US NAIC Fall 2023 National Meeting Highlights: Surplus Lines (C) Task Force

At the Fall 2023 National Meeting of the US National Association of Insurance Commissioners (“NAIC”), the Surplus Lines (C) Task Force (the “Task Force”) met on December 1, 2023. Among other matters, the Task Force discussed certain issues with respect to the filing of service of process forms by surplus lines insurers in light of a June 2023 US Supreme Court decision, Mallory v. Norfolk Southern Railway Company (No. 21-1168).

In Mallory, the majority opinion concluded that the courts of a state have general jurisdiction over a corporation if the corporation has appointed an official of that state (such as the Secretary of State or Insurance Commissioner) as its agent to receive service of process, regardless of whether the state’s courts would otherwise have jurisdiction over the corporation, based on its conduct giving rise to a specific lawsuit.

Interested parties who addressed the Task Force noted that the Uniform Consent to Service of Process Form 12 (“Form 12”)—which was drafted to be used by admitted (not surplus lines) insurers—requires a broad appointment of a state government official or resident agent to receive service of process, extending to “any notice, process or pleading as required by law as reflected on Exhibit A in any action or proceeding against it in the State(s) so designated.” Many states now also require a surplus lines insurer to file a Form 12 before the surplus lines insurer can be placed on the state’s list of eligible/approved surplus lines insurers (commonly referred to as the “white list”).

Interested parties pointed out that the Mallory decision raises the concern for surplus lines insurers that they could be subject to general jurisdiction in a given state if they appoint the Secretary of State or Insurance Commissioner as their agent for service of process by executing a Form 12, even if they are not licensed in that state, and even if they do not maintain a presence in that state sufficient to create general jurisdiction under “due process” principles. Interested parties noted that this is inconsistent with the NAIC’s Unauthorized Insurers Process Law (“Model #850”) and Nonadmitted Insurance Model Act (“Model #870”), which more narrowly allow for service of process and suit on any cause of action arising from an insurance policy issued to a policyholder in the state.

The Task Force created a drafting group to consider the Mallory decision and its impact on Form 12, Model Act #850 and Model Act #870. The drafting group will also consider developing a service of process appointment form specifically for surplus lines insurers in order to promote consistency among states. The drafting group will provide a report at the Task Force’s next meeting in March 2024.

To view additional updates from the US NAIC Fall 2023 National Meeting, visit our meeting highlights page.