OGC Op. No. 07-02-05
The Office of General Counsel issued the following opinion on February 5, 2007, representing the position of the New York State Insurance Department.
Re: Long Term Care Third-Party designation and Biennial Notice Requirement
If a long term care policy is issued in the state of California by an insurer that is unauthorized in New York and the policyholder subsequently moves to New York and becomes a resident, must an insurer comply with the notice requirements of N.Y. Ins. Law § 3111(e), which mandate that in a long-term care insurance policy an insurer must send notices of nonpayment of premiums due or cancellation for nonpayment of premiums to a third party, if so designated by the insured?
An unauthorized insurer that sells a long-term care insurance policy outside of New York to a non-resident where no modifications are made to the policy does not have to comply with N.Y. Ins. Law § 3111(e), even if the insured becomes a New York resident.
Inquirer states that he/she administers long term care business for insurers. Inquirer asks whether N.Y. Ins. Law § 3111(e) (McKinneys 2006) applies to an insurer that is not authorized in New York but that is authorized in another state, and that sells an individual long term care insurance policy in that state to a person who declares residency in New York after procurement of the policy.
N.Y. Ins. Law § 1102(a) (McKinneys 2006) is relevant to your inquiry. It reads as follows:
No person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized by a license in force pursuant to the provisions of this chapter, or exempted by the provisions of this chapter from such requirement. Any person, firm, association, corporation or joint-stock company which transacts any insurance business in this state while not authorized to do so by a license issued and in force pursuant to this chapter, or exempted by this chapter from the requirement of having such license, shall, in addition to any other penalty provided by law, forfeit to the people of this state the sum of one thousand dollars for the first violation and two thousand five hundred dollars for each subsequent violation.
The above section generally forbids any unauthorized insurer from doing an insurance business in New York.
N.Y. Ins. Law § 1101(b)(1) (McKinneys 2006) sets forth various acts, which, whether effected by mail from outside New York or otherwise, constitute doing an insurance business in New York. However, N.Y. Ins. Law § 1101(b)(2) provides exemptions for certain acts or transactions performed by an unauthorized insurer if effected by mail from outside of New York. The statute states in relevant part:
(b)(2) Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state :
(D) transactions with respect to policies or annuity contracts lawfully issued without this state occurring subsequent to issue, if, at the time of issue, such policies or contracts covered subjects of insurance or risks not resident or located in this state;
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(E) transactions with respect to policies of insurance on risks located or resident within or without this state (except master policies or contracts of group insurance which are subject to the requirements of subparagraph (B) hereof), which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business.1
These provisions ensure that a move to New York is not detrimental to the insured, and that no existing contractual rights will be jeopardized. See 1970 N.Y. Laws 2898 and General Counsel Opinion 02-08-11 dated August 13, 2002. Accordingly, the Office of General Counsel has opined that a move to New York by an individual who procured an insurance policy out of state would not alter any existing contractual rights. Id.
N.Y. Ins. Law § 3111(e) (McKinneys 2006) requires that insurers allow a policyholder to designate a third party to be responsible for maintaining the insurance policy, and states in pertinent part:
(e) Every insurer that has in force a long-term care insurance policy as defined in section one thousand one hundred seventeen of this chapter the premiums for which are paid directly to the insurer by the senior citizen insured, except a policy that qualifies as a long-term care insurance contract as defined in Section 7702B of the Internal Revenue Code, shall permit senior citizen insureds to designate a third party to whom the insurer shall transmit notices of nonpayment of premiums due or notice of cancellation for nonpayment of premiums, as determined by the insurer .
Thus insurers that have in force long-term care insurance policies in New York are required to allow the insured to designate a third party to whom the insurer must transmit notices of nonpayment or cancellation. N.Y. Ins. Law § 3111(e), however, would not apply if the policy is sold outside New York by an unauthorized insurer to a non-resident, even if the insured subsequently becomes a resident, and no modifications are made to the policy.2
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.
1With respect to group policies see also N.Y. Ins. Law § 1101(b)(2)(C).
2As prescribed in N.Y. Ins. Law § 1101(b).