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 July 24, 2002, representing the position of the New York State Insurance Department.

Re: Omnibus Crime Bill of 1994, 18 U.S.C.A. § 1033(e)

Question:

Is a company that provides credit information on commercial enterprise to various subscribers, including insurance companies, who may use such information to form underwriting judgments, engaged in the business of insurance within the meaning of the Omnibus Crime Bill of 1994,18 U. S. C. A. § 1033(e)?

Conclusion:

No. A company that merely provides credit information on commercial enterprise to various subscribers, including insurance companies, who may use such information to form underwriting judgments, is not engaged in the business of insurance within the meaning of the Omnibus Crime Bill of 1994, 18 U. S. C. A. § 1033(e).

Facts:

The inquiry is from a company ("ABC"), which is engaged in the business of providing credit information concerning various commercial enterprises to its customers whereby the customers can request of ABC specialized credit information concerning parties that they may be dealing with. An employee and a shareholder of ABC was convicted over 14 years ago in a proceeding in federal court of conspiracy to obtain money and property by false and fraudulent pretences and an attempt to evade income tax due by him to the United States of America. One of ABC’s customers is an insurance company. The insurance company is about to enter into a contractual arrangement with ABC whereby ABC would provide credit information to the insurance company for use by them in making their underwriting decisions. The insurance company, because of the prior conviction of ABC’s employee of a felony has suggested that ABC seek a waiver of the provisions of the Omnibus Crime Bill of 1994, 18 U.S.C.A. § 1033(e) from the Superintendent of Insurance.

Analysis:

The Omnibus Crime Bill of 1994, 18 U.S.C.A. § 1033(e), prohibits an insurer or one engaged in the business of insurance from employing an individual with a felony conviction as defined in the statute. However, the statute further provides that a "waiver" may be obtained by written consent of the Superintendent, as regulator of the insurer that wishes to employ the individual convicted of a crime. Section 1033 reads, in relevant part, as follows:

"(e)(1)(A) Any individual who has been convicted of any criminal felony involving dishonesty or a breach of trust, or who has been convicted of an offense under this section, and who willfully engages in the business of insurance whose activities affect interstate commerce or participates in such business, shall be fined as provided in this title or imprisoned not more than 5 years, or both.

(B) Any individual who is engaged in the business of insurance whose activities affect interstate commerce and who willfully permits the participation described in subparagraph (A) shall be fined as provided in this title or imprisoned not more than 5 years, or both.

(2) A person described in paragraph (1)(A) may engage in the business of insurance or participate in such business if such person has the written consent of any insurance regulatory official authorized to regulate the insurer, which consent specifically refers to this subsection.

(f) As used in this section –

the term "business of insurance" means –

(A) the writing of insurance, or

(B) the reinsuring of risks,

by an insurer, including all acts necessary or incidental to such writing or reinsuring and the activities of persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons;

(2) the term "insurer" means any entity the business activity of which is the writing of insurance or the reinsuring of risks, and includes any person who acts as, or is, an officer, director, agent, or employee of that business. . . ."

18 U.S.C.A § 1033 (e) and (f)

The above provision is only applicable to one engaged in the business of insurance. Providing credit information to various companies, including insurance companies, would not constitute being engaged in the business of insurance. Neither would the contractual agreement between ABC and the insurer elevate the relationship so as to make ABC an "officer, director, agent or employee" of the insurer so as to bring it within the purview of Section 1033(f)(1) and (2).

Since ABC is not engaged in the business of insurance the provisions of The Omnibus Crime Bill of 1994, 18 U.S.C.A. § 1033(e), would not be applicable to its employee/shareholder.

For further information you may contact Senior Attorney Adiza Mohammed at the New York City Office.