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 August 3, 2004, representing the position of the New York State Insurance Department.

RE: Fraud Warning Statement

Question Presented:

1) Are insurers required to include the fraud warning statement contained in N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(b) (2003) (Regulation 95) in their applications and claim forms for both commercial and personal automobile insurance?

2) May an applicant for personal automobile insurance be found to have committed a fraudulent insurance act for having submitted a fraudulent application?

Conclusion:

1) Insurers are required to include the fraud warning statement contained in N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(b) (2003) (Regulation 95) in their applications and claim forms for both commercial and personal automobile insurance, or a statement that is substantially similar thereto that has been approved by the Frauds Bureau, pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(e) (2003) (Regulation 95).

 

2) No; only an applicant for commercial automobile insurance may be found to have committed a fraudulent insurance act for having submitted a fraudulent application. N.Y. Penal Law § 176.05 (McKinney Supp. 2004), N.Y. Ins. Law § 403(a) and (b) (McKinney 2000), N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(b) (2003) (Regulation 95). See also People v. Ferone, 136 A.D.2d 282, 285 –287, 526 N.Y.S.2d 973, 975 - 977 (2nd Dep’t 1988).

Facts:

With reference to the fraud warning statement required to be included in applications and claim forms for automobile insurance in N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(b) (2003) (Regulation 95), an inquirer stated in a letter:

In reviewing the required statement it does not correspond with a personal automobile insurance application, as it states "Any person who knowingly and with intent to defraud any insurance company or other person files an application for commercial insurance . . . "

It is our concern that the way this fraud statement is worded that a personal automobile applicant could not be held to this penalty. Could you please advise if we are to be using a different fraud warning statement for personal automobile?

Analysis:

N.Y. Ins. Law § 403(e) (McKinney 2000) states:

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."

The Department, in keeping with the legislature’s intention to have fraud warning statements included in application and claim forms for both personal and commercial automobile insurance, as denoted in N.Y. Ins. Law § 403(e), promulgated N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(b) (2003) (Regulation 95), which states:

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."

However, only an applicant for commercial automobile insurance may be found to have committed a fraudulent insurance act for having submitted a fraudulent application pursuant to N.Y. Penal Law § 176.05 (1) (McKinney Supp. 2004), which states:

A fraudulent insurance act is committed by any person who, knowingly and with intent to defraud presents, causes to be presented, or prepares with knowledge or belief that it will be presented to or by an insurer, self insurer, or purported insurer, or purported self insurer, or any agent thereof, any written statement as part of, or in support of, an application for the issuance of, or the rating of a commercial insurance policy, or certificate or evidence of self insurance for commercial insurance or commercial self insurance, or a claim for payment or other benefit pursuant to an insurance policy or self insurance program for commercial or personal insurance which he knows to: (i) contain materially false information concerning any fact material thereto; or (ii) conceal, for the purpose of misleading, information concerning any fact material thereto.

A fraudulent insurance act under N.Y. Penal Law § 176.05 is a fraudulent insurance act under the New York Insurance Law pursuant to N.Y. Ins. Law § 403(a) and (b) (McKinney 2000), which state:

(a) In this article, "fraudulent insurance act" means an insurance fraud as defined in section 176.05 of the penal law; and the terms "personal insurance" and "commercial insurance" shall have the same meaning ascribed to them by section 176.00 of such law.

(b) For the purpose of section one hundred nine of this chapter, it is a violation of this chapter for any individual, firm, association or corporation subject to the provisions of this chapter to commit a fraudulent insurance act.

Additionally, see People v. Ferone, 136 A.D.2d 282,286, 526 N.Y.S.2d 973, 976 (2nd Dep’t 1988), which holds that "the submission of an application for personal insurance in the absence of a subsequent claim for payment under the policy, does not constitute a fraudulent insurance act within the meaning of Penal Law § 176.05," and that "[a]lthough with regard to commercial insurance, a fraudulent insurance act may be committed through the ‘knowing and intentional’ presentation of materially false statements in support of an application, with respect to ‘personal insurance,’ the statute imposes the requirement that there be made a ‘claim for payment or other benefit.’"

This is the reason why the fraud warning statement required by N.Y. Comp. Codes R. & Regs. tit. 11, § 86.4(b) (2003) (Regulation 95), among other things, makes reference only to commercial insurance regarding the submission of a fraudulent application.

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.