Excess Line Association of New York (ELANY), Appellant,v.Waldorf & Associates, et al., Respondents, et al., Defendants.BriefN.Y.September 7, 2017State of New York Court of Appeals BRIEF FOR PLAINTIFF-APPELLANT EXCESS LINE ASSOCIATION OF NEW YORK DICK BAILEY SERVICE, Inc. · 1-800-531-2028 · dickbailey.com [REPRODUCED ON RECYCLED PAPER] Appellate Division, Second Department, Docket No. 2013-06615 Supreme Court, Suffolk County, Index No. 35107/11 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, Defendants-Respondents, PAMELA J. WALDORF, Defendant, CHRISTOPHER V. WALDORF, SR., CHRISTOPHER V. WALDORF, JR. and THE WALDORF FAMILY FOUNDATION, INC., Defendants-Respondents. TO BE ARGUED BY: COURT OF APPEALS NO. APL-2016-00069 DAVID B. HAMM, ESQ. HERZFELD & RUBIN, P.C. Appellate Counsel for Plaintiff-Appellant Excess Line Association of New York (ELANY) 125 Broad Street New York, New York 10004 (212) 471-8500 Date Completed: June 28, 2016 TABLE OF CONTENTS Page TABLE OF AUTHORITIES .................................................................................... ii PRELIMINARY STATEMENT ............................................................................... 1 JURISDICTIONAL STATEMENT and QUESTIONS PRESENTED .................... 3 STATEMENT OF FACTS ........................................................................................ 4 A. Statutory Background ............................................................................ 4 B. The Instant Action ................................................................................. 8 C. The Motion to Dismiss ........................................................................ 1 0 D. The Order of the Supreme Court ......................................................... 12 E. The Appeal to the Appellate Division ................................................. 13 ARGUMENT ........................................................................................................... 14 ELANY HAS THE CAPACITY AND THE STANDING TO SUE ONE OF ITS MEMBERS IN ORDER TO INSlJKE COMPLIANCE WITH ITS PLAN OF OPERATION ...................................................................................... 14 A. ELANY HAS THE CAPACITY TO SUE ......................................... 14 B. ELANY HAS STANDING TO ENFORCE ITS PLAN OF OPERATION ...................................................................................... 20 CONCLUSION ........................................................................................................ 23 TABLE OF AUTHORITIES Cases Page Board ofEduc. v. Board ofTrustees, 282 A.D.2d 166 (3d Dept. 2001) .......................................................................... 18 City of New York v. City Civ. Service Comm., 60 N.Y.2d 436 (1983) ........................................................................................... 15 Community Board 7 v. Schaeffer, 84 N.Y.2d 148 (1994) ............................................................................... 13, 14, 15 Excess Line Assn. ofN.Y(ELANY) v. Waldorf & Assoc. 130 A.D.3d 563 (2d Dept. 2015) ............................................................................ 5 ' Flacke v. Freshwater Wetlands Appeals Bd., 53 N.Y.2d 537 (1981) ........................................................................................... 15 Graziano v. County of Albany, 3 N.Y.3d 475 (2004) ............................................................................................. 18 Hanys Servs. v. Empire Blue Cross & Blue Shield, 292 A.D.2d 61 (3d Dept. 2002) ............................................................................ 21 New York Property Ins. Underwriting Ass'n v A.F. Holding Corp., 196 A.D.2d 695 (1st Dept. 1993) ......................................................................... 18 New York Property Ins. Underwriting Ass'n v. Goldfeld, 55 A.D.2d 1032 (4th Dept. 1977) .......................................................................... 18 Paterno, Inc. v. Curiale, 88 N.Y.2d 328 (1996) ......................................................................................... 4, 5 Town of Riverhead v. NY State Bd. of Real Prop. Servs., 5 N.Y.3d 36 (2005) ............................................................................................... 15 Uhr v. East Greenbush Cent. Sch. Dist., 94 N.Y.2d 32 (1999) ............................................................................................. 20 Statutes and Other Authorities 11 NYCRR 27.4(E)(2) ............................................................................................... 5 CPLR 5602(a)(1)(i) .................................................................................................... 3 11 CPLR 5611 ................................................................................................................. 