The office of General Counsel issued the following informal opinion on April 26, 2001, representing the position of the New York State Insurance Department.
Re: Use of electronic commerce in excess line transactions.
Each of the following questions assumes that the risk has been qualified for placement by an excess line broker. N.Y. Ins. Law §2118 (McKinney 2000).
1. To whom may an unauthorized insurer electronically transmit its application?
2. To whom may an excess line broker electronically transmit an unauthorized insurers application form?
3. On whose web site may an unauthorized insurers application be made available for completion by either the potential insured or by the broker on the insureds behalf?
4. Who may electronically transmit a completed application to an unauthorized insurer?
5. To whom may an unauthorized insurer, electronically transmit non-premium bearing endorsements, certificates of insurance, additional insured endorsements, claims forms, and other claims data?
1. An unauthorized insurer may electronically transmit its application only to the excess line broker.
2. The excess line broker may electronically transmit an unauthorized insurers application to either the broker or to the potential insured.
3. An unauthorized insurers application may be placed on the excess line brokers web site for completion by the excess line broker, a broker or a potential insured.
4. Although a completed application can be electronically transmitted by the broker to the excess line broker, the completed application may only be electronically transmitted to the unauthorized insurer by the excess line broker.
5. A policy or contract, as well as non-premium bearing endorsements and certificates of insurance, may be electronically transmitted to the excess line broker who may then deliver it either directly to the insured or to the broker for delivery to the insured. Although the inquirer does not specify in what context the unauthorized insurer would be transmitting claims forms and other claims data, if it is for the adjustment of claims, N.Y. Ins. Law § 2108(a)(1) (McKinney 2000) requires adjusters to be licensed as either independent adjusters or public adjusters, unless one of the exceptions in N.Y. Ins. Law § 2101(g)(1) or (g)(2) applies.
No facts were provided. The questions posed are general in nature.
N.Y. Ins. Law § 1101(b)(1) (McKinney 2000) enumerates the acts, which if done in this state, whether effected by mail from outside this state or otherwise, constitute the doing of an insurance business for which a license is required. N.Y. Ins. Law § 1101(b)(2) (McKinney 2000) contain what are commonly referred to as the "mail order" exceptions and provides as follows:
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: (Emphasis added).
The specific exception for excess lines insurance is contained in N.Y. Ins. Law § 1101(b)(2)(F), which references:
transactions authorized by section two thousand one hundred five of this chapter with respect to excess lines insurance;
N.Y. Ins. Law § 2105 (McKinney 2000), the licensing statute for excess line brokers, permits the Superintendent to issue an excess line brokers license authorizing a qualified person, firm, association or corporation to procure, subject to statutory restrictions, certain policies of insurance from an unauthorized insurer. This authority is limited to those who are licensed as excess line brokers. A broker does not have the authority to procure policies from an unauthorized insurer, other than those types of policies delineated in N.Y. Ins. Law § 2117(b), (c) (McKinney 2000). If a policy is of the type that must be procured by the excess line broker, the unauthorized insurer may effect the transaction only by mail from outside the state through the excess line broker.
The Department believes that the word "mail" in N.Y. Ins. Law § 1101(b)(2) (McKinney 2000) should be understood to include e-mail for the following reasons: e-mail, like postal mail, requires that the sender do an affirmative act to send a document to a particular party or parties; the document is received in a mailbox; only the party whose mailbox the documents are being sent to can retrieve the documents; a record of the mailing can be kept; and a return receipt can be requested. Thus, excess line transactions completed by e-mail are "being effected by mail from outside the state", provided the excess line broker remains the only contact with the unauthorized insurer.
The use of the unauthorized insurers web site or a hyperlink to the unauthorized insurers web site for "transactions", as that term is used in N.Y. Ins. Law § 1101(b)(2)(F) (McKinney 2000), does not qualify as "mail" under N.Y. Ins. Law § 1101(b)(2) (McKinney 2000), The properties described above, that are shared by both postal mail and e-mail, are not present when the unauthorized insurers web site or a hyperlink to that web site is used. Consequently, transactions done in this manner would not be recognized as being "effected by mail from outside this state", as the statute requires.
Further, while the broker may act as a liaison between the excess line broker and the potential insured for the transaction, only the excess line broker may transact with the unauthorized insurer in procuring the insurance. The unauthorized insurer may not effect the transaction by mail from outside New York or otherwise, with either the broker or the insured. Accordingly, the unauthorized insurer may not, by mail from outside New York or otherwise, transmit the application to either the broker or the potential insured. The unauthorized insurer may, however, e-mail the application to the excess line broker who may then either make it available on its web site or e-mail it to the broker for completion by either the potential insured or by the broker on the insureds behalf. The excess line broker could then e-mail the completed application to the unauthorized insurer.
N.Y. Ins. Law § 2117(h)(2) (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, § 27.0, 27.18 (1999) permit a licensed insurance broker to deliver to the insured an insurance policy or contract procured by the excess line broker. Thus, once the policy or contract has been procured, the unauthorized insurer may, by e-mail from outside New York, deliver the policy or contract to the excess line broker. The excess line broker may then, by e-mail, either deliver the policy or contract directly to the insured or to the broker, who may then deliver the policy or contract to the insured.
The inquirer makes reference to policy documents, endorsements, certificates of insurance, and additional insured endorsements. Endorsements, when issued in compliance with all requisites and statutory provisions, are considered part of the contract to the same extent as if they were actually embodied therein. 2 L. Russ & T. Segalla, Couch on Insurance 3d, § 18:17 (1997). Accordingly, endorsements, including additional insured endorsements, may be e-mailed to the excess line broker who, as discussed above, may then e-mail them either to the insured or to the broker for delivery to the insured.
The inquirer also refers to claims forms and other claims data. It is not clear from the inquiry in what situations the unauthorized insurer would need to deliver claims forms and other claims data to the excess line broker, the broker or the insured. However, if it is in the context of adjusting claims, N.Y. Ins. Law § 2108(a)(1) (McKinney 2000) provides that:
No adjuster shall act on behalf of an insurer unless licensed as an independent adjuster, and no adjuster shall act on behalf of an insured unless licensed as a public adjuster.
N.Y. Ins. Law § 2101(g)(1) (McKinney 2000) contains exceptions to the definition of "independent adjuster". If one of the enumerated exceptions is applicable, a license to act as an independent adjuster is not required. However, none of the exceptions are applicable to either excess line brokers or brokers and consequently, a license to act as an independent adjuster would be required. While N.Y. Ins. Law § 2101(g)(2), contains certain exceptions to the definition of "public adjuster" that permit licensed insurance brokers, to act as public adjusters without obtaining a public adjusters license, without specific facts, I cannot advise whether any of the exceptions would be applicable.
For further information you may contact Associate Attorney Joan Siegel at the New York City Office.