New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on January 12, 2000, representing the position of the New York State Insurance Department.

Federal Crime Bill’s prohibition against the hiring by insurance companies of individuals with felony convictions.

Questions Presented:

Does the Federal Crime Bill of 1994 (hereinafter the "Federal Crime Bill") prohibit insurance companies from hiring individuals with felony convictions?

If so, may an individual who is "disqualified" from working for an insurance company obtain a "waiver" from the Superintendent of Insurance allowing her or him to be employed by an insurer?

If such a "waiver" may be granted, what is the process for obtaining one? May the individual apply on their own, or must they be sponsored by an insurance company that seeks to employ them?

Would the fact the individual has received a "Certificate of Relief from Disabilities" be taken into account by the Superintendent in ruling on a "waiver" request?

Conclusion:

Yes. 18 U.S.C.A. §1033(e) provides that any individual who has been convicted of "any criminal felony involving dishonesty or a breach of trust" may not engage in the ‘business of insurance" as defined therein. Violation of the prohibition is punishable by fine or imprisonment or both.

Yes. 18 U.S.C.A. §1033(e) also states that an individual otherwise prohibited from engaging in the business of insurance may do so with the written consent of "any insurance regulatory official" authorized to regulate the insurer that the individual will be acting on behalf of.

The individual seeking the waiver must submit an application to the Superintendent of Insurance. Information should include all details concerning the conviction, the name of the licensed insurer that wishes to employ the individual and the specific duties of the position that the insurer is offering to the individual. The individual may not request a waiver in the absence of a specific offer of employment from a licensed insurer. If the individual is seeking a waiver for the purpose of obtaining an agent’s license, then the waiver application must include the name(s) of the insurer(s) which the individual would be authorized to act on behalf of.

The fact that the individual has received a Certificate of Relief from Disabilities will be one factor considered in ruling on the waiver request. It will not, however, result in automatic granting of the requested waiver.

Facts:

An inquiry was received concerning an individual with a felony conviction who has been denied employment by an insurance company.

Analysis:

The Omnibus Crime Bill of 1994, 18 U.S.C.A. §1033, reads, in relevant part, as follows:

"(e)(1)(A) Any individual who has been convicted of any criminal felony involving dishonesty or a breach of trust, or who has been convicted of an offense under this section, and who willfully engages in the business of insurance whose activities affect interstate commerce or participates in such business, shall be fined as provided in this title or imprisoned not more than 5 years, or both.

(B) Any individual who is engaged in the business of insurance whose activities affect interstate commerce and who willfully permits the participation described in subparagraph (A) shall be fined as provided in this title or imprisoned not more than 5 years, or both.

(2) A person described in paragraph (1)(A) may engage in the business of insurance or participate in such business if such person has the written consent of any insurance regulatory official authorized to regulate the insurer, which consent specifically refers to this subsection.

(f) As used in this section--

(1) the term "business of insurance" means--

(A) the writing of insurance, or

(B) the reinsuring of risks,

by an insurer, including all acts necessary or incidental to such writing or reinsuring and the activities of persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons;

(2) the term "insurer" means any entity the business activity of which is the writing of insurance or the reinsuring of risks, and includes any person who acts as, or is, an officer, director, agent, or employee of that business…."

Based upon the above, an insurer would, in the first instance, be prohibited by federal law from employing an individual with a felony conviction as defined in the statute. However, the statute further provides that a "waiver" may be obtained by written consent of the Superintendent, as regulator of the insurance company that wishes to employ the individual.

This Department’s existing procedure, established in 1996, requires that the individual seeking the waiver submit an application. The Department conducts an investigation equivalent to that which would be done if the individual were applying for a license. The applicant must provide all relevant details, including those relating to the felony conviction itself, the name of the licensed insurer that wishes to employ the individual and the specific duties of the position that the individual would be employed in. The individual may not request a waiver in the absence of a specific offer of employment from a licensed insurer. The Department will then determine the individual’s "fitness" to be employed in that position. An individual may not apply for a "blanket" waiver. The facts relating to the felony conviction and the employment duties allow the Department to make a meaningful assessment of the appropriateness of granting the waiver. If the individual were applying for a waiver for the purpose of obtaining an agent’s license, then he or she could apply directly to the Department and furnish the name of the company or companies that he or she would be authorized to act on behalf of.

The Certificate of Relief from Disabilities is one factor that would be considered in ruling on a waiver application. Obviously, obtaining a certificate of relief is a factor that would mitigate in favor of granting the waiver. However, the Department would still conduct a full investigation before ruling on the application.

If the Department determines that a waiver should not be granted the applicant will be afforded an administrative hearing (if requested) to show cause why the refusal to grant the waiver should not be made final. If the decision after the hearing is to make such denial final the applicant has the right to seek judicial relief from the administrative decision pursuant to Article 78 of the New York Civil Practice Law and Rules and N.Y. Ins. Law §326(a) (McKinney 1985).

For further information you may contact Associate Attorney Samuel Wachtel at the New York City Office.