Jurisdiction Isn’t Simply About The place You’re Based mostly

Captive insurers are fashioned with cautious consideration to domicile to pick for favorable tax, regulatory, and operational local weather. However as a latest determination reminds us, jurisdictional publicity doesn’t finish with the state or nation of incorporation. Captive insurers, like some other 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

Not like 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 business 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 corporations (often throughout the identical trade), or a commerce or skilled affiliation. In every case, the insured social gathering or events put their very own capital in danger, often by premiums, and claims are dealt with beneath the phrases set by the captive insurer.

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

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

The Mayer v. Goldner Resolution

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 grievance alleged that whereas serving as Sherbrooke’s officers, minority shareholders fashioned Grand Hook to compete with Sherbrooke. Amongst different acts, they allegedly defamed Sherbrooke to the North Carolina Division of Insurance coverage, damaging Sherbrooke’s popularity in its dwelling state.

Grand Hook moved to dismiss for lack of private jurisdiction, arguing it had no bodily presence or enterprise dealings in North Carolina. The court docket, nonetheless, discovered that particular jurisdiction existed as a result of Grand Hook—by its brokers—allegedly engaged in intentional tortious conduct directed at North Carolina, figuring out the hurt can be felt there. The court docket emphasised that bodily presence shouldn’t be required for private jurisdiction when a defendant’s actions are purposefully directed on the discussion board state. Accordingly, the court docket 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, certainly one of which is the place the captive insurer could also be topic to jurisdiction. Whereas the place the captive insurer is headquartered and included are elements 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 objective to handle and insure threat, it ought to stay an energetic a part of threat administration itself.