OGC Opinion No. 09-12-04
The Office of General Counsel issued the following opinion on December 22, 2009, representing the position of the New York State Insurance Department.
RE: Independent insurance agents – consent to electronic transactions
1. Must an insurer obtain an independent insurance agent’s consent to engage in an electronic transaction prior to the insurer sending insurance policies and other related documents to the agent electronically?
2. If the insurance agent’s consent is required, how may the consent be obtained?
1. Yes, the insurer must obtain the agent’s consent to engage in an electronic insurance transaction before sending insurance policies and related documents to the agent electronically.
2. The insurance agent’s consent to engage in an electronic transaction may be obtained in a number of ways. For example, the contract between the insurer and the agent may address the matter. However, if the contract does not specifically grant such consent, the course of conduct between the insurer and the independent agent may establish the agent’s implicit consent to do business electronically. For example, the insurer may have been sending insurance policies electronically to the independent agent for some time without an objection being raised by the independent agent.
The inquiry is of a general nature, without reference to particular facts.
I. Need for consent to an electronic transaction
The New York Insurance Law does not address whether an insurer may transmit insurance policy forms to its agents in electronic form to forward to their clients, the insureds. See Opinion of Office of General Counsel No. 05-11-28 (November 23, 2005). However, N.Y. State Tech. Law (“ESRA”) § 309 (McKinney Supp. 2009) is relevant to the inquiry. That statute reads as follows: “Nothing in this article shall require any entity or person to use an electronic record or an electronic signature unless otherwise provided by law.” Similarly, the federal Electronic Signatures in Global and National Commerce Act (“E-SIGN”) provides that this statute does not “require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party.” 15 U.S.C. § 7001(b)(2).
These state and federal laws require that both parties obtain the consent of the other party to engage in an electronic transaction. See Opinion of Office of General Counsel No. 09-08-04 (August 7, 2009). Consequently, an insurer must obtain the consent of the independent agent before transmitting an insurance policy and other documents to the independent agent electronically.
II. How consent may be demonstrated
Although consent is required, it can be demonstrated in a number of ways. For example, the contract between the insurer and its insurance agent may address whether the insurer may transmit insurance policies and related documents electronically. However, if there is no such provision in the contract, the course of business conduct between the insurance agent and the insurer may establish the agent’s implicit consent to engage in an electronic transaction. See Murphy v. Kuhn, 90 N.Y. 2d 266, 660 N.Y.S. 2d 371, 374 (Ct.App. 1997). That may be the case where, for example, the insurer has been sending the independent agent insurance policies electronically for some time, without objection by the agent. Whether consent may be implied depends upon the particular facts of each circumstance.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.