New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on June 2, 2005, representing the position of the New York State Insurance Department.

Re: Excess Line Association of New York ("ELANY") Proposed Electronic Filing & Stamping System

QUESTIONS PRESENTED:

1. Does the Insurance Law permit ELANY to accept excess line documents electronically, including by facsimile and electronic mail, and electronically record and stamp such documents?

2. Does the Insurance Law permit ELANY to accept electronic signatures on submitted broker affidavits?

CONCLUSIONS:

1. N.Y. Ins. Law §§ 2118(b)(7) and 2130(i) (McKinney Supp. 2005) specifically provide that submission and filing of excess line documents may be accomplished by electronic or other media transmission, providing the Superintendent first approves the proposed methods of electronically submitting, receiving, recording and stamping such documents.

2. There is nothing in the Insurance Law that prohibits the use of electronic signatures.

FACTS:

The inquirer requests an opinion from this office that would allow ELANY to electronically file, receive, record and stamp excess line documents. The inquirer states that, presently, ELANY receives original documents from excess line brokers and stamps the documents using a specially designed rubber stamp and standard wet ink. These documents are then returned to the broker for delivery to the policyholder.

In lieu of a wet stamp, the inquirer would like to utilize an alternative method of certifying that ELANY has reviewed the documents. For example, the inquirer proposes the use of a computer generated duplicate of the current stamp, a watermark, an imprint, a separate certificate of compliance, or some other document to be returned to the members. The inquirer added that regardless of the method of verification of compliance, such verification or any evidence thereof, will be affixed or attached to the original document for delivery to the insured and retail producer.

In addition, ELANY would like to process non-original policy documents, binders, declaration pages, cover notes and endorsements that are submitted via electronic mail, facsimile or electronically. ELANY would also like to return duplicates or electronic versions of the original documents it receives. In addition, ELANY would like to accept electronic signatures on broker affidavits.

ANALYSIS:

Excess line brokers must satisfy the requirements in N.Y. Ins. Law § 2118(b)(1) (McKinney Supp. 2005), which provides, in pertinent part, as follows:

(b)(1) Within forty-five days after a policy is procured, a licensee shall submit the declarations page or cover note of every policy procured under his or her license to the excess line association established pursuant to section two thousand one hundred thirty of this article for recording and stamping. In the event that no declarations page or cover note is available to the licensee, within forty-five days after the policy is procured, the licensee shall submit a binder to the excess line association in lieu of such declarations page or cover note. In the event that a binder is submitted to the excess line association, the licensee shall submit the declarations page or cover to the excess line association promptly upon receipt….

N.Y. Ins. Law § 2118(b)(7) (McKinney Supp. 2005) specifically permits electronic or other media transmission of excess line documents by excess line brokers. That paragraph states:

(7) Compliance by a licensee with the requirements set forth in this section in connection with submitting for recording and stamping declarations pages, cover notes, binders, endorsements, affidavits, notices of excess line placement and other excess line insurance documents may be accomplished by means of electronic or other media transmission, provided the superintendent first approves such methods of submitting for recording and stamping. (emphasis added).

The duties of ELANY are outlined in N.Y. Ins. Law § 2130(a)(3) (McKinney Supp. 2005), which provides, in pertinent part:

(a) There is hereby created a non-profit association to be known as the excess line association of New York…. The association shall be authorized and have the duty to:

(3) stamp all excess line insurance documents which excess line brokers are required to file with the association under section two thousand one hundred eighteen of this article, provided that an unauthorized insurer meets the standards of eligibility imposed by section two thousand one hundred eighteen of this article together with any rules and regulations promulgated pursuant to said section.

With regard to ELANY’s duties, Section 2130(i) (McKinney Supp. 2005) also permits the use of electronic or other media transmission to fulfill its duties. Subsection (i) provides:

(i) Compliance by the association with the duties set forth in subsection (a) of this section in connection with filing, receiving, recording and stamping of excess line insurance documents, as well as the requirement to deliver standard forms for affidavits, may be accomplished by means of electronic or other media transmission, provided that the superintendent first approves such methods of filing, receiving, recording and stamping. (emphasis added).

In addition to the above statutes, which allow electronic transactions, the Department, in Circular Letter No. 33 (1999) and the amendment thereto, Circular Letter No. 5 (2002), has encouraged the implementation of electronic commerce.1   Consequently, ELANY’s proposal to file, receive, record and stamp excess line documents electronically or by other media transmission, as well as its request to accept electronic signatures on broker affidavits are, generally, permitted by Sections 2118 and 2130. Notwithstanding the fact that Sections 2118 and 2130 permit electronic handling of these documents, both sections also require that any such proposal be submitted for the Superintendent’s approval. Therefore, ELANY is hereby advised to submit a complete and detailed plan to the Property Bureau for approval of its submission, filing and stamping process.

For further information please contact Associate Attorney D. Monica Marsh at the New York City Office.


1   However, Circular Letter No. 33 explains that amendments or further regulatory interpretation may, in some cases, be necessary in order to accommodate certain electronic commerce proposals.  In this instance, depending upon the proposal, an amendment to N.Y. Comp. Codes R. & Regs. tit. 11, Part 27 (2003) (Regulation 41) may be necessary to accommodate ELANY’s electronic proposal.