ELANY's capacity. (R.30.) which had been pending since the motion was filed in February 2012. Indeed, the 2013 Amendment to § 2130 did not even make ELANY a permanent "advisory association." ELANY's argument that the collection of fees falls outside of the Superintendent's enforcement and regulatory powers likewise fails. Here, the "zone of interest to be protected" included only New York insureds purchasing excess line insurance and the State's fiscal interests. (R. at 35 (citing legislative history).) In enacting Insurance Law §§ 109 (Penalties; civil actions), 301 (Regulations by Superintendent), 2105 (Excess line brokers; licensing), 2117 18 (Penalties for violations), 2118 (Excess line brokers; duties), and 2130 (Excess line association), the Legislature gave the "functional responsibility" for protecting those interests only to the Superintendent. First, § 2130(g) includes a savings' clause that nothing contained therein is intended to diminish the powers of the Superintendent. Second, ELANY is expressly seeking an independent right to sue the Superintendent's licensees to compel compliance with unapproved procedures when the regulation and licensing of said licensees is exclusively vested in the Superintendent. In no manner can it be said that such implied rights do not interfere with the Superintendent's authority. Third, § 109, by design, applies to each section of Chapter 28, that is the entirety of the Insurance Law. ELANY' s argument simply ignores that the section vests exclusive authority and functional responsibility to commence civil action in the Superintendent. In investigating the W aldorfs, the Superintendent chose to settle, not litigate, and declined to seek recovery or demand payment of any erstwhile stamping fees. ELANY incorrectly argues that the Legislature could not have intended for it to lose any stamping fees, its sole funding source, and must have intended to provide the right to collect them independently from the Superintendent because it was intended to be a self-funding organization. This Court has held that as long as the regulatory authority does not act irrationally or capriciously in declining to 19 recover revenue for statutorily created associations, such as ELANY, may even be forced to operate at a loss and may imply no property rights beyond their enabling statute. Med. Malpractice Ins. Ass'n v. Superintendent of Ins. of State of N.Y., 72 N.Y.2d 753, 766, 533 N.E.2d 1030, 1037 (1988) (rejecting Article 78 challenge and due process argument of a statutorily created unincorporated non-profit association and holding even if the Association "will operate at a continued loss, such a loss is not confiscatory vis-a-vis MMIA"). ELANY does not contend that, absent the fees associated with the Respondents' Lloyd's placements, it may actually suffer a loss or face a deficit. The Record demonstrates ELANY' S fiscal soundness insofar as its Departmentally approved stamping fee has declined since 2004 and not been raised once. (R. 57.) ELANY's sole remedy was to bring an Article 78 challenge to the Department's Settlement that did not provide it with any recovery. Finally, Appellant conflates Article 78 capacity with its newly found enforcement capacity and argues that because other statutorily created entities have been found to have an implied capacity to sue, this Court should imbue it with implied powers. Both arguments are easily answered. ELANY cannot rely on the implied capacity of the New York Property Insurance Underwriting Association ("NYPIUA"). That association is an insurer and, as such, must necessarily have the 20 capacity to sue for such things as denying coverage for a particular claim, rescinding a policy, or collecting reinsurance. Second, this case has never been about denying ELANY any capacity at all. The limited issue is whether ELANY can act independently of the Superintendent and commence enforcement proceedings as a regulator - - in competition with the Superintendent who decided not to require in its settlement with Respondents the obligation to pay stamping fees for policies written during the period 1995-2009.3 As below, Respondents expressly concede ELANY has Article 78 capacity and failed to exercise that capacity here. (R. 348-349 (counsel for ELANY noting the concession