3 Educ. Law §201 ....................................................................................................... 18 Educ. Law §202 ....................................................................................................... 18 Educ. Law § 1709 ..................................................................................................... 18 Financial Services Law §203 ..................................................................................... 7 General Association Law§ 12 ............................................................................ 14, 15 Insurance Law § 109 ................................................................................................. 1 7 Insurance Law §1101(b)(2)(E) .................................................................................. 9 Insurance Law §2105(a) ...................................................................................... 3, 17 Insurance Law §2117(a) ............................................................................................ 4 Insurance Law §2177(h)(3) ....................................................................................... 4 Insurance Law &2118 ....................................................................................... passim u - Insurance Law §2130 ....................................................................................... passim T 1 OQQ r'l-. h:'HI ,...., "illa"'r1ar1 huT '1f\1 "l r'l-. '1f\ '1 ..-::; h: 17 '1'1 L.t • .L.7UU' ~H. VJV' a~ U.L l~HU~U LIJ L.J, -"-V.LJ' ~11. -"-V ................................ -"-, -', v, .L I' kk lll STATE OF NEW YORK COURT OF APPEALS --------------------------------------------------------------------------x 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, Defendants-Respondents, PAMELA J. WALDORF, Defendant, CHRISTOPHER V. WALDORF, SR., CHRISTOPHER V. WALDORF, JR. and THE WALDORF FAMILY FOUNDATION, INC., Defendants-Respondents. --------------------------------------------------------------------------x BRIEF FOR PLAINTIFF-APPELLANT EXCESS LINE ASSOCIATION OF NEW YORK PRELIMINARY STATEMENT Plaintiff-Appellant the Excess Line Association of New York (“ELANY”), a statutorily-created non-profit association, appeals from the Order of the Appellate Division, Second Department entered on July 1, 2015 which held that ELANY had neither the capacity, nor the standing, to commence an action against one of its members to enforce the provisions of ELANY’s operating plan as well as the member’s statutory obligations vis-à-vis ELANY. ELANY, a creature of statute, is a general association of which all excess line insurance brokers1 are mandatory members. It has been described by the state legislature as "an indispensable component in the regulation of the excess line market" (L. 1988, Ch. 630, Sec. 5, as amended by L. 2013, Ch. 20, Sec. 1). A key feature of ELANY's regulatory duties is the obligation imposed on each of its members to submit all excess line insurance documents to ELANY for inspection and for stamping. Nevertheless, ELANY is not publicly funded, but rather relies entirely on stamping fees that, under ELANY' s Plan of Operation and pursuant to Insurance Law §2118, must be paid by its members for each excess line policy issued. These stamping fees are ELANY' s sole source of income. The Order appealed from has now made it impossible for ELANY to directly compel its members to comply with the requirements of the Plan of Operation, including the obligation to submit excess line insurance documents for inspection, and the obligation to pay stamping fees on any excess line policy issued. As a result, ELANY wiil not be able to perform its "indispensable" regulatory duties, leaving insureds who have obtained excess line policies unprotected, and depriving ELANY of its sole source of income. This result ignores the legislature's stated intent and the statutory language from which ELANY' s capacity and standing to As more fully explained, infra, excess line insurance refers to policies issued by insurers that are not licensed to do business in the State ofNew York. 2 sue its members is clearly implicated. The Order of the Appellate Division should be reversed. JURISDICTIONAL STATEMENT AND QUESTIONS PRESENTED This Court has jurisdiction to entertain this appeal pursuant to CPLR 5602(a)(1)(i), because the order of the Appellate Division, Second Department (R11-13)2, affirming the order of Supreme Court dismissing the complaint in its entirety R14-21 ), disposed of all the claims in this case. It is thus a final order pursuant to CPLR 5611. This Court granted ELANY leave to appeal (R1 0). The issues presented are: 1. Whether ELANY has the capacity to sue its members to compel compliance with ELANY's Plan of Operation, including the members' duty to submit excess line insurance documents to ELANY and, in particular, to enable ELANY to recover stamping fees (ELANY' s only source of funding) due and owing to ELANY? (Raised below at, inter alia, R152-R156). 