Jurisdiction Isn’t Simply About The place You’re Primarily based

Captive insurers are shaped with cautious consideration to domicile to pick out for favorable tax, regulatory, and operational local weather. However as a current resolution reminds us, jurisdictional publicity doesn’t finish with the state or nation of incorporation. Captive insurers, like another entity, can discover themselves topic to litigation in jurisdictions the place their conduct has an impact. Understanding this attain is important to managing threat from an insurance coverage and company governance perspective.

Captive Insurance coverage Overview

In contrast to the everyday insured-insurer relationship, a captive insurer is wholly owned and managed by the insured. Captive insurance coverage is a type of self-insurance exterior of the industrial insurance coverage market the place the insured establishes a licensed insurance coverage firm to insure their very own dangers. There are a number of kinds of captive insurers, together with these established by a single firm, a number of firms (often inside the identical trade), or a commerce or skilled affiliation. In every case, the insured celebration or events put their very own capital in danger, often via premiums, and claims are dealt with beneath the phrases set by the captive insurer.

Captive insurers usually are shaped the place the industrial insurance coverage market is prohibitively costly, unavailable, or not match for the insured’s wants. Different advantages could embrace lowered prices, tailor-made protection, and tax benefits.

When establishing a captive insurer, the place to include is commonly a primary consideration for regulatory and tax causes, in addition to authorized publicity and private jurisdiction. Relating to the latter two concerns, insureds ought to be conscious that authorized publicity and private jurisdiction usually are not restricted to a captive insurer’s place of incorporation. A current case, Mayer v. Goldner, No. 2024CVS1258 (N.C. Bus. Ct. Oct. 2, 2025), illustrates this level. 

The Mayer v. Goldner Choice

This case facilities on a shareholder dispute involving Sherbrooke Company Ltd., a captive insurer working in North Carolina. Minority shareholders sued the bulk shareholder. The bulk shareholder and Sherbrooke responded with counterclaims and third-party claims, notably towards Grand Hook Company, LLC. The third-party criticism alleged that whereas serving as Sherbrooke’s officers, minority shareholders shaped Grand Hook to compete with Sherbrooke. Amongst different acts, they allegedly defamed Sherbrooke to the North Carolina Division of Insurance coverage, damaging Sherbrooke’s repute in its residence state.

Grand Hook moved to dismiss for lack of non-public jurisdiction, arguing it had no bodily presence or enterprise dealings in North Carolina. The courtroom, nevertheless, discovered that particular jurisdiction existed as a result of Grand Hook—via its brokers—allegedly engaged in intentional tortious conduct directed at North Carolina, understanding the hurt could be felt there. The courtroom emphasised that bodily presence isn’t required for private jurisdiction when a defendant’s actions are purposefully directed on the discussion board state. Accordingly, the courtroom denied Grand Hook’s movement to dismiss, holding that exercising jurisdiction wouldn’t offend due course of beneath the circumstances.

Key Takeaway

Forming a captive insurer entails many strategic choices, one among which is the place the captive insurer could also be topic to jurisdiction. Whereas the place the captive insurer is headquartered and integrated are components on this jurisdictional evaluation, it doesn’t finish there. As illustrated by Mayer, the captive insurer’s after-formation conduct can topic it to jurisdiction in different boards. Whereas jurisdictional planning shouldn’t eclipse a captive’s core function to handle and insure threat, it ought to stay an energetic a part of threat administration itself.