at argument).) Likewise, among ELANY's express rights are the right to contract, to borrow money, and to employ necessary people. In the course of exercising those express duties, it cannot be gainsaid that ELANY may have to resort to civil courts has been vested with the functional responsibility to do so. Appellant correctly states that the lack of capacity is "not an all or nothing" proposition, (App. Br. At 18 citing Graziano v. County of Albany, 3 N.Y.3d (2004).) Respondents only argue no capacity exists to sue to enforce the Insurance laws. Should it have a dispute with its landlord or a vendor, such capacity would be properly implied as it would not interfere with the Superintendent's enforcement of the Insurance Laws. 3 Respondents started filing documents and paying stamping fees for the 2010 year, which has never been dispute throughout these appeals. (R. 233.) 21 ELANY m fact has exercised its limited capacity to challenge the Superintendent m the past. For example, in ELANY v. Curiale, the First Department affirmed the rejection of ELANY's challenge to reporting requirements that the Department imposed upon it while adding § 27.7(a)(2) to Reg 41, which simply required ELANY to report to the Superintendent violations of Reg. 41 or § 2118 by excess line brokers. ELANY complained that contrary to the Legislature's intent, the new regulatory requirement would "transform it into 'an enforcement arm .... " (App'x A at 6.) The First Department rejected ELANY's argument that it was intended to be a "self-governing, self-policing organization" noting the "Legislature declared ELANY to be only an 'advisory' association whose intended function was 'to facilitate and encourage compliance' with 'the rules and regulations of the superintendent."' (!d.) ELANY never explains from whence it derived its newly discovered enforcement powers that it previously resisted. The crux of that challenge, that ELANY should be deemed to be independent of the Department, is essentially the same it now pursues some 20 years later, albeit to the opposite end. In that time period, no substantive changes to the statutory structure have been made. The lower courts must be affirmed. 22 POINT III THE LEGISLATURE DID NOT INTEND TO CREATE IMPLIED CAUSES OF ACTION OTHER THAN WHERE IT CREATED THEM EXPRESSLY It is well settled that the Legislature expresses its intent to deny private rights when it creates enforcement power in one part of a statute but not in another. Varela v. Investors Ins. Holding Corp., 81 N.Y.2d 958, 961 (1993). Here, the Legislature gave that authority to sue in court to the Superintendent, § 109, as well as to specified individuals aggrieved by certain specific types of conduct in Insurance Law §§ 4226(d), 2319(c)(2), and 7708, but did not do so in creating ELANY in 1988 or extending their statutory existence in 2013 or in repealing the erstwhile bonding requirement of excess lines brokers in 2001. Cf. also Certain Underwriters at Lloyd's, London v. Plasmanet Inc., No. 01 CIV. 6023 (LLS), 2002 WL 1788020 at *3 (S.D.N.Y. Aug. 1, 2002) ("The legislature, when it repealed a requirement that excess line brokers post a bond, found there was no need to supplement the enforcement mechanism provided by the Insurance Department") citing New York State Senate, Memorandum in Support, S4372B, 224th Sess., at 1321 (2001) ("the historical infrequency of the bond being drawn down and threat of regulatory action by the New York Insurance Department vis-a-vis any violation of the Insurance Law with disciplinary tools such as fines and licensure revocation have more than sufficient deterrence capabilities, thereby rendering this 23 requirement vestigial"). Accordingly, any such implied claims must now be rejected. POINT IV ELANY DOES NOT MEET THE TEST FOR IMPLYING PRIVATE STATUTORY CAUSES OF ACTION In Burns Jackson Miller Summit & Spitzer v. Linder, 59 N.Y.2d 314, 325 (1983), and more recently in Sheehy v. Big Flats Community Day, Inc., 73 N.Y.2d 629, 633 (1989), the Court of Appeals described the three-part test to establish an implied private right of action: (i) whether the plaintiff is "one for whose especial benefit the statute was enacted"; (ii) whether a private right of action is consistent with the objective of the statute and (iii) "[m]ost