New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on January 17, 2003, representing the position of the New York State Insurance Department.

RE: Submission of Part C Affidavits to Excess Line Brokers by Means of Facsimile Transmission.

Question Presented:

May a New York excess line broker accept Part C affidavits from producing brokers sent to it by means of a facsimile transmission under N.Y. Comp. Codes R. & Regs. tit. 11, Part 27 (1994) (Regulation 41)?

Conclusion:

Yes. An excess line broker may accept a Part C affidavit sent to it by a producing broker by means of a facsimile transmission and use it in order to satisfy the requirement in Regulation 41 that there be proof of declinations before business may be placed by an excess line broker with an unauthorized insurer.

Facts:

Currently, ABC Association ("ABC") accepts only originally signed (with "wet" signatures) supporting affidavits as it believes is required by Regulation 41. As a result of ABC’s interpretation of the regulatory requirement, excess line brokers have not been accepting Part C affidavits, which are sent to them by means of a facsimile transmission from producing brokers.

The inquirer stated that this situation creates a time delay for an applicant in obtaining coverage in the excess line market because it may take a few days before the producing broker can get an originally signed Part C affidavit to the excess line broker. Whereas, if a Part C affidavit sent by means of a facsimile transmittal was acceptable, the time delay would be eliminated. The inquirer stated that, "A number of excess line brokers have told me that permission to accept facsimile Part C affidavits would greatly expedite their filings due to the nature of the paper flows in their offices."

Analysis:

The duties of excess line brokers regarding the placement of business with an unauthorized insurer are contained in N.Y. Ins. Law § 2118 (McKinney Supp. 2003). Under subsection (b), within forty-five days after a policy is procured, the licensee is required to submit specified insurance documents to the excess line association. Specifically, paragraph (3)(A) thereof specifies, in pertinent part, that such documents:

…shall be accompanied by a statement subscribed to, and affirmed by, the licensee or sublicensee as true under the penalties of perjury that, after diligent effort, the full amount of insurance required could not be procured, from authorized insurers, each of which is authorized to write insurance of the kind requested and which the licensee has reason to believe might consider writing the type of coverage or class of insurance involved.…shall be accompanied by a statement subscribed to, and affirmed by, the licensee or sublicensee as true under the penalties of perjury that, after diligent effort, the full amount of insurance required could not be procured, from authorized insurers, each of which is authorized to write insurance of the kind requested and which the licensee has reason to believe might consider writing the type of coverage or class of insurance involved, and further showing that the amount of insurance procured from an unauthorized insurer is only the excess over the amount procurable from an authorized insurer. The licensee, however, shall be excused from affirming that a diligent effort, as defined above, was made to procure the coverage from authorized insurers if the licensee’s affidavit is accompanied by the affidavit of another broker involved in the placement affirming as true under the penalties of perjury that, after diligent effort by the affirming broker, the required insurance could not be procured from an authorized insurer which the affirming broker had reason to believe might consider writing the type of coverage or class of insurance involved…..[Emphasis added]

Section 27.5 of Regulation 41 implements the statutory requirement for supporting affidavits. It provides, among other things, that each affidavit will be on a form prescribed by the Superintendent, consisting of parts A and C. Part A is the affidavit by the excess line broker and Part C is the affidavit by the producing broker, which is prepared if any of the required declinations from authorized insurers has been obtained by the producing broker. Under subdivision (c)(1) the excess line broker is required to obtain "…a properly completed and executed affidavit from the producing broker (part C), if the producing broker has obtained any of the requisite declinations from authorized insurers or if the producing broker provided the insured with the written notice required by subdivision (e) of this section." Subdivision (e) requires that the insured be advised in writing that the insurer writing the coverage is not licensed to do an insurance business in New York and is not subject to supervision in New York; that in the event of insolvency losses will not be covered by a New York State security fund; and that the policy may not be subject to all of the insurance regulations as to policy forms.

Facsimile transmissions have been fully integrated into business and legal practices. For example, under CPLR Rule 2103(b)(5) (McKinney Supp. 2003), for example, the service of interlocutory documents in litigation upon an attorney by transmitting the paper by "facsimile transmission" provided that the facsimile telephone number is designated by the attorney for that purpose, is permitted. Subdivision (f)(3) of the foregoing CPLR Rule defines "Facsimile transmission," for its purposes, as follows:

3. "Facsimile transmission" means any method of transmission of documents to a facsimile machine at a remote location which can automatically produce a tangible copy of such documents.

Neither N.Y. Ins. Law § 2118 nor § 27.5 of Regulation 41 require that the Part C affidavit Part C that is filed with ABC by the excess line broker be an original document containing a wet signature of the producing broker. The only requirements specified therein are that the affidavit shall be properly completed and executed by the producing broker and affirmed by him or her as true under the penalties of perjury and that the insured was advised in writing of the pertinent facts surrounding a placement with an unauthorized insurer. Accordingly, a signed affidavit Part C, a reproduction of which is received by the excess line broker through a facsimile transmission, satisfies the statutory and regulatory requirements.

CPLR Rule 4539 (McKinney Supp. 2003) concerns the admissibility in evidence of reproductions of originals. Subsection (b) was added by Chapter 27 of the laws of 1996 and provides, as follows:

(b) A reproduction created by any process which stores an image of any writing, entry, print or representation and which does not permit additions, deletions, or changes without leaving a record of such additions, deletions, or changes, when authenticated by competent testimony or affidavit which shall include the manner or method by which tampering or degradation of the reproduction is presented, shall be as admissible in evidence as the original.

Therefore, should the accuracy of the information contained in the Part C affidavit (including the signature of the producing broker) be questioned, the faxed copy received by the excess line broker would be admissible in a court of law pursuant to CPLR 4539 as a reproduction of the original.

Should the excess line broker have any reason to suspect that a Part C affidavit that is sent to it by facsimile transmission may have been fraudulently prepared and/or transmitted, the excess line broker may insist that the producing broker provide him or her with the original hard copy affidavit containing a wet signature.

For further information you may contact Associate Attorney Barbara Kluger at the New York City Office.