The Office of General Counsel issued the following opinion on March 9, 2004 representing the position of the New York State Insurance Department.
Re: Proposal By A Charitable Not-For-Profit Organization To Confer A Benefit Of Up To $2,000 Accident And Health Coverage For Its Volunteers
If a charitable not-for-profit corporation ("charitable organization"), not organized primarily for the purpose of providing insurance benefits, were to confer a benefit of up to $2,000 accident and health coverage for its volunteers when they travel, covering health injuries and medical costs, with additional accident and health insurance for its volunteers provided by an insurer, would the proposed component of accident and health coverage conferred by the charitable organization ("proposal") be an insurance contract that would trigger the requirement that the charitable organization have a license to do an insurance business?
The proposal is an insurance contract because there would be a benefit of pecuniary value dependent upon the happening of a fortuitous event that would trigger the requirement that the charitable organization have a license to do an insurance business.
This is a general inquiry. No additional facts were provided.
With certain exceptions, N.Y. Ins. Law § 4522(a)(3) (McKinney 2000) provides an exemption from provisions of the Insurance Law for a charitable organization:
(3) Organizations of a religious, charitable, benevolent or fraternal character, which are not organized or maintained primarily for the purpose of providing insurance benefits, and which have not more than fifteen hundred members who are or may be entitled to any insurance benefits unless the organization obligates itself to pay a death benefit of more than five hundred dollars on the death of any one member, or disability benefits of more than three hundred fifty dollars to any one person in any one year, or both.
Generally, Office of General Counsel opinions provide that before it can be determined whether N.Y. Ins. Law § 4522(a)(3) (McKinney 2000) would be applicable to exempt a charitable organization from the Insurance Law, detailed information must be submitted to the Department including a copy of the charitable organization's bylaws and articles of incorporation, together with a description of its actual method of operation. However, the focus here is on the charitable organization's volunteers. Since the charitable organization is a not-for-profit corporation and not a fraternal benefit society, the volunteers are not members of the charitable organization. Principal Attorney Alan Rachlin's September 23, 2002 opinion addresses whether N.Y. Ins. Law § 4522(a)(3) (McKinney 2000) is applicable to volunteers and employees, and it states in pertinent part:
[Section 4522(a)(3)] was intended to exempt an organization that provides benefits to its members, not benefits to employees and volunteers who provide services to it. However, if the employees and volunteers are also members, and if the organization provides benefits to its members, those employees and volunteers could also receive the benefits.
Accordingly, this exemption would not apply in this instance.
Moreover, N.Y. Ins. Law § 1108 (McKinney 2000), which exempts certain insurers, their officers, agents, representatives and employees from licensing and other requirements of the Insurance Law (except regarding Article 74 rehabilitation, liquidation, conservation and dissolution of insurers) does not provide any exemption from licensing applicable to the charitable organization.
N.Y. Ins. Law § 1101(a) (McKinney Supp. 2004), in pertinent part, defines an insurance contract:
(a) In this article: (1) "Insurance contract" means any agreement or other transaction whereby one party, the "insurer", is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
(2) "Fortuitous event" means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.
N.Y. Ins. Law § 1101(b)(1)(A) (McKinney Supp. 2004), apart from circumstances not relevant here, defines doing an insurance business as:
(A) making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association, or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts;
N.Y. Ins. Law § 1102(a) (McKinney Supp. 2004) states in pertinent part: "No person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized by a license in force pursuant to the provisions of this chapter, or exempted by this chapter from such requirement."
If the charitable organization were to confer a benefit up to $2,000 accident and health coverage for its volunteers when they travel, covering health injuries and medical costs, there would be a fortuitous event because health injuries and medical costs are to a substantial extent beyond the control of the charitable organization and its volunteers. The proposal would be a benefit of pecuniary value to the charitable organization's volunteers. The proposal would be an insurance contract, which would trigger the requirement that the charitable organization have a license to do an insurance business. The Insurance Law does not provide an exemption from the licensing requirement of N.Y. Ins. Law § 1102(a) (McKinney Supp. 2004).
This opinion is limited to an interpretation of the Insurance Law. No opinion is herein given regarding any other New York State law or regulation.
For further information you may contact Senior Attorney Robert Freedman at the New York City Office.