importantly," the consistency of inferring a private right of action with the purposes of the legislative scheme. ELANY can meet none of these requirements. First, neither ELANY's "involvement" in parts of a statutory scheme nor its ancillary financial benefit vis-a-vis stamping fees render it a member of the class intended to be benefitted by the enactment of Insurance Law § 2130. The Legislature memorialized who was in that class. As noted by the Supreme Court below, (R. 37), the legislative history is clear that ELANY is not a member of the class for whose "especial benefit" either § 2130 or § 2118 were enacted: The legislature hereby finds .... [that] this act [creating ELANY] shall be liberally construed and applied to promote its underlying purposes which include: protecting persons seeking insurance in this state; 24 permitting excess line insurance to be placed with reputable and financially sound unauthorized insurers; and protecting revenues of this state. Ins. L. § 2130, L. 1988, c.630 (emphasis added). [E]ffective insurance regulation must be to allow citizens of this state reasonable access to financially sound and reliable insurers .... The legislature hereby declares that certain of these insurers should be allowed to provide coverage to citizens of this state, either as licensed insurers or as eligible excess line insurers[.] Ins. L. § 2118, L. 1993, c.663 § 1 (emphasis added).· ELANY' s argument that it has a direct actionable right as a protected class member would effectively grant it an excess line racket well beyond the Legislature's intention. Imbuing ELANY now with private claims is inconsistent with the express statutory structure and enforcement scheme. ELANY' s argument to the contrary is circular: it is the intended beneficiary of the stamping fee, which it needs to collect to facilitate compliance. ELANY' s ultimate conclusion asks this Court to rewrite the enforcement scheme and create tailor-made private collection rights to sue the Superintendent's licensees ultra vires to its own Plan of Operation and notwithstanding the Superintendent's exclusive enforcement and civil action rights under the statutory structure. Notwithstanding ELANY's argument to the contrary, (App. Br. At 19), the Record reveals why the learned Justice below held it was unlikely the Legislature intended a group of competitors to use ELANY as a vehicle to sue one of their 25 competitors: ELANY's Board of Directors is comprised of Respondents' competitors and some of the largest insurance brokers in the world. (R. 49.) At the time this action was filed, admittedly being approved by its Board of Directors, that body included representatives from A.J. Gallagher, Wells Fargo Insurance Services, and Willis HRH North America. (!d.) To allow ELANY such a right of action would undermine the authority of the Superintendent to negotiate settlements with licensees alleged to have violated the Insurance Laws and the regulatory scheme set out by the Legislature. Here, ELANY seeks to transform itself from a "record keeper," that runs educational programs, and facilitator, creating forms to be used by excess line brokers, into an independent regulator - and asks this Court, not the Legislature, to make that transformation contrary to the canons of statutory construction and the laws of the State. See McKinney's Statutes§ 73 ("Courts ... do not sit in review of the discretion of the Legislature."). 26 POINTV THE SUPERINTENDENT'S SETTLEMENT WITH RESPONDENTS IS A RELEASE AGAINST ELANY'S CLAIMS BASED ON A FAILURE TO PAY STAMPING FEES AND FOR DENYING ELANY THE RIGHT TO EXAMINE RECORDS After fully investigating the Waldorf direct placement program, the Superintendent agreed that compliance with the Settlement (i.e., timely payment of the stipulated premium taxes, interest and penalties together with timely payment of premium taxes for 2010, on March 15, 2011, and in the future) will be accepted by the Department: in full settlement of the Waldorfs' premium tax liability for all Lloyd's Placements from 1995-2009 .... Full compliance with this agreement will also be accepted by the Department in lieu of any disciplinary action that could be taken by the Department against the W aldorfs or any sublicensee thereof in connection with the failure to pay