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 October 25, 2006, representing the position of the New York State Insurance Department.

Re: Electronic Record Retention of No-Fault Insurance Claim Forms

Questions Presented:

1. Do the New York State Electronic Signatures and Records Act ("ESRA") and the federal Electronic Signatures in Global and National Commerce Act (E-Sign) obligate an insurer to accept electronic records and signatures in connection with No-Fault insurance claim forms?

2. May a digitally reproduced NF-AOB serve as an original document for purposes of a verification request by an insurer under Section 65-3.11(c) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 65 (Regulation 68)?

Conclusions:

1. No. Neither E-Sign nor ESRA obligates an insurer to accept electronic records or signatures.

2. Yes, provided that it is accurate and accessible as required under Section 7001(d)(1) of E-Sign and the insurer consents to the use of an electronic record as an original document.

Facts:

The inquirer's firm represents various radiology facilities doing business in the State of New York. These facilities provide radiological services for patients who are covered under various forms of insurance, including private health insurance, Medicare/Medicaid, No-Fault and Workers' Compensation insurance.

One of the inquirer's clients ("MRI Corporation X") recently raised a question regarding whether it may use electronic documents and electronic signatures in submitting No-Fault insurance claims. MRI Corporation X has a large number of offices that perform various radiological functions, including MRI's, X-rays and CT Scans. Due to the size of the practice and the number of offices, MRI Corporation X has converted its offices to a paperless system. In so doing, original documents are digitally imaged and stored on a network. Additionally, many documents that require signatures are created with digital signatures that are applied in lieu of actual signatures. Once these documents are created and stored, the hard copies are then destroyed.

Specifically, MRI Corporation X would apply the digital signature of its physicians (with their knowledge and express permission) on NF-3 and NF-AOB forms submitted for No-Fault Insurance claims; present a copy of the forms with the physician's digital signature to the insured; have the insured physically sign the NF-AOB (the NF-3 does not require a patient's signature); scan the forms into a database and then destroy the forms.

Analysis:

Insurer's Obligation to Accept Electronic Records and Signatures

New York State has enacted ESRA, N.Y. State Tech. Law §§ 301-309 (McKinney Supp. 2006), which establishes a legal framework for the conduct of electronic commerce in New York State and is consistent with the federal E-Sign, 15 U.S.C.A. §§ 7001-7031 (2006). 1

The term "electronic record" is defined in N.Y. State Tech. Law § 302(2) (McKinney Supp. 2006) as:

[I]nformation, 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.

The term "electronic signature" is defined in N.Y. State Tech. Law § 302(3) (McKinney Supp. 2006) as:

[A]n 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. State Tech. Law § 305(3) (McKinney Supp. 2006) provides that electronic records are given the same force and effect as records not produced by electronic means. Section 304(2) (McKinney Supp. 2006) further provides that the use of an electronic signature has the same validity and effect as the use of a signature affixed by hand.

Section 7001(a) of the federal E-Sign also provides that electronic records and signatures may not be denied legal effect, validity or enforceability solely because they are made electronically.

Both E-Sign and ESRA authorize the use and acceptance of electronic signatures and electronic records in commercial transactions and confirm their legal validity. The Department issued Circular Letter No. 33 (1999), in which it advised that insurance transactions may be effected by electronic means since most existing provisions of the Insurance Law do not prescribe such activities. The Department encouraged insurers to carefully review ESRA and other laws and to consider integrating electronic signatures and records into their operations in New York State.2

However, neither ESRA nor E-SIGN obligates any person, including an insurer, to accept the use of electronic records and signatures.3 Accordingly, an insurer is not required to accept electronic records and signatures and may require that such records and signatures are submitted in hard copy form.

Electronic Records Serving as Original Documents in No-Fault Transactions

Section 65-3.11(c) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 65 (Regulation 68) provides as follows:

(c) The insurer may request, in writing, the original assignment or authorization to pay benefits form to establish proof of claim in accordance with the procedures contained in subdivision (d) of this section. The insurer must maintain the original form in its claim file. (emphasis supplied)

Thus, an insurer may, at its discretion, request that an original assignment or authorization be provided for verification purposes. The question is whether an electronically reproduced assignment of benefits may serve as an original document for purposes of Section 65-3.11(c) of Regulation 68.

Section 7001(d)(1) of E-Sign provides, in regard to accuracy and accessibility, as follows:

If a statute, regulation, or other rule of law requires that a contract or other record relating to a transaction in or affecting interstate or foreign commerce be retained, that requirement is met by retaining an electronic record of the information in the contract or other record that --

(A) accurately reflects the information set forth in the contract or other record; and

(B) remains accessible to all persons who are entitled to access by statute, regulation, or rule of law, for the period required by such statute, regulation, or rule of law, in a form that is capable of being accurately reproduced for later reference, whether by transmission, printing, or otherwise. . . .

Additionally, Section 7001(d)(3) provides, in regard to originals, as follows:

If a statute, regulation, or other rule of law requires a contract or other record relating to a transaction in or affecting interstate or foreign commerce to be provided, available, or retained in its original form, or provides consequences if the contract or other record is not provided, available, or retained in its original form, that statute, regulation, or rule of law is satisfied by an electronic record that complies with paragraph (1).

Thus, in accordance with the above, a digitally reproduced NF-AOB may serve as an original document for purposes of a verification request by an insurer under Section 65-3.11(c) of Regulation 68, so long as it is accurate and accessible as required under Section 7001(d)(1) and the insurer consents to the use of an electronic record as an original document. Prior to the initial submission of such record to a No-Fault insurer, the Department suggested that the inquirer contact the insurer to determine whether it would consent to the submission of a digitally reproduced NF-AOB form as an original document, in order to prevent delays in the processing of claims.

For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.


1   E-Sign applies to transactions in or affecting interstate or foreign commerce, including the business of insurance.  See Sections 7001(a) and (i).

2   Circular Letter No. 33 (1999) is available on the Department's web site located at: http:\\www.ins.state.ny.us.

3   N.Y. State Tech. Law § 309 of ESRA provides that an entity or person is not required to use an electronic record or an electronic signature, unless otherwise provided by law.  Section 7001(b) of E-Sign states, in relevant part, that: "This subchapter does not . . . require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party." See 15 U.S.C.A. § 7001(b) (2006).