The Office of General Counsel issued the following opinion on May 5, 2004, representing the position of the New York State Insurance Department.
Re: Notification to Terminate Group Accident and Health Insurance Sent by Electronic Transmission
Question Presented:
May notification of termination of a group accident and health insurance policy be submitted to certificate holders by electronic transmission (i.e., e-mail)?
Conclusion:
Notification of termination of a group accident and health insurance policy may be submitted to certificate holders by electronic transmission (i.e., e-mail) where the certificate holders have affirmatively consented to such procedure.
Facts:
No specific facts were provided.
Analysis:
N.Y. Labor Law § 217 (McKinney 2002), among other things, requires a policyholder of a group accident and health insurance policy to provide notification of termination to all persons covered under the policy ("certificate holders"). Section 217 states in relevant part:
1. Statement of public policy. The legislature finds that in today's society health and accident insurance coverage for medical care and treatment is of prime importance to all employees and their dependents within the state of New York. Adequate and prospective planning is necessary to insure that such coverage is in effect at the time of commencement of the need for medical and health care. Many employees and their dependents in New York State are covered through group policies issued to their employers, employee organizations or trustees of employee welfare funds and no statutory provision has heretofore afforded these employees and their dependents the right as certificate holders of a group accident or group health policy to receive notification of the intended termination or substitution of the group policy and to have premiums remitted to insurers on their behalf should they choose to exercise continuation privileges available under law.
Accordingly, it is the declared public policy of the state of New York that sufficient and timely notice be afforded each employee covered under a group accident or group health policy of the intended termination or substitution of such policy and that employers be required to remit premiums to insurers on behalf of individuals exercising their right to continuation coverage under the law.
2. Definitions. As used in this section:
(a) "Policyholder" shall mean any person, co-partnership, corporation, trade association, joint stock association, incorporated or unincorporated association, trustees or labor organization as defined in subsections (c) and (g), respectively, of section four thousand four hundred two of the insurance law or any other entity to whom a policy or contract of group accident, group health or group accident and health insurance has been issued.
For the purpose of this section, "policyholder" shall also include any group remitting agent.
(b) "Certificate holder" shall mean any person insured, on either a contributory or non-contributory basis, by a policy or contract of group accident, group health or group accident and health insurance, as well as persons covered by group remittance policies.
3. Notification. A policyholder shall, subsequent to receipt from the insurer of notice of termination pursuant to subsection (k) of section four thousand two hundred thirty-five of the insurance law provide written notice to the certificate holders of such policy of such termination. In any case where the policyholder is substituting such policy with another policy providing similar coverage for the same certificate holders, the policyholder shall provide certificate holders with a written notice including therein the name of the substituted insurer. Where the employees are represented by a labor organization, such notice shall be given to the representative of that labor organization. Such written notice shall be in accordance with the rules and regulations of the superintendent of insurance, promulgated pursuant to subsection (1) of section four thousand two hundred thirty-five of the insurance law.
N.Y. Ins. Law § 4235(k) (McKinney Supp. 2004) requires an insurer of a group accident and health policy to include in its notification of termination a reference to the policyholder's responsibilities under N.Y. Labor Law § 217.
Whenever an insurer elects to terminate any policy as described in this section, such insurer shall include in his notification of intent to terminate such policy reference to the policyholder's responsibilities under section two hundred seventeen of the labor law. Whenever any policy as described in this section terminates as a result of a default in payment of premiums, the insurer shall notify the policyholder that termination has occurred or will occur and shall include in his notification reference to the policyholder's responsibilities under section two hundred seventeen of the labor law.
N.Y. Ins. Law § 4235(k) (McKinney Supp. 2004)
N.Y. Comp. Codes R. & Regs. tit. 11, § 55.2 (c) and (d) (Regulation 78) further require that the insurer advise the policyholder that the notification the policyholder provides to the certificate holders shall be in writing and either hand delivered to the certificate holders or mailed to the certificate holders' homes.
(c) The insurer shall advise the policyholder that the policyholder must give written notice of the intended termination to each certificate holder resident in New York State insured under the group policy by hand-delivering or mailing to the certificate holder a copy of the insurer's notice of termination and a covering letter advising the certificate holders of the intended termination.
(d) The insurer shall advise the policyholder that the policyholder's notice to the certificate holder shall be either:
(1) hand-delivered by the policyholder to the certificate holder at the certificate holders place of employment (e.g., by including the notice in the certificate holders pay envelope) at least nine days prior to the intended date of termination; or
(2) mailed by the policyholder to each certificate holder at the certificate holders last known residential address at least nine days prior to the intended date of termination.
N.Y. Comp. Codes R. & Regs. tit. 11, § 55.2 (c) and (d) (Regulation 78).
The Department interprets statutes that provide for "delivery," "notice," and the like to permit electronic communications, in recognition of the authority established under the Electronic Signatures and Records Act ("ESRA"), N.Y. State Tech. Law Art. 1 (McKinney 2003) and the federal Electronic Signatures in Global and National Commerce Act ("E-SIGN"), 15 U.S.C. §§ 7001 7031.
ESRA creates a statutory structure in New York State that supports the use of electronic records in everyday public and business undertakings. N.Y. State Tech. Law § 102(2) states:
"Electronic record" shall mean information, evidencing any act, transaction, occurrence, event, or other activity, produced or stored by electronic means and capable of being accurately reproduced in forms perceptible by human sensory capabilities.
N.Y. State Tech. Law § 105(3) states that electronic records "shall have the same force and effect as those records not produced by electronic means." Thus, an electronic record has the same legal effect as one that is written.
E-SIGN, the federal Act, provides that electronic records may not be denied legal validity simply because they are made electronically. E-SIGN preempts inconsistent state laws, other than state statutes patterned after the Uniform Electronic Transactions Act ("UETA"). 15 U.S.C. § 7001(a) states in relevant part:
(a) Notwithstanding any statute, regulation, or other rule of law . . . with respect to any transaction in or affecting interstate or foreign commerce
(1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and
(2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.
Under E-SIGN, electronic documents are given the same force in law as paper signatures and documents.
It should be noted, however, that under both ESRA and E-SIGN, consumers must consent to doing business electronically.
Hence, notification of termination of a group accident and health insurance policy may be submitted to certificate holders by electronic transmission (i.e., e-mail) where the certificate holders have affirmatively consented to such procedure.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.