State Board of Insurance v. Todd Shipyards Corporation

edited October 2019 in Dearie.Excess

Does this ruling no longer apply because of the provisions in Dodd-Frank? The ruling of this case, as per the Wiki, is: "under McCarran-Ferguson, the home state could not tax or regulate the transaction." Under Dodd-Frank, only the home state is able to tax and regulate the transaction, correct? So, Dodd-Frank essentially supersedes this ruling? Just want to make sure I have this right.

Comments

  • I see what you mean - it seems like Dodd-Frank potentially contradicts the Todd precedent but I don't know how to resolve this based on the syllabus readings.

    • Although not discussed in the syllabus, parts of Dodd-Frank have been nullified by Congress so all of that is up the air at the moment. Note also, that much of the Dodd-Frank material has been removed from the syllabus. (There are still bits and pieces of it left in Chapter 30 of Odomirok and NAIC.Solvency, but it feels like Dodd-Frank is not as relevant as it once was.)
    • Also, the Dearie reading was published in 2018 so I would take Dearie as the definitive source. In other words: in most cases the home state cannot tax/regulate direct placement / independent procurement.

    The Dearie text did have some extra information about Todd but I felt it was too detailed to include in the wiki. It says the following:

    • While a number of subsequent decisions have distinguished Todd Shipyards, the current case law would still protect a direct placement transaction from state regulation provided the following circumstances apply:
    • ==> The insured does not access the non-admitted insurer through a resident agent or surplus lines broker.
    • ==>There is no activity by the non-admitted insurer in the state either in the making or in the performance of the contract.
    • ==> The transaction takes place "solely" (or, in New York, "principally") outside of the state where the insured is located.

    I believe that in most situations, these 3 circumstances would apply. So as I mentioned in the wiki, despite subsequent decisions that distinguished this case, Todd is likely still valid in most jurisdictions.

  • Thanks. I think it’s unlikely this case will come up, but if it does, I’ve memorized a canned response anyhow.
  • edited October 2019
    Wait a second: regarding your second point, unless you’re implying something different, I thought one of the key provisions was that, under NRRA, *only* the insured’s home state can regulate / tax a surplus lines transaction?

    EDIT: Ah, sorry. I see you’re getting at something different, as independent procurement / direct placement is separate from surplus lines placement. This is all very nuanced, but is making more sense.
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