2. Whether ELANY has standing to commence an action against one of its members to compel compliance with ELANY's Plan of Operation including the duty to submit excess line insurance documents to ELANY and, in particular, to recover stamping fees (ELANY' s only source of funding) due and owing to ELANY? (Raised below at, inter alia, R156-R164). 2 Numbers in parentheses preceded by the letter R refer to pages of the Record on Appeal filed in this Court. 3 STATEMENT OF FACTS A. Statutory Background New York Insurance Law generally prohibits the sale in New York of insurance underwritten by insurers not authorized to conduct business in New York (Insurance Law §2117[a]). The only exception is set forth in Insurance Law §2105(a) which authorizes excess line brokers to "procure, subject to the restrictions herein provided, policies of insurance from insurers which are not authorized to transact business in this state." See, Insurance Law §2177(h)(3) Paterno, Inc. v. Curiale, 88 N.Y.2d 328, 330 (1996) ("excess line brokers ... are entities statutorily permitted under certain conditions to procure insurance from insurers not authorized to do business in New York"). Defendants Waldorf & Associates, Waldorf Risk Solutions, LLC, Waldorf Special Risk, LLC Waldorf Servicing, LLC, William G. Waldorf, Stephen M. Waldorf, Christopher V. Waldorf, Sr. and Christopher V. Waldorf, Jr? (the "Waldorfs") are excess line brokers (R64-R 7 4 ). Because insurance coverage provided by unauthorized insurers poses various risks to the insureds, this right is not without limitation. Before an excess line broker can procure coverage from an unauthorized insurer, the broker must make diligent efforts to obtain the insurance from authorized insurers, i.e., three 3 Christopher V. Waldorf, Jr. is a nominal defendant since he was never properly served. 4 authorized insurers must have declined the risk (Insurance Law §2118 [b][3](A]). The excess line broker must also verity that the unauthorized insurer is authorized in its domiciliary jurisdiction to write the insurance policy procured by the excess line broker (Insurance Law § 2118 [b] [ 5]). In addition, all insureds must be advised "in writing, before placement, that in the event of insolvency of the unauthorized insurer, losses would not be covered by a New York State security fund (11 NYCRR 27.4[E][2])" (Paterno, 88 N.Y.2d at 333; see Insurance Law §2118). In order to monitor and insure that excess line brokers comply with the requirements of Insurance Law §2118, in 1988 the state legislature created a nonprofit association to be known as the Excess Line Association of New York, or ELANY (L.1988, Ch. 630). The purpose of the association was to facilitate and encourage compliance with the requirements of Insurance Law §2118. As the legislative history supporting the creation ofELANY explained: The legislature hereby finds and declares that the establishment of an excess line advisory association is desirable to facilitate and encourage compliance by its members with the laws of this state and the rules and regulations of the superintendent relative to excess line insurance. Accordingly, the legislature declares that this act [adding this section and provisions set out as notes under this section and amending section 2118] shall be liberally construed and applied to promote its underlying purposes which include: protecting persons seeking insurance in this state; permitting excess line insurance to be placed with reputable and financially sound unauthorized msurers; and protecting revenues of this state. L.l988, Ch. 630, Sec. 1. 5 In 2013 the legislature extended ELANY' s existence to 2019, noting that: Established by the Legislature in 1988, ELANY, which is financially self-sustaining, quickly became an indispensable component in the regulation of the excess line market. The excess line market is a small, but extremely important marketplace which serves as an "incubator" for innovative insurance products, as well as a market for hard-to- place risks. Foremost among ELANY's accomplishments has been its success in collecting and processing insurance data and monitoring the solvency of insurers in the excess line marketplace. These activities are of paramount importance to a properly functioning excess line market in New York. *** ELANY also assists the Department of Financial Services in the calculation and collection of excess line premium taxes. In fulfilling its statutory mandate to notify the Superintendent if ELANY believes that an unauthorized insurer does not meet the standards of eligibility imposed by New York, ELANY has compiled extensive data on