STATE OF NEW YORK
25 BEAVER STREET
NEW YORK, NEW YORK 10004
|George E. Pataki
Re: Merger of Service Contract Providers
If two registered service contract providers plan to merge, what agreements have to be submitted to the New York State Superintendent of Insurance?
What type of notice should be sent to the service contract holders of the non-surviving provider, if the claims process, telephone numbers, and addresses for contacting the service contract provider remain unchanged?
Is the service contract reimbursement insurer of the non-surviving service contract provider required to confirm that the service contract reimbursement coverage currently in effect will remain in effect until the expiration of all obligations under the providers issued service contracts?
The Superintendent expects that all agreements pertaining to the merger of two New York registered service contract providers be submitted to the Superintendent prior to the merger.
Although not specifically required by statute or regulation, if service contract holder information is available, it would be prudent for the surviving New York registered service contract provider to send notices to affected service contract holders that the obligations under their service contracts are being assumed by a different company but that claims process, telephone numbers, and other pertinent matters will remain unchanged.
The service contract reimbursement insurer should confirm that coverage will remain in effect until the expiration of all obligations under the non-surviving service contract providers issued service contracts and issue any necessary endorsements to the surviving provider.
A New York registered service contract provider plans on merging into another New York registered service contract provider, which is also its affiliate. Upon merger, the surviving registered service contract provider will assume responsibility for administering the run-off of the non-surviving providers service contract obligations. The surviving company would write new service contracts issued on or after the date of merger. Both service contract providers have service contract reimbursement insurance policies to satisfy the financial responsibility obligations of Article 79 of the New York State Insurance Law.
A review of Article 79 of the New York Insurance Law and regulations pertaining to service contracts and service contract providers reveals that there are no provisions regarding the merging of two registered service contract providers. However, N.Y. Ins. Law § 7907(c) (McKinneys 2000) requires all providers to keep current all the information required to be provided to the Superintendent under N.Y. Ins. Law § 7907 by reporting all material changes or additions within 30 days after the end of the month that the provider learns of the change or addition.
Consequently, if the merger results in any change or addition in:
(1) the name and address of the principal office of the provider;
(2) the name and address of the providers' agent for service of process in this state, if other than the provider;
(3) the identities of the provider's executive officer or officers directly responsible for such provider's service contract business, and, if more than fifty percent of the provider's revenue is derived from the sale of service contracts, the identities of the provider's directors and stockholders having beneficial ownership of five percent or more of any class of securities registered under the federal securities law;
(4) the name, location and telephone number of any administrators designated by the provider to be responsible for the administration of service contracts in this state, together with an acknowledgment by each such administrator (who is not employed by the provider) of such administrator's obligations under this article;
(5) the statement indicating that, under N.Y. Ins. Law § 7903(c), the provider qualifies to do business as a service contract provider in this state;
then the provider is required to provide this information to the Superintendent within 30 days after the end of the month that the provider learns of the change or addition.
In addition, N.Y. Ins. Law § 7910(a) (McKinneys 2000) states in pertinent part:
The superintendent may conduct investigations or examinations of providers, administrators, insurers or other persons to enforce the provisions of this article and protect service contract holders in this state. Upon request of the superintendent, the provider shall make all accounts, books and records concerning service contracts sold in this state by the provider available to the superintendent which are necessary to enable the superintendent to reasonably determine compliance or noncompliance with this article.
The Superintendent has the general authority to investigate and examine the accounts, books, and records of New York registered service contract providers to protect service contract holders in New York. Furthermore, the merger affects the registration status of the companies. Merging service contract providers should, prior to the merger, provide the Superintendent with all agreements pertaining to the merger and send notices to affected service contract holders, if their identities are known, that the obligations under their service contracts are being assumed by a different company but that the claims process and telephone numbers will remain unchanged. The service contract reimbursement insurer should also confirm to the service contract provider that the service contract reimbursement coverage in effect for New York service agreements issued prior to the merger will remain in effect until the expiration of all obligations under the non-surviving companys issued service contracts. The provider should provide such confirmation to the Superintendent. Where the provider has utilized another form of financial responsibility, other matters would need to be addressed.
For further information please contact Special Counsel Athan Shinas at the New York City Office.