The office of General Counsel issued the following informal opinion on March 29, 2001, representing the position of the New York State Insurance Department.
Re: Subsidiaries use of Parent Companys Name in Advertising
Questions Presented:
1. Is it permissible for subsidiaries, licensed under their own names, to use the name of their parent company, an insurance agency, in advertising services provided by the subsidiaries themselves, without mentioning their names?
2. Is it considered solicitation if Insurance Agency A sends a letter to Insurance Agency B advertising services that Agency A can provide to Agency B?
Conclusions:
1. No.
2. Yes.
Facts:
A property/casualty insurance agency, as parent company, has three (3) subsidiaries. Each subsidiary is licensed in its own name. There has been no filing with this Department or the county clerk by the subsidiaries to use a brand name. However, the parent companys brand name is used in advertising services that are provided solely by the subsidiaries. No mention is made in the advertisement of the name of the subsidiaries. All business generated as a result of the mailing is placed with the subsidiaries.
On a separate note, is it solicitation when Agency "A" sends correspondence to Agency "B" advising Agency "B" of the services provided by Agency "A"?
Analysis:
N. Y. Ins. Law § 2102(a)(1) (McKinney 2000) which governs the licensing of agents, brokers and adjusters, states:
(a)(1) No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
Pursuant to N. Y. Ins. Law § 2102(a) (McKinney 2000), after all requirements are met, the Department will issue a license to an applicant to operate under a specific name. The licensee must use that name in advertising or transacting business unless he applies and gets permission from the Departments Licensing Bureau to use another name and makes the proper filing with the county clerk. If the licensee uses a name, other than the one he is licensed under, he is, in essence, doing business without a license in violation of N. Y. Ins. Law § 2102(a) (McKinney 2000).
A licensed name must be identified so as not to mislead the consumer. The subsidiaries in question are licensed under their own separate names. The Department has not approved their use of a brand name, as such they are only allowed to use the names they are licensed under. It is also a violation of N. Y. Ins. Law § 2110(a)(3) & (4) (McKinney 2000) for any agent or broker to engage in any dishonest or untrustworthy act. The subsidiaries, by using a name they are not licensed under and that they know may mislead the public, would be engaging in untrustworthy conduct in violation of Section 2110.
In addition, N. Y. Gen. Bus. Law § 130 (McKinney 2001) provides that no person may conduct a business under an assumed name unless a certificate is filed with the county clerk in each county where he is doing business setting forth certain information.
N. Y. Gen. Bus. Law § 130(1) (McKinney 2001) states in relevant part:
(1) No person shall hereafter (i) carry on or conduct or transact business in this state under any name or designation other than his or its real name unless:
(a) Such person shall file in the office of the clerk of each county in which such business is conducted or transacted a certificate setting forth the name or designation under which and the address within the county at which such business is conducted or transacted, the full name or names of the person or persons conducting or transacting the same, including the names of all partners, with the residence address of each such person, and the age of any person less than eighteen years of age. Each certificate shall be executed and duly acknowledged by the person or, if there be more than one, by all of the persons conducting the business.
N.Y. Penal Law § 190.20 (McKinney 1999) also states:
"A person is guilty of false advertising when, with intent to promote the sale or to increase the consumption of property or services, he makes or causes to be made a false or misleading statement in any advertisement addressed to the public or to a substantial number of persons; except that, in any prosecution under this section, it is an affirmative defense that the allegedly false or misleading statement was not knowingly or recklessly made or caused to be made. False advertising is a class A misdemeanor."
In conclusion, a subsidiary can only use the name the Department licensed it to use. It must file and get approval from both this Department and the county clerk to use a brand name or any other name. If these procedures are not followed, the subsidiary is prohibited from using any other name, including the name of its parent company, in advertisements or business transactions. In using the name of the parent company in advertisements, prospective insureds are likely to believe that the services will be provided by the parent company. However, if they attempt to purchase the services, they would be channeled to the subsidiaries, whose names were not used in the advertisement. The subsidiaries would, in essence, be engaging in deceptive and misleading advertisement in violation of New Yorks Insurance Law, the General Business Law and the Penal Law.
Also requested, was an opinion on whether the following scenario constitutes solicitation:
"Agency A sends a letter to Agency B advertising services (such as placement options of certain classes of risks) that Agency A can provide to Agency B".
N. Y. Ins. Law §2102(a)(1) (McKinney 2000) states in relevant part:
(a)(1) No person, firm, association, corporation shall act as an insurance agent, insurance broker in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
N. Y. Ins. Law § 2101(a) (McKinney 2000) defines an insurance agent as:
(a) [a]ny authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization or annuity contract .
Assuming that Agency A is claiming, by sending the letter, that it can place some of Agency Bs risks, Agency A is effectively soliciting insurance business which requires a proper license pursuant to N. Y. Ins. Law §2102(a)(1) (McKinney 2000).
For further information you may contact Attorney D. Monica Marsh at the New York City Office.