The Office of General Counsel issued the following informal opinion on February 3, 2005, representing the position of the New York State Insurance Department.
Re: Fraud Warning
Is there any alternative to providing the fraud warning statement on the application just above the signature line required by 11 NYCRR § 86.4 (2003) (Regulation 95), when the insurers application procedure does not require the applicant to complete a physical application?
11 NYCRR § 86.4 (2003) (Regulation 95) requires a fraud warning statement that conforms to 11 NYCRR § Part 86.4 (2003) (Regulation 95) be presented to the applicant during the application process; however, as discussed below, the medium of that warning statement may vary with the medium of the application.
The inquirer described a situation where an insurance broker works on large commercial insurance accounts and the insurance broker obtains from prospective insureds information for the application, but there is no physical document styled "application" provided to the applicant for signature. The inquirer wants to know whether a fraud warning statement is required in this situation, and if it is, whether the insurance broker or the insurance company has a duty to provide it prior to, or after, insurance coverage is bound.
11 NYCRR § 86.4 (2003) (Regulation 95) states in relevant part:
(a) . . . all applications for commercial 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 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."
. . . .
(d) Location of warning statements and type size. The warning statements required by subdivisions (a) . . . of this section shall be placed immediately above the space provided for the signature of the person executing the application . . .
(e) Notwithstanding the provisions of subdivisions (a) . . . of this section, insurers may use substantially similar warning statements provided such warning statements are submitted to the Insurance Frauds Bureau for prior approval.
Pursuant to 11 NYCRR § 86.4 (2003) (Regulation 95) the insurance company, or the insurance broker or insurance agent for the insurance company, must provide a written fraud warning statement on the physical application above the insureds signature line. The written fraud warning must be provided to the applicant during the application process.
However, if no physical document styled "application" is to be presented to the applicant for completion and signature, the insurance company, or the insurance broker or insurance agent on behalf of the insurance company, may read the fraud warning statement to the applicant in person or over the telephone during the application process. This reading, and the acknowledgment of it by the applicant, should be recorded and maintained on a durable medium that meets the Departments record retention regulation, 11 NYCRR § 243 (2003) (Regulation 152). Alternatively, during the application process, the insurer or the insurance broker or insurance agent on behalf of the insurance company, may provide a written fraud warning statement to the applicant, and the insurer or the insurance broker or insurance agent on behalf of the insurance company must maintain documentation of this on a durable medium that meets the Departments record retention regulation, 11 NYCRR § 243 (2003) (Regulation 152).
If the application is electronically transmitted via the internet, the fraud warning statement, which must be provided during the application process, must be transmitted over the internet with the rest of the application. The insurer or the insurance broker or insurance agent on behalf of the insurance company, must maintain documentation of having conveyed the fraud warning statement to the applicant on a durable medium that meets the Departments record retention regulation 11 NYCRR § 243 (2003) (Regulation 152).
For further information one may contact Senior Attorney Susan Dess at the New York City Office.