The office of General Counsel issued the following informal opinion on February 5, 2001, representing the position of the New York State Insurance Department.
Re: Adding a New York risk to an out of state policy issued by an unauthorized insurer
May an insurer, not authorized to do an insurance business in New York, add a New York risk to a policy, when such policy and the amendment thereto were transacted, negotiated, issued and delivered outside of New York?
Yes. Article 11 of the New York Insurance Law does not prohibit an unauthorized insurer from adding a New York risk to a policy, when both the policy and the amendment to such policy were transacted, negotiated, issued and delivered outside of New York state.
The inquiry came from a mutual property/casualty insurer based in Texas. The insurer is licensed in Texas and Illinois, but not in New York. The insurer has a "potential small commercial" account for a distributor of various houseware and seasonal goods. The insurance policy in question was negotiated, issued and delivered in Illinois. The insured is domiciled in Illinois but leases a small office in New York. The distributor travels to the New York office 4-6 times a year and only uses the office to make telephone calls.
The question here is whether adding a New York risk to a policy would constitute doing an insurance business by an unauthorized insurer, in violation of N. Y. Ins. Law §1102(a) (McKinney 2000), when both the policy and the amendment were transacted, negotiated, issued and delivered outside of New York.
N. Y. Ins. Law §1102(a) (McKinney 2000) states in pertinent part:
(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 . 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 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. (emphasis added).
N.Y. Ins. Law §1101(b)(1)(A) (McKinney 2000) states in relevant part:
(1) Except as provided in paragraph two, 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 .
(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. (emphasis added).
If an unauthorized insurer solicits, negotiates, issues or delivers an insurance policy in New York, that insurer would be doing an insurance business in New York, thereby violating N. Y. Ins. Law. §1102(a) (McKinney 2000). However, New York law does not extend to transactions with unauthorized insurers that are not conducted in New York, including transactions covering New York risks. Based on the information supplied, the policy and the amendment in question were negotiated, issued and delivered outside New York. Therefore, New York law does not prevent the insurer from adding the New York risk to the out of state policy.
For further information you may contact Attorney D. Monica Marsh at the New York City Office.