every foreign and alien insurer writing business in New York, while monitoring their activities. Based on ELANY's recommendations, the Department of Financial Services has prohibited the placement of risks with a number of insurers that were determined by ELANY not to meet the minimum financial criteria required by New York law. In this manner, ELANY has protected the interests of New York State consumers by ensuring that their insurance needs are met by the most financially secure insurers possible. In addition, ELANY has taken various measures directed at increasing compliance by excess line licensees with New York's excess line law. *** [B]ased on its excelient performance record over its twenty plus year existence, it is clear that ELANY has demonstrated its importance to the insurance marketplace. At this juncture, therefore, there is absolutely no reason why ELANY's role in helping to regulate the excess line market should not be substantially extended. L. 1988, Ch. 630, Sec. 5, as amended by L. 2013, Ch. 20, Sec. 1. 6 In order to facilitate ELANY' s ability to fulfill its duties, Insurance Law §2130 deemed "all excess line brokers ... to be members of the association" (Insurance Law §2130[a]). All members of ELANY are required to comply with the Plan of Operation adopted by ELANY and approved by the Superintendent of Insurance4 (!d. at §2130[c] [1] and [2]). The Plan of Operation (R51-R56) requires that all members "submit excess line insurance documents to the Association" (R55). In addition, since ELANY is not publicly funded, the Plan of Operation requires that "all members pay the fees required by the Association" (!d.). These payments took the form of stamping fees which were to be paid by the excess line broker directly to ELANY (R55, W). The amount of the stamping fee was to be established by the board of directors ofELANY (R54-R55) and was to be assessed "for each declarations page, cover note or other premium bearing documents submitted to the association" (Insurance Law §2130[g]). While the amount of the stamping fee was "subject to the approval of the superintendent," (R55) the fee itself was for the sole benefit of ELANY. The stamping fees, which were separate and independent of the taxes which had to be paid to the Superintendent of Insurance (Insurance Law §2118[d][l]), were not turned over to the Superintendent of Insurance or the Department of Insurance (Insurance Law §2130[[fJ; R55). 4 The Superintendent of Insurance is now the Deputy for Insurance and the Head of the Insurance Division of the New York Department of Financial Services (see, Financial Services Law §203). 7 Indeed, pursuant to ELANY' s operating plan, any funds remammg upon the dissolution of ELANY were to be transferred to "another non-governmental organization established for the same or similar purpose as the Association, or if no such organization exists, to one or more charitable organizations selected by the Board" (R56, emphasis supplied). B. The Instant Action The Waldorf defendants are licensed excess line brokers and as a result they are members of ELANY. As members of ELANY, the Waldorf defendants were required to comply with the Plan of Operation (Insurance Law §2130[c][2]), pursuant to which all excess line brokers are required to "submit excess line insurance documents for review and stamping" (R29). In fact, Insurance Law § 2118(b )( 6) makes it "unlawful" for an excess line broker to deliver a policy which has not been stamped by ELANY. The stamp informed insureds, that (Rl54): THE INSURER(S) NAMED HEREIN IS (ARE) NOT LICENSED BY THE STATE OF NEW YORK, NOT SUBJECT TO ITS SUPERVISION, AND IN THE EVENT OF THE INSOLVENCY OF THE INSURER(S), NOT PROTECTED BY THE NEW YORK STATE SECURITY FUNDS. THE POLICY MAY NOT BE SUBJECT TO ALL OF THE REGULATIONS OF THE INSURANCE DEPARTMENT PERTAINING TO POLICY FORMS. Members are to be billed on a monthly basis for any fees due on excess policies processed during the preceding month (R57). 8 Between 1995 and 2009, the Waldorf defendants admittedly procured tens of millions of dollars of excess line insurance from Lloyd's of London, an unauthorized insurer (R142-R143). Nevertheless, the Waldorf defendants admittedly submitted none of those policies to ELANY for review and stamping and consequently paid no stamping fees. In addition, the Waldorf defendants did not pay the premium taxes due to the Insurance Department for those policies (R143), and the policies failed to warn insureds about the absence of Security Fund coverage. The Waldorfs initially tried to justify their failure to abide by the requirements of Insurance Law §2118 and ELANY's Plan of Operation by characterizing the insurance policies they procured from Lloyd's of London as direct or independent insurance transactions authorized by Insurance Law §1101(b)(2)(E) (R138-R139). Their