A New York appellate court has ordered Millennia Assurance, Inc. to deposit $4.75 million in collateral after a dispute with New York Marine and General Insurance Company over regulatory compliance and operational risk.
On September 11, 2025, the Appellate Division, First Department, issued a decision reversing a lower court’s denial of a preliminary injunction sought by New York Marine and General Insurance Company. The case arose when New York Marine, acting as plaintiff, asked the court to compel Millennia Assurance, Inc. to deposit $4,753,758.02 into a trust account. The insurer argued that a collateral shortfall had resulted in a statutory Schedule F penalty from a state regulator in 2022. This penalty, according to New York Marine, reduced its total policyholder surplus and undermined its ability to issue or reinsure federal bonds.
To substantiate its request, New York Marine submitted an affidavit from the vice president of Coaction Management, the company’s servicer, which described the regulatory penalty and the resulting reduction in surplus. The affidavit was accompanied by a collateral review statement, which documented a deficiency of $4,753,758.02. New York Marine argued that the lack of sufficient collateral not only led to the penalty but also created ongoing risks to its surplus and operational capacity.
The Supreme Court, New York County, initially denied New York Marine’s motion for a preliminary injunction. However, the Appellate Division, First Department, reversed this decision. The appellate court found that New York Marine had demonstrated a likelihood of success on the merits and had established the element of irreparable harm. The court noted that the damage resulting from the failure to provide security was not readily ascertainable and that a legal remedy would be inadequate. The decision referenced prior cases in which preliminary injunctions were granted under similar circumstances, particularly where the calculation of future damages would be unreliable and there was a potential for irreparable harm.
The appellate court’s order requires Millennia Assurance, Inc. to deposit the full $4,753,758.02 into the trust account. The decision was made without prejudice to Millennia’s right to move before the motion court to determine the appropriate amount of any undertaking, as provided by CPLR 6312(b). The appellate court also recalled and vacated its prior decision and order entered on May 29, 2025.
For insurance professionals, this case highlights the importance of maintaining sufficient collateral to meet regulatory requirements. The outcome demonstrates that collateral shortfalls can have immediate and significant operational consequences, including regulatory penalties and restrictions on an insurer’s ability to conduct business. The decision serves as a reminder that compliance lapses in collateral management are not just technicalities - they can lead to substantial legal and financial obligations, as well as heightened scrutiny from regulators.
