The Office of General Counsel issued the following opinion on April 2, 2007, representing the position of the New York State Insurance Department.
RE: Federal Employer Identification Number as Electronic Signature
May an employer’s EIN serve as an acceptable electronic signature on an insured’s application for a New York DBL insurance policy?
Although the use of electronic signatures is generally permissible in New York, it is outside the Department’s province to address whether an EIN is an acceptable electronic signature on an insurance application. This office referred the inquirer to the Internal Revenue Service (IRS) for determining the acceptable uses of EINs.
The inquirer reports that an insurance producer wants to submit an insurance company’s New York DBL applications for policies electronically. One of the inquirer’s concerns is that the insureds must sign the applications. As a result, the inquirer asks whether an EIN is an acceptable signature on an application for a New York DBL insurance policy.
In 1999, New York State enacted the Electronic Signatures and Records Act (ESRA). Codified as N.Y. State Tech. Law §§ 301-309 (West, WESTLAW through L.2007, c. 2 legislation), ESRA is consistent with the federal Electronic Signatures in Global and National Commerce Act (E-Sign), which provides that electronic signatures, contracts, or other records may not be denied legal effect, validity, or enforceability solely because they are in electronic form. 15 U.S.C.A. § 7001(a)(1) (West, WESTLAW through P.L.110-15, approved Mar. 23, 2007).
N.Y. State Tech. Law § 302(3) (West, WESTLAW through L.2007, c. 2 legislation) defines “electronic signature” 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. State Tech. Law § 303 authorizes the Office for Technology to administer ESRA, and to promulgate rules and regulations consistent with ESRA. While neither New York law, nor its regulations, mandates the use of any particular electronic signature technology, the Office for Technology is empowered, pursuant to State Technology Law § 303, to develop guidelines that identify preferred technology standards relating to the security, confidentiality, and privacy of electronic signatures and records.
Although E-Sign and ESRA authorize the use and acceptance of electronic signatures and records in commercial transactions, neither law supersedes the requirements of the New York Insurance Law or the regulations applicable to doing an insurance business in New York. See OGC Opinion dated Sept. 16, 2005. Thus, before implementing an electronic business process, one should review the process so as to ensure that the electronic technology complies with applicable provisions of the Insurance Law and regulations promulgated thereunder. Id.
The Department has consistently encouraged the use of electronic transactions. See Circular Letter No. 33 (1999). Nevertheless, the Department requires that an insurer, agent, or broker who uses such technology to transact business be capable of verifying that the person providing the electronic signature is actually the party to be charged. OGC Opinion dated Sept. 16, 2005. For example, the Department does not consider a checked box to be a valid signature without a measure in place that verifies that the person providing the electronic signature is actually the party to be charged. Id.
That said, it is outside the Department’s province to address whether an EIN is an acceptable signature on an application for a New York DBL insurance policy. Since an EIN is a number that the IRS assigns and uses to identify taxpayers that must file various business tax returns, this office referred the inquirer to the IRS for determining whether an EIN is an acceptable electronic signature, and whether the IRS restricts its use in any way.
In addition, this office notes that in 2002 a federal regulation established the EIN as a unique employer identifier, as well as requirements concerning its use by health plans, health care clearinghouses, and health care providers, especially in the context of electronic transactions. Health Insurance Reform: Standard Unique Employer Identifier, 67 Fed. Reg. 38,009 (May 31, 2002) (codified as 45 C.F.R. pt. 160 and 162). Under that regulation, use of EINs by employers that are not health plans, health care clearinghouses, or health care providers is strictly voluntary; such employers may use their EINs to identify themselves in transactions to enroll or disenroll their employees in health plans only if such employers so choose. Id. at 38,016.
For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.