efforts failed however, because Insurance Law § 1101 (b )(2)(E) is by its terms limited to policies which "are principally negotiated, issued and delivered without this state." Ultimately, on April 12, 2011, the Waldorfs entered into a letter agreement with the New York State Insurance Department. The agreement, which was accepted and agreed to by the Waldorf entities (R144), provided that (R142): The W aldorfs do not contest the Department's determination that one or more of the Waldorfs did in fact act as excess line brokers in making the aforementioned Lloyd's Placements, and that they 9 incurred premium tax liability pursuant to Section 2118 (d) of the New York Insurance Law ("Insurance Law") in connection therewith. Under the terms of the letter agreement the Waldorf defendants agreed to pay excess line premium taxes of $2,435,486.00 for all Lloyd's placements from 1995 to 2009. The Waldorf defendants also agreed to pay a penalty of $982,422.40 (R143). The letter agreement between the Insurance Department and the Waldorf defendants said nothing about the stamping fees owed to ELANY or any other obligations which the Waldorf defendants had as members of ELANY (R187). Accordingly, in November 2011, ELANY commenced the instant action against the Waldorf defendants seeking, inter alia, to recover the stamping fees that, pursuant to the Plan of Operation, the Waldorf defendants owed to ELANY for excess line policies the vValdorf defendants admittedly procured from 1989 through 2011 (R85, R91). In addition, ELANY sought to examine the Waldorf defendants' "complete and separate records of the transactions for the policies they procured from one or more unauthorized insurers" as mandated by Insurance Law §2118 (R74) and ELANY's Plan of Operation (R55). C. The Motion to Dismiss The Waldorf defendants, in a pre-answer motion, sought dismissal of the complaint against them. The motion was premised on the assertion that ELANY "has neither statutory or implied authority to sue for claims based on violations of 10 the Insurance Law, nor does it have standing to bring the antitrust and consumer related claims alleged in its Complaint" (R48). The Waldorf defendants took the position that ELANY functions under the supervision of the Superintendent of Insurance and therefore only the Superintendent of Insurance could seek enforcement of the provisions of the Insurance Law. In addition, the Waldorf defendants maintained that ELANY "has no statutory, regulatory or even operational authority to assert any rights against its members. Its sole remedy, even for member delinquencies, is to report the alleged violation to the Department" (R46). In opposition to the motion, ELANY maintained that by necessary implication of the duties and powers imposed upon ELANY by the Insurance Law and by the terms of its Plan of Operation, ELANY has the authority to commence litigation against one of its members in order to enforce the provisions of the Plan of Operation (R156-R159). ELANY also demonstrated that it had standing to pursue these claims because it was entirely funded by the stamping fees collected from its members, and it could only enforce the collection of the stamping fee by enforcing its right to inspect all excess line insurance documents (!d.). ELANY specifically sought leave to amend the complaint if the court felt the claims asserted were not properly plead (Rl84). 11 D. The Order of the Supreme Court The Supreme Court, Suffolk County, granted the motion to dismiss finding that ELANY did not have the capacity to sue its members for their failure to comply with ELANY's Plan of Operation and the statutes on which it was based (R17-R18). The court concluded that ELANY had neither express nor implied authority to enforce its entitlement, inter alia, to stamping fees on all excess line policies procured by its members. First, the court noted that Insurance Law §2130 does not specifically grant ELANY enforcement powers. The court further noted that pursuant to ELANY' s operating plan, the Superintendent is to be notified if an excess line broker fails to pay fees. Based on this provision, the court concluded that ELANY did not have the implied authority to commence an action seeking to recover fees owed by one of its members, but rather, that it was the legislature's intent that all enforcement actions be undertaken by the Superintendent (R18), even though the Superintendent could never receive payment of those fees. The court applied the same reasoning to conclude that Insurance Law §2130 did not create a private right of action, ignoring the fact that ELANY is not an individual insured seeking to enforce a private right of action, but rather a nonprofit association seeking to collect the fees owed it by one of its members (!d.). Finally, the court concluded that the complaint failed to state a cause of action (Rl8-R21). 