The Office of General Counsel issued the following informal opinion on November 14, 2002, representing the position of the New York State Insurance Department.
N.Y. Ins. Law § 403 (McKinney 2000) Civil Penalties
This is in response to your recent request for an opinion.
Does an insurers failure to comply with N.Y. Ins. Law § 403(d) (McKinney 2000) subject the insurer to penalties under N. Y. Ins. Law § 109 (McKinney 2000) or N. Y. Ins. Law § 403(c) (McKinney 2000)?
An insurers failure to comply with N.Y. Ins. Law § 403(d) (McKinney 2000) would subject the insurer to penalties under N. Y. Ins. Law § 403(c) (McKinney 2000).
No facts were presented. The inquiry is general in nature.
N.Y. Ins. Law § 403(d) (McKinney 2000) provides:
All applications for commercial insurance, individual, group or blanket accident and health insurance and all claim forms, except as provided for in subsection (e) of this section, shall contain a notice in a form approved by the superintendent that clearly states in substance the following:
"Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information, or conceals for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime, and shall also be subject to a civil penalty not to exceed five thousand dollars and the stated value of the claim for each such violation."
Pursuant to the above, an insurer is required to include the "fraud warning" in applications for certain types of insurance and in claim forms. An insurers failure to comply would be a violation of this section and would subject the insurer to penalties under N.Y. Ins. Law § 403(c)(i) (McKinney 2000), which provides:
(c) In addition to any criminal liability arising under the provisions of this section, the superintendent shall be empowered to levy a civil penalty not exceeding five thousand dollars and the amount of the claim for each violation upon any person, including those persons and their employees licensed pursuant to this chapter, who is found to have:
(i) committed a fraudulent insurance act or otherwise violates the provisions of this section; or
(ii) knowingly and with intent to defraud files, makes, or assists, solicits or conspires with another to file or make an application for a premium reduction, pursuant to subsection (a) of section two thousand three hundred thirty-six of this chapter, containing any materially false information or which, for the purpose of misleading, conceals information concerning any fact material thereto.
N.Y. Ins. Law § 109 (McKinney 2000) is also a penalty section. It provides:
(a) Every violation of any provision of this chapter shall, unless the same constitutes a felony, be a misdemeanor.
(b) Every penalty imposed by this section shall be in addition to any penalty or forfeiture otherwise provided by law.
(c) (1) If the superintendent finds after notice and hearing that any authorized insurer, representative of such insurer, licensed insurance agent, licensed insurance broker or licensed adjuster has wilfully violated the provisions of this chapter, he may order such insurer, representative, agent, broker, or adjuster, as the case may be, to pay to the people of this state a penalty in a sum not exceeding five hundred dollars for each such offense.
(2) Failure to pay such penalty within thirty days after the order, unless it is suspended by an order of a court of competent jurisdiction, shall constitute a further violation of the provisions of this chapter.
(3) No penalty shall be imposed pursuant to this subsection if a monetary penalty is otherwise provided in this chapter.
(d) The superintendent may maintain a civil action in the name of the people of the state to recover a judgment for a money penalty imposed by law for the violation of any provision of this chapter.
However, the provisions of N.Y. Ins. Law § 109(c)(1), (2) (McKinney 2000) are made inapplicable to a violation of N.Y. Ins. Law § 403(d) (McKinney 2000) by N.Y. Ins. Law § 109(c)(3) (McKinney 2000).
I trust this is responsive to your inquiry.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.