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 September 9, 2003, representing the position of the New York State Insurance Department.

Re: Fraud "Warning Statements" Under Regulation 95

Question Presented:

May Company A include fraud warning statements when corresponding with insureds and prospective insureds to obtain underwriting information with respect to personal automobile insurance?

Conclusion:

The fraud warning statement set forth in N.Y. Ins. Law § 403(e) (McKinney 2000) may be included in the communications as described.

Facts:

Company A proposes to include warning statements, such as those provided for in N.Y. Comp. Codes R. & Regs. tit. 11 § 86.1 et seq. (1998) ("Regulation 95"), when corresponding with applicants and insureds to obtain underwriting information as part of the application process (i.e., ascertaining the actual locations of cars, number of and identification of drivers, etc.) to help reduce the number of misrepresentations made on applications.

Analysis:

Both N.Y. Ins. Law § 403 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11 § 86.4(b)(2003) (Regulation 95, 4th Amend. Aug. 11, 2003) require the inclusion of warning statements in certain forms, applications and communications. Of relevance to this inquiry is the type of notice required under N.Y. Ins. Law § 403(e), which provides as follows:

(e) All applications for automobile insurance and all claim forms shall contain a notice, in a form approved by the superintendent, that clearly states in substance the following:

"Any person who knowingly makes or knowingly assists, abets, solicits or conspires with another to make a false report of the theft, destruction, damage or conversion of any motor vehicle to a law enforcement agency, the department of motor vehicles or an insurance company, 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 value of the subject motor vehicle or stated claim for each violation."

N.Y. Ins. Law § 403(e) (McKinney 2003).

As indicated by the statute a notice must be included in all applications for automobile insurance as well as all claim forms. In addition, the most recent amendment of the applicable regulation, N.Y. Comp. Codes R. & Regs. tit. 11 § 86.4(b)(2003) (Regulation 95, 4th Amend. Aug. 11, 2003), requires the inclusion of a specific warning statement in applications and claim forms. The Regulation provides as follows:

(b) All applications and claim forms for automobile insurance provided to any person residing or located in this State in connection with insurance policies for issuance or issuance 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 commercial insurance or a statement of claim for any commercial or personal insurance benefits containing any materially false information, or conceals for the purpose of misleading, information concerning any fact material thereto, and any person who, in connection with such application or claim, knowingly makes or knowingly assists, abets, solicits or conspires with another to make a false report of the theft, destruction, damage or conversion of any motor vehicle to a law enforcement agency, the department of motor vehicles or an insurance company, 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 value of the subject motor vehicle or stated claim for each violation."

N.Y. Comp. Codes R. & Regs. tit. 11 § 86.4(b)(2003)(Regulation 95, 4th Amend. Aug. 11, 2003).

Although the communications that Company A proposes to include a fraud warning statement are not insurance applications per se, these communications are nevertheless an integral part of the application process, i.e., they are needed in order to obtain accurate underwriting information from the insured or prospective insured. Thus, the use of a fraud warning is not unreasonable. Furthermore, although the above-quoted statute and regulation mandate the use of warning statements in certain specific contexts, neither they nor any other statute or regulation prohibit the inclusion of such a statement in other contexts. Accordingly, the Department would not object to the use of a N.Y. Ins. Law § 403(e) or Regulation 95-type fraud warning statement in the correspondence described.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.