OGC Op No 09-08-06
The Office of General Counsel issued the following opinion on August 13, 2009 representing the position of the New York State Insurance Department.
Re: Mail Order Exemptions
May an unauthorized insurer engaged in the business of selling group life insurance policies to New York employees through the mail provide its telephone number and/or e-mail address in mail communications for purposes of answering customer-initiated insurance questions?
An unauthorized insurer may not provide its telephone number for purposes of engaging in telephone conversations, even if the communications are customer-initiated and devoid of any acts of solicitation by the insurer. Furthermore, an unauthorized insurer may not conduct group life insurance transactions by phone or through an internet web page.
The inquiry is of a general nature, without reference to particular facts.
N.Y. Ins. Law § 1102(a) (McKinney 2000 & Supp. 2005), which prohibits a person, firm, association, corporation or joint-stock company from doing an insurance business in New York without a license, is relevant to your inquiry. That statute reads as follows:
(a) 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.
Insurance Law § 1101(b)(1), which defines what constitutes the doing of an insurance business, also is relevant to your inquiry. That statute states, in pertinent part:
(b)(1) Except as provided in paragraph two, three or three-a of this subsection, any of the following acts in this state, effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of section three hundred two of the civil practice law and rules:
(A) making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association, or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts;
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(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance;
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(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter.
Notwithstanding the provisions quoted above, Insurance Law §1101(b)(2) establishes certain "mail order" exceptions, which permit an unauthorized insurer to engage in certain activities from without the state, so long as those activities are done by mail. Insurance Law §1101(b)(2) 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, but section one thousand two hundred thirteen of this chapter shall nevertheless be applicable to such insurers:
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(B) transactions with respect to group life, group annuity, group accident and health or blanket accident and health insurance (other than any transaction with respect to a group annuity contract funding individual retirement accounts or individual retirement annuities, as defined in section four hundred eight of the Internal Revenue Code, funding annuities in accordance with subdivision (b) of section four hundred three of such code or providing a plan of retirement annuities under which the payments are derived wholly from funds contributed by the persons covered):
(i) where such groups conform to the definitions of eligibility contained in;
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(III) section four thousand two hundred thirty-eight (except paragraphs six and seven of subsection (b) thereof) of this chapter; and
(ii) where the master policies or contracts were lawfully issued without this state in a jurisdiction.
Where a master policy has been issued and delivered outside of this state, in a jurisdiction where the insurer is authorized to do business, and the insurer issues insurance policies to “groups” as that term is defined in Insurance Law §4235, then an insurer may transact business by mail to the New York members of such groups. See OGC Opinion No. 05-12-04, dated December 5, 2005 entitled, “Mail Order Exemptions.”
The mail order exception only applies to contact occurring through the mail, including electronic mail. Id. The exception, however, does not apply to other activity on the internet, including internet conference calls.
Therefore, if an unauthorized insurer did business through the internet or telephone, it would constitute the doing of an insurance business in violation of Insurance Law §1102, which permits such activity only pursuant to a duly-issued license from the New York State Insurance Department. Accordingly, an unauthorized insurer may not include its telephone number to its customers for purposes of engaging in telephone conversations, even if the communications are customer-initiated and devoid of any intended acts of solicitation by the insurer.
For further information you may contact Associate Attorney Roger Rock at the New York City Office.