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 September 16, 2005, representing the position of the New York State Insurance Department.

RE: Electronic Signatures

Questions Presented:

1) As to an insurance applicant who utilizes the Internet to obtain insurance coverage, is his or her electronic check mark on a box on an on-line insurance application, broker service fee agreement, or affidavit a legally valid electronic signature in New York?

2) Does the response to the question above change where the insurance broker is placing the coverage with an insurer unauthorized in New York?

Conclusions:

1) Generally speaking, a checked box on an electronic form on the Internet constitutes a valid electronic signature in New York if the “electronic … symbol or process [is] attached to or logically associated with [the] electronic record and executed or adopted by a person with the intent to sign the record,” N.Y. State Tech. Law § 302(3) (McKinney Supp. 2005), provided that the insurer, agent or broker using such technology to transact business is capable of verifying that the person providing the electronic signature is actually the party to be charged. Without such verification measure in place, the Department would not consider a checked box to be a valid signature.

With respect to affidavits, it is unclear how an on-line affidavit may be utilized as affidavits generally require notarization.

2) The response is the same even where the insurance broker is placing the coverage with an insurer unauthorized in New York and such insurance broker is a licensed excess line broker under N.Y. Ins. Law § 2118. Please note that an excess line broker may not solicit or advertise the products or services of the unauthorized insurer, electronically or otherwise, to NY residents. See Circular Letter No. 5 (2001).

Facts:

An insurance brokerage seeks to place professional liability insurance through the Internet. An Internet user would indicate its assent to a transaction by electronically checking a box (which was referred to as an electronic signature) on the on-line application, broker service fee agreement, or affidavit.

Analysis:

The federal Electronic Signatures in Global and National Commerce Act (“E-Sign”), 15 U.S.C.A. §§ 7001 – 7031 (West Supp. 2003) provides that electronic records may not be denied legal effect, validity or enforceability solely because they are created electronically.

New York State enacted the Electronic Signatures and Records Act (“ESRA”) as part of Chapter 4 of the Laws of 1999, which added the State Technology Law as new Chapter 57-A of the Consolidated Laws of New York. ESRA is currently codified as N.Y. State Tech. Law §§ 301 – 309 (McKinney Supp. 2005). ESRA is consistent with the federal E-Sign.

The term “electronic signature” is defined in N.Y. State Tech. Law § 302(3) (McKinney Supp. 2005) as:

…an electronic sound, symbol or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record.

N.Y. Comp. Codes R. & Regs. tit. 9, Part 540 (2003) contains the rules governing the use of electronic signatures. Neither New York law, nor its regulations, mandates the use of any particular electronic signature technology.

While E-Sign and ESRA authorize the use and acceptance of electronic signatures and records in commercial transactions, neither Act supersedes the requirements of the New York Insurance Law or regulations applicable to doing an insurance business in New York. Thus, before an electronic business process is implemented it should be reviewed to assure that the electronic technology chosen will comply with applicable provisions of the New York Insurance Law and regulations. Bear in mind that most New York statutory and regulatory provisions, such as those governing insurance applications and brokers’ service fee agreements, do not proscribe electronic transactions and the Department has consistently encouraged such use. See Circular Letter No. 33 (1999), available on the Department’s web site.

While the Department encourages the use of electronic transactions, it does require that the insurer, agent or broker using such technology to transact business is capable of verifying that the person providing the electronic signature is actually the party to be charged. Without such verification measure in place, the Department would not consider a checked box to be a valid signature.

With respect to affidavits, it is unclear how an on-line affidavit may be utilized as affidavits generally require notarization.

Our analysis above applies when an insurance broker obtains an applicant’s electronic signature on an application for insurance as well as when an insured electronically signs the broker’s service fee agreement, whether the coverage is written by an authorized insurer or an insurer that is not licensed to do an insurance business in New York. In the latter instance, coverage may only be placed through a licensed excess line broker in compliance with N.Y. Ins. Law § 2118 (McKinney Supp. 2005), whether the insured deals directly with the excess line broker or the insured’s broker deals with the excess line broker.

Be advised, however, that the products and services of an unauthorized insurer may not be solicited or advertised, electronically or otherwise, to New York residents. See Circular Letter No. 5 (2001), available on the Department’s web site.