premium taxes or otherwise comply with the provisions of Section 2118 of the Insurance Law and Department Regulation 41 (11 N.Y.C.R.R. Part 27) on the Lloyd's Placements from 1995 through 2009. /d. (emphasis added). As noted by Appellants, Ins. Law § 2118(b)(6) makes it "unlawful" for an excess line broker to deliver a policy which has not been stamped by ELANY. (App. Br. At 8.) ELANY ignores that the Settlement releases those "violations" by Respondents. So too, Insurance Law § 2118( c) requires excess line brokers to submit various documents to ELANY, and Section 2118(c)(2) requires the above- described documents to be open to ELANY for inspection. Once received, § 27 2130(f) allows ELANY to impose a stamping fee, in prescribed amounts, for "each declarations page, cover note or other premium bearing documented submitted to the association [ELANY]." !d. (emphasis added). ELANY ignore ·that, for the periods of 1995 - 2009, the Department has released Respondents from having to "submit" any of the documents to ELANY that are the subject of the stamping fee or allow ELANY to inspect documents to impose stamping fees. ELANY now asks this Court to compel the Respondents' comply with its demand for documents de novo going back to 1989. All claims prior to 1995, however, are time-barred under any measure. Ins. L. § 2118(c)(2); see also Reg. 41 § 27.21; see also CPLR § 213. CONCLUSION Defendants-Respondents therefore respectfully request the Order appealed from be affirmed. Dated: Garden City, New York August 26, 20 16 Respectfully submitted, Michael D. rown, Esq. Matthew Bryant, Esq. 1305 Franklin Avenue, Suite 300 Garden City, New York 11530 Tele No.: (516) 873-6334 Fax No.: (516) 873-8912 Our file No.: 3807-001 28 Certificate of Compliance Pursuant to Part 500.13(c)(l) of the Rules ofPractice of the Court of Appeals, State of New York The foregoing brief was prepared on a computer. A proportionally spaced typeface was used, as follows: Name of typeface: Times New Roman Point size: 14 Line spacing: Double The total number of words in the brief, inclusive of point headings and footnotes and exclusive of pages containing the table of contents, table of citations, proof of service, certificate of compliance, or any authorized addendum containing statutes, rules and regulations, etc. is 6,578 words. APPENDIX "A" UNREPORTED DECISION 02/05/2014 11:55 FAX 212 9S4 2804 UNITED LA WVERS SERVICE !ill 002/009 . . SUPREME COURT OF THE STATE OF' NF.W YORK - NEW YORK COUNTY PRESENT: Hon.._....:=e~A~a!i..:o:..=L~e::..:..... • ..::....:.H_u_~P~· --=--- .I ust.ice. 4~-~o/-cf (!_~ The following papers numbered I to r~ad on t hi$ mo -- Notice of Motlon/OrdP-r to Show Cau~e - ArrtdHvi l·~ -:- PART ,. '5 "d-=-- Answering A(fidavit!t - Exhibits --------- -..&...~~.lo;}-l.:----::~~---- Replylns Affldavits ______________ -:-------: ...:::J. ~--~.-~-~ .... ~ ... ._....J. ___ ....J.,_ .Upon the foregoing papers ~ thi:'\ ~ cr:-?J:'~'· .,.,._~;;. ' . ----~--- \ ·, J}:;_· . \. ' , ----------·--~~ -··------ -- -·-- -+r-RrF=:::.__ ________ _ . N I ¢= Dated MAR 2 5 1994 ------------- --- 02/05/2014 11:55 FAX 212 984 2804 UNITED LAWVERS SERVICE liJ 003/009 SUPREME COURT OF THE STATE OF NEW YORK 419twl COUNTY OF NEW YORK: IAS PART 32 ----------~~----~------~~--------------------x In the Matter of the Application of EXCESS LINE ASSOCIATION OF NEW YORK,. : Index No. 134460/93 Petitioner, For a Jud~ent Pursuant to Article 78 of the CPLR, - against - SALVATORE R. CURIALE, Superintendent of Insurance of the State of New York, Respondent. . . : : : ; ------~~~------~----~~---------~--------~----x CAROL E. HUFF, J.: In this Article 78 proceeding, petitioner seeks a judgment enjoininq the Superintendent of Insurance of the State of New York (the 11Superintendent") from enfo:r:cinq sections 27.6 (a) (2) and (a) (3) of the "new Regulation 41u promulgated by the Superintendent, and declaring sa•e null and void. The regulation took effect on January 1, 1994. Petitioner, the Excess Line Association of i'lew York ( "ELANY'') is an association of hexcess line b:rokersrr which are licensed insurance brokers who have the right to obtain insurance coverage from insurers not authorized within New ~ark State. since most of the consumer protections that are available when authori~ed insurers