12 E. The Appeal to the Appellate Division ELANY appealed to the Appellate Division, Second Department, reiterating the arguments made in the lower court, and relying on this Court's oft-stated holding that an entity's capacity to sue can be inferred as a "necessary implication" from the entity's powers and responsibilities, provided "there is no clear legislative intent negating [capacity]" (e.g., Community Board 7 v. Schaeffer, 84 N.Y.2d 148, 156 [1994]). Specifically, ELANY focused on this Court's recognition that the power to bring a particular claim may be inferred when the entity has "functional responsibility within the zone of interest to be protected" (Id.). Since ELANY, as a nonprofit association, has been accorded functional responsibility to insure that its members comply with its Plan of Operation, by implication it had the capacity and standing to sue its members in order to insure compliance with the Plan of Operation. This was particularly true with regard to ELANY's right to collect stamping fees, its only source of income. In this regard, ELANY clarified that it was not attempting to collect a penalty or to enforce the requirements of the Insurance Law. By order entered on July 1, 2015, the Appellate Division, Second Department affirmed the dismissal of ELANY' s complaint. The Appellate Division determined that (130 A.D.3d 563, 565; R12): Contrary to ELANY's contention, none of the provisions of the statute confers upon it by necessary implication the capacity to sue to enforce 13 the provisions of the Insurance Law. Rather, the broad enforcement powers of the Superintendent, the lack of enforcement powers granted to ELANY, and the requirement that ELANY function under the supervision of the Superintendent 'negate[] any inference of a legislative intent to confer that power.' The Appellate Division also found that (!d., R13, citations omitted): ELANY has no private right of action under the Insurance Law, since it is not one of the class for whose particular benefit the statute was enacted, and, further, because creation of such a right would be inconsistent with the legislative scheme, which places enforcement in the Superintendent. . . . 'Where an insurance law is intended as a general police regulation, and the violation made punishable solely as a public offense, the recognition of a private cause of action would be improper.' ELANY's common-law causes of action are predicated solely on alleged violations of the Insurance Law and its regulations, and thus fail to state a cause of action. The Order of the Appellate Division should be reversed. ARGUMENT ELANY HAS THE CAPACITY AND THE STANDING TO SUE ONE UJ:f ITS MEMBEKS IN ORDER TU INSURE COMPLIANCE WITH ITS PLAN OF OPERATION. A. ELANY HAS THE CAPACITY TO SUE ELANY is a creature of statute. It was created by the legislature as a nonprofit association (see, Insurance Law §2130[a]). As this Court explained in Community Board, supra, 84 N.Y.2d at 155, whether or not an artificial entity such as ELANY has the capacity to sue is to be determined on the basis of the enabling legislation or other statutory predicate. In addition to the fact that associations such as ELANY are accorded the capacity to sue its members pursuant to General 14 Association Law § 12, ELANY's capacity to sue its members as a means of enforcing its Plan of Operation and of collecting the fees which its members are mandated to pay can be inferred from the provisions of Insurance Law §2130. While Insurance Law §2130 does not expressly authorize ELANY to commence actions against its members, as this Court has recognized, the capacity to sue can be implied (Town of Riverhead v. N. Y State Bd. of Real Prop. Servs., 5 N.Y.3d 36, 42 [2005] ["capacity may be inferred as a necessary implication from the powers and responsibilities of a governmental entity, 'provided, of course, that there is no clear legislative intent negating review"']; Flacke v. Freshwater Wetlands Appeals Bd., 53 N.Y.2d 537, 540 [1981] [commissioner's power to challenge decision by appeals board can be implied from statute]). As this Court explained in Community Board, 84 N.Y.2d at 156, "the power to bring a particular claim may be inferred when the agency in question has 'functional responsibility within the zone of interest to be protected,"' citing City of New York v. City Civ. Service Comm., 60 N.Y.2d 436, 445 (1983). In City of New York, this Court held that a provision in the New York City Charter which gave the city Personnel Director the "responsibility to ensure that the city personnel such as respondent police officers are appointed and promoted in accordance with a system of merit and fitness," gave the Personnel Director the capacity and standing to challenge a determination by the New York City Civil 15 Service Commission to grant veterans' preference credits to police officers called to "active duty" during the postal strike. The same is true here. 