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 informal opinion on June 11, 2002, representing the position of the New York State Insurance Department.

Re: The Property/Casualty Insurance Security Fund & Vicarious Employment Practices Liability

Question Presented:

Does the Property/Casualty Insurance Security Fund afford protection for the vicarious liability portion of employment practices liability insurance policies issued by an authorized insurer?

Conclusion:

Yes. N.Y. Ins. Law § 7603(a)(1)(B) (McKinney 2000) authorizes the Property/Casualty Insurance Security Fund to cover insurers’ obligations arising under employment practices liability insurance policies, including coverage for vicarious liability provided thereunder, issued by an authorized insurer pursuant to N.Y. Ins. Law § 1113(a)(13) (McKinney Supp. 2002). Please see the text of Article 76 of the Insurance Law for discussion of other important provisions of the law governing the Property/Casualty Insurance Security Fund.

Facts:

There are no facts presented.

Analysis:

N.Y. Ins. Law § 7603(a)(1)(B) (McKinney 2000) provides:

(a)(1) The property/casualty insurance security fund shall be used in the payment of allowed claims remaining unpaid, in whole or in part, by reason of the inability due to insolvency of an authorized insurer to meet its insurance obligations under policies:

. . . .

(B) for all of the kinds of insurance specified in paragraphs four through fourteen . . . of subsection (a) of section one thousand one hundred thirteen of this chapter with respect to coverage of property or risks located or resident in this state, or outside this state but within the United States . . . .

N.Y. Ins. Law § 1113(a)(13) (McKinney Supp. 2002) provides:

(a) The kinds of insurance which may be authorized in this state, subject to the other provisions of this chapter, and their scope, are set forth in the following paragraphs.

. . . .

(13) "Personal injury liability insurance," means insurance against legal liability of the insured, and against loss, damage or expense incident to a claim of such liability. . . , arising out of death or injury of any person, or arising out of injury to the economic interests of any person, as the result of negligence in rendering expert, fiduciary or professional service, but excluding any kind of insurance specified in paragraph fifteen except insurance to protect an insured against liability for indemnification or contribution to a third party held responsible for injury to the insured’s employee arising out of and in the course of employment when such insurance is written pursuant to this paragraph and not written pursuant to paragraph fifteen of this subsection.

Employment practices liability insurance is considered to come within the definition of "personal injury liability insurance" as defined in N.Y. Ins. Law § 1113(a)(13). Office of General Counsel Opinion 01-01-02 (January 9, 2001). Accordingly, the Property/Casualty Insurance Security Fund (the "Fund") will cover claims of vicarious liability under employment practices liability insurance issued by an authorized insurer if the underlying policy provides for the coverage of vicarious liability.

Please note that when acts of discrimination form the basis for employment practices liability, the Fund will only cover claims of vicarious liability or disparate impact. By Circular Letter No. 6 dated May 14, 1994, the New York State Insurance Department modified its longstanding prohibition against liability coverage for discrimination claims, and "concluded that liability coverage for acts of discrimination, when based solely on either disparate impact (as opposed to disparate treatment) or vicarious liability, would not be against public policy and therefore should be permitted."

Please see the text of Article 76 of the Insurance Law for discussion of other important provisions of the law governing the Property/Casualty Insurance Security Fund.

The above opinion is informal and not binding on any court. For further information you may contact Attorney Kristian Earl Lynch at the New York City Office.