US NAIC Spring 2024 National Meeting Highlights: Surplus Lines (C) Task Force

At the Spring 2024 National Meeting of the US National Association of Insurance Commissioners (“NAIC”), the Surplus Lines (C) Task Force (the “Task Force”) met on March 16, 2024. The Task Force focused on concerns raised by surplus lines insurers regarding the consequences of filing the Uniform Consent to Service of Process (“Form 12”), in light of a June 2023 US Supreme Court decision, Mallory v. Norfolk Southern Railway Company(No. 21-1168).

In Mallory, the Supreme Court rejected a federal due process challenge to a Pennsylvania state law that conditioned registration to do business “as a foreign corporation” on the corporation’s consent to a “general personal jurisdiction.” While the precise contours of Mallory, which involved a splintered set of opinions, have yet to be delineated in subsequent litigation, there is now uncertainty over whether state courts will 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.

Members of the Task Force noted that the Form 12—which some states require as a condition for surplus lines insurers to be listed on the state’s approved/eligible list of surplus lines insurers—has a broad service of process appointment, which, under a broad reading of Mallory, could expose surplus lines insurers to lawsuits in any state designated on the Form 12. This would be inconsistent with the NAIC’s Unauthorized Insurers Process Law (“Model #850”) and Nonadmitted Insurance Model Act (“Model #870”), which limit the jurisdiction of lawsuits against surplus lines insurers to the state where the risk or exposure is located.

At the Fall 2023 National Meeting of the NAIC, the Task Force formed a drafting group to consider the Mallory decision and its impact on Form 12, Model Act #850 and Model Act #870. For more information on that meeting, please refer to our prior Legal Update, US NAIC Fall 2023 National Meeting Highlights: Surplus Lines (C) Task Force.

The drafting group has since conducted a survey of state insurance departments to gather information on their practices and requirements regarding the filing of service of process forms for surplus lines insurers. The survey was sent to all states and territories and elicited 32 state responses. The survey results showed that there was variation among the states: 16 states require the filing of service of process forms for both US and non-US insurers doing business in the state; 12 states do not require any filings; and 4 states only require a form for US-domiciled insurers. Fifteen states use the NAIC Form 12, and 5 states use a state-specific Form 12. The survey also indicated that only 7 states expressed support for the creation of a surplus lines-specific service of process form, which the drafting group suggested might be due to a lack of awareness of the issue.

The Task Force directed the drafting group to proceed with developing a surplus lines-specific service of process form. The drafting group will provide a report during the Summer 2024 National Meeting.

To view additional updates from the US NAIC Spring 2024 National Meeting, visit our meeting highlights page.