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. What is more, ELANY is not government funded but has been authorized to establish and collect a stamping fee from its members in order to fund its activities. It is ELANY that has "functional responsibility" to impose and collect the stamping fee from its members and it is ELANY that has the "functional responsibility" to review excess line policies, assess the stability of unauthorized insurers and to oversee compliance with the excess line law and its Plan of Operation. In order to fulfill this "functional responsibility," ELANY, by "necessary implication," has to have the capacity to enforce the obligations imposed on its members. The Appellate Division's holding, that allowing ELANY to commence a proceeding against one of its members would interfere with the "broad enforcement powers of the Superintendent," misapprehends the relief which ELANY is seeking in this action. ELANY is not seeking to discipline or penalize one of its members; ELANY concedes that only the Superintendent has been authorized to impose fines and to suspend or revoke an excess line broker's license 16 for noncompliance with the Insurance Law (see Insurance Law §§ 109, 2105[a]). Rather, ELANY is seeking to enforce its right and statutory obligation to oversee the conduct of its members and to collect the stamping fees which are payable only to ELANY. The determination by the Appellate Division that ELANY was intended by the legislature to have no juridically cognizable existence independent of the Department of Insurance, and that the provisions of ELANY' s operating plan, including ELANY's right to collect fees from its members, are to be enforced if at all solely by the Superintendent, ignores the legislature's express directive that "this act [creating ELANY] shall be liberally construed" (L. 1988, CH. 630 § 1 ). It ignores as well the definitive legislative intent that only ELANY, and never the Superintendent, is to receive payment of those fees (Insurance Law §2130[£]). Rather than empowering ELANY to fulfill its recognized "indispensable" role in the "regulation of the excess line market," the Appellate Division decision renders ELANY essentially powerless to fulfill the duties imposed upon it by the Legislature. Indeed, the circumstances of this case underscore the separate functions and capacity of the Superintendent and ELANY, for here the Superintendent did secure payment of past due taxes and a fine from defendants, yet did not address or secure payment ofELANY's stamping fees (R116-R118; Rl60-R163). 17 As this Court recognized in Graziano v. County of Albany, 3 N.Y.3d 475 (2004 ), capacity to sue is not an all or nothing proposition. Whether or not an entity has the capacity to sue will often tum on the relief sought. Thus, while ELANY may not have the capacity to sue in order to penalize or discipline the Waldorf defendants, that does not eliminate or undermine its capacity to sue in order to fulfill its "functional responsibility," to encourage compliance with the excess line law. Nor does the fact that ELANY is supervised by the Superintendent require a different result. Indeed, other nonprofit associations have been found to have the capacity to sue despite the fact that they are under the "supervision" of the Superintendent. See, e.g., New York Property Ins. Underwriting Ass'n v A.F. Holding Corp., 196 A.D.2d 695 (1st Dept. 1993) (where the Association brought a combined interpleader-declaratory judgment action concerning fire insurance proceeds against the City of New York); New York Property Ins. Underwriting Ass'n v. Goldfeld, 55 A.D.2d 1032 (4th Dept. 1977) (where the Association brought an action for restitution). Similarly, in Board of Educ. v. Board of Trustees, 282 A.D.2d 166 (3d Dept. 2001), the Appellate Division held that a Board of Education, which is under the control and supervision of the New York Board of Regents (Educ. Law§§ 201, 202), and has not expressly been granted the power to sue (Educ. Law § 1709), had the capacity to challenge via Article 78 the 18 arbitrariness of the State University ofNew York in granting a license to a charter school. Certainly, the fact that ELANY has to report an excess line broker's failure to pay the stamping fee to the Superintendent (who must then assess whether or not to suspend the broker's license) does not in any way undermine ELANY' s capacity to sue in order to collect the stamping fees, which are its only source of funding, and if necessary to enforce its right to review excess line policies issued to determine the amount of the stamping fee owed. This is particularly true since the stamping fees remain the