provide insurance coverage are not present in the excess line market, excess line brokers are required to use "due care" in selectinq the unauthorized insurer from whom policies are procured un4er his license (Ins. Law §2ll8[a)[l)). Excess line brokers may 02/05/2014 11:55 FAX 212 984 2804 UNITED LAWYERS SERVICE ~ 004/009 only solicit such coverage to the extent full coverage cannot he I obtained from a New York licensed insurer (.Ins. Law §2118[b](3][A]). ~he Superintendent who issues licenses to excess line brokers has the authority to discipline such licensees, and to suspend or revoke their licenses if they are found to be in violation of the Insurance Law or have demonstrated untrustworthiness or incompetency (Xns. Law §2110). Regulation 41 was oriqinally enacted by the Insurance Department and effective on october 1, 1962 for the purpose of establishinq procedures to be followed by excess line insurers. These procedures were deemed essential in ••the exercise of the due care and diligence as required by law". Regulation 41 was upheld B & R E¥eess corp. v. Thacher, 37 Misc.2d 307, aff'd 18 AD2d 1137. ELANY was established by Chapter 630 of the La'lits of 1988, which added Section 2130 to the Insurance Law. The Legislature created ELANY as an "advisory" association "to facilitate and encourage compliance by its members (excess line licensees) with the laws of this state and the rules and regulations of the superintendent relative to excess line insurance." L. 1988, c. 630 Sl- The Leqislature declared that ELANY bas three ••underlying purposes": to protect persons seeking insurance in this state; to permit excess line insurance to be placed with reputable and financially sound unauthorized insurers; and, to protect state revenues (Id.). Subject to the Superintendent's review, ELANY's principal role - 2 - 02/05/2014 11:55 FAX 212 984 2804 UNITED LAWYERS SERVICE ~ 005/009 . / ~ is to act as a record keeper ror excess 1ine transactions. Its tasks include the responsibility to stamp all excess line filings by unauthorized insurers who meet the eligibility standards. The filing includes a declarations page or cover note of ev~ policy procured by the licensee. ELANY is also obliqated to notify the superintendent prior to stamping submitted insurance documents if the association believes that the unauthorized insurer does not meet these standards. ELANY's reporting requirements include the preparation of: monthly reports containing premium data from licensee affidavits relating to insurance filed and stamped by licensees the preceding calendar month; and, annua1 reports includinq a delineation of the clC!lsses and kinds of business procured dUX'inq the year. (See, generally, InsA Law §21.1.8). ELANY assists excess line brokers in fulfilling their obligations pursuant to Ins. Law §2118 to ensure that licensees and unauthorized insurers are financially sound and that licensee tC\X returns accurately reflect revenue due the state. In January, 1994 after the superintendent held public hearinqs on the proposed revisions to Regulation 41, he promulqated revised Regulation 41 for the stated purpose of clarifying the duties and . responsibilities of excess line brokers, unauthorized insurers and the Excess Line Association with reqard to excess line business placed in New York. The particular revision in dispute herein concerns the requirement that ELANY submit bimonthly reports, identifying excess line brokers thC!lt failed to comply with section 2118 of the - .3 - 02/05/2014 11:55 FAX 212 964 2804 UNITED LAWYERS SERVICE lgJ 006/009 ~ / Insurance Law, i.e., placeMent of any policy with an unauthorized insurer that does not meet eligibility standards for stamping by the excess line association (and, if so, also identifying the insurer) whether or not stamped by the association, durihq the preceding two-month period; and, an annual repo~, by March 15 concerning excess line business, including the number of policies presented to, but not stamped by, the Excess Line Association, and a de1ineation of the classes and kinds of business procured during the preceding calendar year. The superintendent maintains that these revisions were made because an exa.ination of ELANY covering the period of January 1989 throuqh Septentber 1990 revealed that