The Office of General Counsel issued the following opinion on October 14, 2003, representing the position of the New York State Insurance Department.
Re: Electronic Signatures
Question Presented:
Does the New York State Insurance Department have any rules that an insurance company doing business in New York must adhere to regarding its use of electronic signatures on electronic documents used in its electronic claims operations?
Conclusion:
No. However, in implementing electronic signature technology an insurance company doing business in New York must assure that the business processes it adopts in connection with its use of electronic signatures must render the company in compliance with all applicable provisions of the New York Insurance Law and regulations.
Facts:
ABC Mutual Insurance Company ("ABC Mutual") is in the process of changing over its claims operation and work environment to that of a paperless (meaning electronic) environment. ABC Mutual currently electronically scans all the paper documents it receives having to do with insurance claims and, after an unspecified period of time, destroys the paper documents.
ABC Mutual anticipates that it will need to send documents electronically which are to be used in insurance claims processing. Such documents will include correspondence with insureds, attorneys, adjusters, and third-party claimants. ABC Mutual may also wish to send electronic documents regarding the filing of workers compensation forms.
Analysis:
The federal Electronic Signatures in Global and National Commerce Act ("E-Sign"), 15 U.S.C.A. §§ 7001-7031 (West Supp. 2002), provides that electronic records may not be denied legal effect, validity or enforceability solely because they are created electronically.
The New York Electronic Signatures and Records Act ("ESRA") which is contained in the New York State Technology Law §§ 101-109 (McKinney 2003) in Section 102(3) defines "electronic signature" broadly as "an electronic sound, symbol or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record."
Section 104 authorizes the Office for Technology, the electronic facilitator to establish rules and regulations governing the use of electronic signatures. They may be found at N.Y. Comp. Codes R. & Regs. tit. 9, Part 540 (2003). ESRA is consistent with federal E-Sign and in § 105(3) provides that an electronic record has the same force and effect as non-electronic records. Neither the law, nor the Office of Technology regulations implementing the law, mandate the use of any particular electronic signature technology.
Both the federal E-Sign and ESRA authorize the use and acceptance of electronic signatures and electronic records in commercial transactions, and confirm their legal validity. Every insurance company that chooses to incorporate electronic signatures into its business operation must decide for itself which electronic signature technology is best for it. However, since neither of the foregoing electronic laws supersede the requirements of the New York Insurance Law or regulations applicable to an insurance company doing business in New York, such an insurance company must continue to comply with applicable provisions of the New York Insurance Law. Therefore, before an insurance company implements an electronic business process it should review that process in order to assure that the electronic technology it wishes to adopt and the business process changes such technology entails, will keep the insurance company fully in compliance with applicable provisions of the New York Insurance Law and regulations.
The Department issued Circular Letter No. 33 (1999) in which it advised that insurance transactions may be effected by electronic means since most existing provisions of the Insurance Law do not proscribe such activities. This Department has consistently encouraged the use of electronic transactions in the insurance business. In addition, the Department has opined that an electronically signed document may constitute a record that is maintained in a durable medium within the meaning of N.Y. Comp. Codes R. & Regs. tit. 11, § 243 (1996) (Regulation 152). Therefore, if the electronic records comply with the standards contained in the aforementioned regulation, it would be acceptable as a means of records retention. Opinions dealing with the subject may be viewed on the Departments web site at www.ins.state.ny.us.
For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.