property of ELANY; they are not turned over to the Superintendent, even if ELANY is dissolved. Enforcement of these rights will not in any way interfere with the Superintendent's authority to penalize and discipline excess line brokers. In this regard, the determination by the Supreme Court, Suffolk County, that the legislature could not have intended for ELANY to be a co-regulator with the Superintendent, and to have the right to inspect records of excess line placements maintained by its members, because it would not want "a group of competitors to bring an action against a fellow competitor" (R18), ignores the plain language of Insurance Law §2118(c)(2), which requires that the records maintained by excess line licensees be "open to examination by the excess line association." Clearly, ELANY, as a statutory association, is not a competitor to excess line brokers, and 19 there are no facts in the record to support that erroneous conclusion. More importantly Insurance Law §2118( c )(2) exists precisely in order to empower ELANY to access the records of transactions by members who have willfully refused to file them with ELANY. The ruling by the courts below renders this statutory provision illusory. Clearly, that was not the intent of the Legislature. B. ELANY HAS STANDING TO ENFORCE ITS PLAN OF OPERATION The Appellate Division's determination that ELANY had no standing to assert a claim against its members premised on a violation of the Insurance Law misapprehends the claim being asserted here. As this Court explained in Uhr v. East Greenbush Cent. Sch. Dist., 94 N.Y.2d 32, 38 (1999), making a determination of whether or not a statute creates a private right of action requires the application of a three-prong test (Jd.): ( 1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme. Of necessity, application of this test focuses on the precise nature of the claim being asserted. ELANY is not seeking to sanction, discipline or punish the Waldorf defendants for their failure to fulfill their obligations under the Insurance Law, including their failure to pay taxes on the policies issued. Such a claim 20 clearly falls within the bailiwick of the Superintendent of Insurance (see, e.g., Hanys Servs. v. Empire Blue Cross & Blue Shield, 292 A.D.2d 61 [3rd Dept. 2002]). Rather, ELANY commenced this action in an effort to review the records related to the excess line policies procured by the Waldorf Defendants and to collect the stamping fees owed to it by the Waldorf defendants. Application of the three-prong test to the provision of Insurance Law §2130(±), which authorizes ELANY's board of directors to establish a stamping fee to be paid by its members, supports the recognition of ELANY' s right to assert a claim seeking to compel the payment of the stamping fees. First, Insurance Law §2130(±) was clearly enacted for the benefit of ELANY. Indeed, there is no other party which benefits from the collection of the stamping fee. The stamping fee is never turned over to the Superintendent (R30). This is particularly true since the stamping fee is ELANY' s only source of funding. Second, allowing ELANY to collect the stamping fees will promote the legislative purpose of "facilitating and encouraging" compliance with the excess line law (Insurance Law §2130[a][l0]), since it is the sole source of funding for the association statutorily created to perform that task. Third, permitting ELANY to assert a limited private cause of action to recover the stamping fees is consistent with the legislative scheme which assigns different roles to the Superintendent and to ELANY. Certainly, recognition of 21 such a private cause of action will not interfere with the Superintendent's authority to enforce compliance with the Insurance Law by disciplinary action, nor with the Superintendent's right to collect taxes, fees and penalties owed to it. The order appealed from should be reversed. The decisions by the courts below deprive ELANY of any way to collect the stamping fees which are its only source of income. This could result in the dissolution of ELANY, an association created by the Legislature for a specific purpose and which in the words of the Legislature has become "an indispensable component in the regulation of the excess line market" (L. 1988, Ch. 630, Sec. 5, as amended by L. 2013, Ch. 20, Sec. 1 ). 22 CONCLUSION For all of the reasons set forth herein the Order appealed from should be reversed and the complaint reinstated. Dated: New York, New York June 28, 2016 David B. Hamm Miriam Skolnik, Of Counsel Respectfully submitted, Miriam Skolnik David B. Hamm HERZFELD & RUBIN, P.C. Appellate Counsel to Law Offices of Curtis, Vasile, Mehary & Darry, P.C. Attorneys for Plaintiff-Appellant Excess Line Association of New York (ELANY) 125 Broad Street, New York, N.Y. 10004 (212) 471-8500 23