The Office of General Counsel issued the following opinion on June 11, 2001 representing the position of the New York State Insurance Department.
RE: Dividend Plans for Workers Compensation.
1. May a stock property/casualty insurer have multiple participating dividend plans in the same company?
2. Which states law governs the applicability of dividend plans where multi-state policies are involved?
2. Pursuant to N.Y. Ins. Law §4106 (McKinney 2000), New York Law applies to policies that are issued or delivered in New York State.
No specific facts were provided relative to the above questions.
N.Y. Ins. Law §4106 (McKinney 2000), as applicable to stock property/casualty companies, provides in pertinent part as follows:
A stock property/casualty insurance company authorized to do business in this state may include in its charter a provision authorizing the board of directors to permit its policyholders from time to time to participate in the profits of its operations through the payment of dividends to policyholders. For the purpose of carrying into effect this provision, the board of directors may from time to time make reasonable classifications of policies. Every such classification of risks shall be filed with the superintendent and shall not be effective as to policies issued or delivered in this state unless approved by the superintendent as fair and equitable and not unfairly discriminatory . . . No dividends to policyholders shall be declared or paid by any such company except out of its earned surplus. . . (emphasis added).
Thus, a property/casualty insurer is permitted to have more than one participating dividend plan if its Board of Directors makes reasonable classifications of policies. Every such classification of risks must be filed with the Superintendent of Insurance, and will not be effective as to policies issued or delivered in New York unless approved by the Superintendent as fair and equitable and not unfairly discriminatory.
With respect to the inquirers second question regarding what law governs dividend plans where multi-state policies are involved, pursuant to the language of N.Y. Ins. Law §4106 (McKinney 2000), New York law applies to policies that are issued or delivered in New York State.
For further information, you may contact Attorney Pascale Joasil in the New York City office.