The Office of General Counsel issued the following opinion on November 23, 2005, representing the position of the New York State Insurance Department.
Re: Delivery of Policy Forms by an Insurer In Electronic Form Only
Does the Insurance Law prohibit an insurer from adopting a procedure whereby all of its insurance policy forms are transmitted to its agents exclusively in electronic form?
No. The N.Y. Insurance Law does not preclude an insurer from transacting the policy forms it issues to its agents in electronic form for the agent to forward to their clients, the insureds.
An insurer is considering the adoption of a procedure whereby its insurance policy forms would be transmitted to its agents exclusively in electronic form.
The Department interprets statutes that provide for "delivery" to permit electronic communications, in recognition of the authority established under the Electronic Signatures and Records Act ("ESRA"), N.Y. State Tech. Law, Art. 4 (McKinney Supp. 2005 and Ch. 741 L. 2005, § 7) and the federal Electronic Signatures in Global and National Commerce Act ("E-SIGN"), 15 U.S.C.A. §§ 7001-7031 (West Supp. 2003). In Circular Letter No. 33 (1999), the Department advises that certain insurance transactions may be done electronically, as most existing provisions of the New York Insurance Law will not hinder such transactions. The Department interprets statutes that use words such as "writing" or "certificate" to allow electronic documents. Furthermore, Circular Letter No. 33 states that electronic communications are permitted where statutes provide for "delivery." See also Supp. No. 1 to Cir. Letter No. 33 (09/03/2002). Circular letters are available on the Departments web site at www.ins.state.ny.us.
ESRA creates a statutory structure in New York State that supports the use of electronic records in everyday public and business undertakings. N.Y. State Tech. Law § 402(2) states:
Electronic record shall mean information, evidencing any act, transaction, occurrence, event, or other activity, produced or stored by electronic means and capable of being accurately reproduced in forms perceptible by human sensory capabilities.
N.Y. State Tech. Law § 305(3) states that electronic records "shall have the same force and effect as those records not produced by electronic means." Thus, an electronic record has the same legal effect as one that is written.
Federal E-SIGN provides that electronic records may not be denied legal validity simply because they are made electronically. Electronic documents are given the same force in law as paper signatures and documents. E-SIGN preempts inconsistent state laws, other than state statutes patterned after the Uniform Electronic Transactions Act ("UETA"). 15 U.S.C.A. § 7001(a) states, in relevant part:
(a) Notwithstanding any statute, regulation, or other rule of law. . .
with respect to any transaction in or affecting interstate or foreign commerce
(1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and
(2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability sole because an electronic signature or electronic record was used in its formation.
Under both ESRA and E-SIGN (N.Y. State Tech. Law § 309 and 15 U.S.C.A. § 7001(c), respectively), consumers must consent to do business electronically. Insurance agents who would transmit the insurance policy forms to insureds by electronic means and in electronic form must therefore obtain the consent of each insured to make delivery in this manner. For insureds who do not give such consent, the agent would be required to print out a hard copy of the policy form and deliver it to them.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.