The Office of General Counsel issued the following opinion of April 10, 2007, representing the position of the New York State Insurance Department.
RE: Paintless Dent Removal Service – 2006-00481
Is a provider of paintless dent removal (PDR) for a discounted fee that covers the cost and overhead associated with the repair doing an insurance business within the meaning of N.Y. Ins. Law § 1101 (West, WESTLAW through L. 2000, c. 486 legislation)?
Under the specific facts presented, a PDR provider that receives a fee at the inception of a “Ding Shield Service Plan” to perform a specific number of PDR services for a separate discounted fee for each service, which covers the cost of performing the services, including reasonable overhead, is not doing an insurance business under Insurance Law § 1101.
You have submitted with your inquiry, a Ding Shield Service Plan that provides for the removal of certain dings and dents from the buyer’s or lessee’s vehicle using a process known as PDR. The plan is limited to personal use passenger cars, trucks, and sport utility vehicles with steel or aluminum body panels.
The Ding Shield Service Plan Contract provides for either 5 PDR panel repairs over a 36 month period; 6 PDR panel repairs over a 48 month period; or 7 PDR panel repairs over a 60 month period. Each PDR panel repair involves the removal of dents and dings within an area located on a single panel of vehicle that does not exceed 3.25 inches by 2 inches. The PDR panel repairs must be “accessible.” For example, an area within ¾ inch of a door edge is not accessible. Dings and dents that have punctured the vehicle’s metal or have visibly damaged the vehicle’s paint are not covered. No loaner cars are provided during the time of repair.
You report that under the plan, the vehicle owner or lessee pays the PDR provider a fee at the inception of the contract. Each time the vehicle owner or lessee wishes to have a dent or ding repaired by the PDR provider, the provider charges a discounted fee that covers the cost of the services and overhead for each repair.
The definition of an insurance contact is set forth in Insurance Law § 1101(a)(1), which provides :
"Insurance contract" means any agreement or other transaction whereby one party, the "insurer", is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
The definition of the doing of an insurance business is set forth in Insurance Law § 1101(b)(1). It reads as follows:
Except as provided in paragraph two, three or three-a of this subsection, any of the following acts in this state, effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of section three hundred two of the civil practice law and rules:
(A) making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association, or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts;
(B) making, or proposing to make, as warrantor, guarantor or surety, any contract of warranty, guaranty or suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the warrantor, guarantor or surety;
(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance;
(D) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this chapter;
(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter.
N.Y. Ins. Law § 1102(a) (West, WESTLAW through L. 2003 c. 164) prohibits any person, firm, association, corporation, or joint-stock corporation from doing an insurance business in New York unless authorized by a license in force pursuant to the Insurance Law, or exempted by the provisions of the Insurance Law from such requirement.
A service plan where the pre-paid fee is a membership fee, and where certain services occasioned by the happening of a fortuitous event are offered by the provider of the services for an additional fee per service (even if such charge is less than the usual fee for such service), does not constitute the doing of an insurance business that requires a license, so long as the additional fee covers the cost of rendering the service, including reasonable overhead. See, e.g., Opinion of General Counsel No. 02-05-20 (2002).
Therefore, under the facts presented, the “Ding Shield Service Contract” is not an insurance contract under Insurance Law § 1101(a)(1) and the PDR provider is not doing an insurance business within the meaning of Insurance Law § 1101.
For further information you may contact Special Counsel Athan Shinas at the Albany Office.