ELANY received documents evidencing placements by member excess line brokers for kinds of insurance not authorized to be written in New York and failed to notify the Insurance Department (the "Department")· Apparently, ELAHY simply returned the unstamped documents, sometimes without even a written explanation to the licensees. J:n December, 1991, the Department was contacted by excess line brokers whose submissions to ELANY had been returned unstamped, again without notice to the Department. Subsequent examination of ELANY further revealed that it had established a "suspense file'' which records all excess line transactions that are returned, unstamped, to brokers by ELANY. ELANY has also declined to transmit this information to the Department. The Superintendent argues that ELANY has not met its obligation to "facilitate ancl encourage compliance•• with the excess - 4 - 02/05/2014 11:55 FAX 212 864 2804 UNITED LAWYERS SERVICE Ill 007/008 line law when it has reason to believe the excess line laws were violated and it fails to timely notify the Department. The Department Jeintains that ELANY'S failure to notify the Department which has the authority to investigate and effect compliance with the statute and regulations, has made compliance almost discretionary on the part of the brokers. The SUperintendent has broad authority to prescribe, in writing, official regulations, not inconsistent with the provision of the Insurance Law interpreting the provisions of the law (Qaterer v. Schenk,·41 NY2d 784 at 786; Matter of B & R zxcess COZP• v. ~achar, 37 Misc. 2d 307, 309 [Sup.ct.N.Y.co.], aff'd 18 AD2d 1137) provided such regulations are not arbitrary or unreasonable, they will be upheld unless they exceed the powers delegated to him by the Legislature (Id.). ELANY challenges the Department's statutory authority to promulgate the reporting requirements contained in revised .Requlation 41. ELANY maintains that the Legislature intended it to be a self-governing, self-policing organization, subject only to the •onthly and annual reporting require•ents specifically enacted by the Legislature in §2130[a][4] and (a](S], respectively. According to ELANY, the superintendent lacks the power to impose, by regulation, an additional bi-monthly reporting requirement, not prescribed in the Insurance Law, which would require them to specify the number and nature of improper excess line documents submitted to ELANY. In enacting ELANY, the Legislature declared ELANY to be only - 5 - laJ 008/009 02/05/2014 11: 55 FA X 212 96 4 2804 UHI TED LAWVERS SERVICE I / / , / an "advisory" association whose intended function was "to facilitate and encouraqe compliance" with "the rules and regulations of the superintendent". Rather than state that ELANY was 11selt-CJOVerninq" the statute plainly states that "(t)he association shall be supervi.sed by the superintendent.'' (:Ins. Law S2130(a)). The additional reportinq requirements in the c::hallenCJed regulation would ~rovide of information about the pr!lctices o! excess line brokers that the superintendent must have in order to promote the interests of the people ot this state (See :Ins. Law 52110, 2118, 2130). Moreover, ELANY's contention that the chal.lenged requlation will transform it into "an enforcement arm" or is an undue administrative burden and thus, will have a negative e~tact on the excess line insurance business, is equally without merit and, even if true would not be a sufficient basis to - ~nvalidate the respondent Superintendent's leqit~ate exercise of its regulatory authority to protect the public interest (Matter of B & B De••• corp. 'l'h&cber, J7 Misc2d at J lO; Borea~i v. AXelrod, 71 NY2d 1). Petitioner has not demonstrated that t he superintendent has exercised his authority in an arbitrary or c apricious manner. Rather, the Superintendent's implementation of the additional reporting requirements ot revised Requlation 41 is consistent with his authori ty to etfectuate and enforce t he statutory purpose of the excess line broker laws. Accordingly, the application is deni ed and the pet ition is dismissed. - 6 - 02/05/2014 11:56 FAX 212 964 280 4 UNITED LAWYE RS SERVICE ~009/009 / . ~ This constitutes the decision and order of the Court. Dated: MAR 2 5 1994 ... ' ' ' J.s.c. CAROl E. HU.Ff - 7 -