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 May 5, 2003 representing the position of the New York State Insurance Department.

Re: Application of N.Y. Ins. Law § 403 and Regulation 95 Requirement of Fraud Notices in Applications and Claim Forms to Excess Line Placements

QUESTION PRESENTED:

Are unauthorized insurers who write excess lines business in New York required to comply with N.Y. Ins. Law § 403(d) & (e) (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4 (2002) (Regulation 95), which require that all applications for commercial insurance, individual, group or blanket accident and health insurance, and automobile insurance and all claim forms contain the applicable fraud notices contained therein?

CONCLUSION:

Unauthorized insurers are required to comply with the fraud notices requirement in N.Y. Ins. Law § 403(d) & (e) (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4 (2002) (Regulation 95).

FACTS:

The inquiry is general in nature. No specific facts were provided.

ANALYSIS:

The Insurance Fraud Prevention Act ("the Act"), in Article 4 of the Insurance Law, was promulgated to aid in the prevention and eradication of insurance fraud in New York State. The Act requires, among other things, that insurers take an active role in preventing insurance fraud. Accordingly, N.Y. Ins. Law § 403(d) (McKinney 2000) provides:

(d) All applications for commercial insurance, individual, group or blanket accident and health insurance1 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." (emphasis added).

Subsection (e) referenced above, applies to all applications for automobile insurance and all claim forms for such insurance and requires a similar fraud notice.

The Superintendent, pursuant to N.Y. Ins. Law § 301 (2000), has been vested with broad powers to promulgate regulations that, among other things, interpret and clarify the provisions of the Insurance Law. As a result, N.Y. Comp. Codes R. & Regs. tit. 11, Part 86 (2002) (Regulation 95) was promulgated to clarify, interpret and effectuate the purposes of the Act. Specifically, Section 86.4(a) provides that:

(a) All applications provided to applicants for commercial insurance and all claim forms for insurance, except personal automobile insurance, delivered to any person residing or located in this State (on and after February 2, 1994) in connection with insurance policies to be issued or issued for delivery in this State shall contain the following statement:

"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." (emphasis added).

Section 86.4(b) contains a similar fraud notice that applies to claim forms for personal automobile insurance policies delivered to any person residing or located in New York.

Clearly, Section 403(d) & (e) requires that all applications for commercial insurance, individual, group or blanket accident and health insurance, automobile insurance and all claim forms contain one of the fraud notices/warning statements above. There is no exception in Section 403 for applications and claim forms of unauthorized insurers.

Regulation 95 goes even further in clarifying Section 403. Specifically, Section 86.4(a) provides that all applications provided to applicants for commercial insurance and all claim forms for insurance that are delivered to any person residing or located in New York in connection with insurance policies to be issued or issued for delivery in New York shall contain a fraud notice. Further, Section 86.4(b) provides that all claim forms for personal automobile insurance delivered to any person residing or located in this State in connection with such insurance policies shall contain a fraud notice. Again, there is no exception for unauthorized insurers in Regulation 95. Accordingly, the above-mentioned applications and claim forms, including those of an excess line insurer procured by an excess line broker in New York, must contain the specific fraud notice that applies to the kind of insurance being sold.

For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.


1Accident/health insurance may not be written on an excess line basis except as provided for in N.Y. Ins. Law § 2105(h) (McKinney Supp. 2003).