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 June 7, 2004, representing the position of the New York State Insurance Department.

Re: Free Defensive Driving Course to Company’s Employees

Question Presented:

May Agency A, a New York licensed property/casualty insurance agent, provide a free defensive driving course to Company Z employees if attendance is not limited to Company Z employees that are also Agency A clients, and Agency A does not require any employee to purchase insurance, receive an insurance quote or fulfill any other condition to attend the course?

Conclusion:

Yes. Under the presented facts, Agency A may provide a free defensive driving course to Company Z employees if attendance is not limited to Company Z employees that are also Agency A clients, and Agency A does not require any employee to purchase insurance, receive an insurance quote or fulfill any other condition to attend the course. In addition, Agency A may neither advertise the availability of its insurance products during the course, nor use the course as an inducement for Company Z employees to purchase insurance.

Facts:

Agency A, a New York licensed property/casualty insurance agent, administers a payroll deduction program ("Program") for personal lines homeowners’ and automobile insurance policies to the employees of Company Z. Agency A meets with Company Z employees who express an interest in the Program and provides such employees with premium quotes for homeowners’ and automobile insurance policies. If an employee accepts a premium quote, the Program enables the employee to deduct the applicable premium payments each pay period.

Agency A would like to offer a free defensive driving course, which will be presented in a classroom setting, to all Company Z employees. Agency A will not limit the offer to employees who are Agency A clients, or require any employee to purchase insurance or receive an insurance quote to attend the course.

Analysis:

N.Y. Ins. Law § 2324(a) (McKinney Supp. 2004) prohibits rebating and discrimination in contracts of property/casualty insurance by stating that:

(a) No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker, or shall give, sell or purchase, or offer to give, sell or purchase, as an inducement to the making of such insurance or in connection therewith, any stock, bond or other securities or any dividends or profits accrued thereon, nor shall the insured, his agent or representative knowingly receive directly or indirectly, any such rebate or special favor or advantage, provided, however, a licensed insurance agent or a licensed insurance broker may retain the usual commission or underwriting fee on insurance placed on his own property or risks, if the aggregate of such commissions or underwriting fees will not exceed five percent of the total net commissions or underwriting fees received by such licensed insurance agent or insurance broker during the calendar year.

Accordingly, N.Y. Ins. Law § 2324 (McKinney Supp. 2004) prohibits insurers, brokers, agents and their representatives from directly or indirectly offering inducements or valuable consideration (other than an article of merchandise not exceeding $15 in value) in connection with the sale of property/casualty insurance when such inducements or valuable consideration are not specified in the insurance policy.

Under the presented facts, Agency A’s provision of the free defensive driving course does not constitute a violation of § 2324 because attendance is not limited to Company Z employees that are also Agency A clients, and Agency A does not require any employee to purchase insurance, receive an insurance quote or fulfill any other condition to attend the course. In addition, please note that Agency A may neither advertise the availability of its insurance products during the course, nor use the course as an inducement for Company Z employees to purchase insurance.

For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.