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 opinion on May 22, 2001 representing the position of the New York State Insurance Department.

RE: N.Y. Comp. Codes R. & Regs. tit. 11 § 420 (2001) (Reg. 169) Notice Requirements.

Questions Presented:

1. Does N.Y. Comp. Codes R. & Regs. tit. 11 § 420.24 (2001) require that privacy notices be mailed by July 1, 2001 or that the notices be received by that date?

2. If a licensee has a system in place by July 1, 2001 to provide initial notices to consumers and customers, may the initial notice to customers be sent post July 1 with renewals of the customer’s business?

3. Does the exception in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.14(a)(1) (2001) apply to the activities of insurance brokers placing contracts of insurance with insurers on behalf of consumers?

4. Does the exception under N.Y. Comp. Codes R. & Regs. tit. 11 §420.14(a)(1) (2001) apply to the notice and opt-out requirements pertaining to the broker’s customers?

5. If the conditions in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2)(i) are met, is an insurance broker, who has binding authority for an insurer, subject to the notice and opt out requirements in N.Y. Comp. Codes R. & Regs. tit. 11 §§ 420.4 – 420.9 (2001)?

6. Are there relationships, other than binding authority, that would make the insurance broker an employee, agent, or other representative of the insured?

Conclusions:

1. N.Y. Comp. Codes R. & Regs. tit. 11 § 420.24 (2001) requires that initial privacy notices be provided by July 1, 2001. Thus, if the licensee is mailing its notices, they must be mailed by July 1, 2001.

2. No. N.Y. Comp. Codes R. & Regs. tit. 11 § 420.24 (2001) requires that, if the mail is used, initial privacy notices must be mailed by July 1, 2001.

3. Depending on the facts, N.Y. Comp. Codes R. & Regs. tit. 11 § 420.14(a)(1) (2001) could apply to a broker.

4. No. N.Y. Comp. Codes R. & Regs. tit. 11 420.14(a)(1) (2001) applies to initial notice and opt out requirements for consumers, not for customers.

5. No. See N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001).

6. The operative language in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001) is "employee, agent or other representative of a principal", not of an insured.

Facts:

No facts were presented. The inquiry was general in nature.

Analysis:

Mailing of Notice

N.Y. Comp. Codes R. & Regs. tit. 11 § 420.24(b) (2001) provides:

(1) Notice requirement for consumers who are the licensee’s customers on the compliance date. By July 1, 2001, the licensee shall provide an initial notice, as required by section 420.4 of this Part, to consumers who are the licensee’s customers on July 1, 2001.

(2) Example. A licensee meets the requirement in section (b)(1) of this subdivision, if, by July 1, 2001, a licensee has established a system for providing an initial notice to all new customers and has mailed the initial notice to all the licensee’s existing customers.

This section clearly requires that the licensee, if utilizing mail, must mail the initial notice to all of its existing customers by July 1, 2001 in order to be in compliance.

Notice by Brokers

N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(1) (2001) defines the term "licensee". An insurance broker would come under the definition of a "licensee". However, N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001) provides, in pertinent part:

 

(2) (i) A licensee is not subject to the notice and opt out requirements for nonpublic personal financial information set forth in sections 420.4 through 420.9 of this Part if the licensee is an employee, agent, sublicensee, or other representative of another licensee ("the principal") and:

(a) The principal otherwise complies with, and provides the notices required by, the provisions of this Part; and

(b) The licensee does not disclose any nonpublic personal information of a consumer or customer to any person other than the principal from or through which such consumer or customer seeks to obtain or has obtained a product or service, or its affiliates in a manner permitted by this Part.

(ii) Examples of employee, agent or other representative of a principal:

(d) An insurance broker that has binding authority for an insurer;

Thus, an insurance broker that has binding authority for an insurer would not be subject to the notice and opt out requirements for nonpublic personal financial information set forth in N.Y. Comp. Codes R. & Regs. tit. 11 §§ 420.4 through 420.9 (2001), provided that the requirements contained in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2)(i)(a) and (b) (2001) are met. The notice and opt out requirements set forth in N.Y. Comp. Codes R. & Regs. tit. 11 §§ 420.4 through 420.9 (2001) pertain to both consumers and customers.

Conversely, pursuant to N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001), an insurance broker that does not have binding authority for an insurer would not be exempted from the notice and opt out requirements for nonpublic personal financial information, nor would a broker with binding authority, if the requirements in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2)(i)(a)and (b) (2001) were not met. However, if, in either of the situations discussed in this paragraph, the nature of the transaction came within one of the exceptions contained in N.Y. Comp. Codes R. & Regs. tit. 11 §§ 420.14 or 420.15 (2001), the broker would not have to provide the initial notice to consumers required under N.Y. Comp. Codes R. & Regs. tit. 11 § 420.4(a)(2) (2001) and the opt out provisions contained in N.Y. Comp. Codes R. & Regs. tit. 11 §§ 420.7 and 420.10 would not apply. This, of course, would be a factual determination.

Although the inquirer’s last question asks whether there are relationships, other than binding authority, that would make the insurance broker an employee, agent or other representative of the insured, the operative language in N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001) is "employee, agent or other representative of a principal", not of an insured. Insofar as whether there are other relationships that would make a broker an employee, agent or other representative of the principal, the language in that section is illustrative, not exhaustive. Thus, the inquirer was directed to provide a description of the relationship, together with a legal analysis of why the inquirer believes that the relationship comes within the scope of N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001), and the Department will later advise whether it is in agreement. If the relationship is such that it comes within the scope of N.Y. Comp. Codes R. & Regs. tit. 11 § 420.3(p)(2) (2001), the broker will not be subject to the notice and opt out requirements set forth in N.Y. Comp. Codes R. & Regs. tit. 11 §§ 420.4 through 420.9 (2001).

For further information, you may contact Associate Attorney Joan Siegel at the New York city office.