OGC Op. No. 09-04-07
The Office of General Counsel issued the following opinion on April 16, 2009, representing the position of the New York State Insurance Department.
Re: Record Retention Requirements for New York Licensed Special Risk Insurers
Must a special risk insurer maintain paper underwriting and claim files in its New York office for policies written in the New York Free Trade Zone 1 after it has converted such files into an electronic format and stored them on a server located outside of New York?
No. So long as the insurer has converted its paper underwriting and claim files into an electronic format that constitutes a durable medium, as defined by N.Y. Comp. Codes R. & Regs. tit. 11, § 243.1(c) (Regulation 152), and the electronic files are accessible from the insurer's New York office, the insurer need not maintain paper files in its New York office.
The inquirer reports that his company, ABC, is a New York- licensed special risk insurer with three offices in the United States. Its main office is located in Atlanta, Georgia, and it also has offices in New York City and Los Angeles. ABC seeks to make the transition to a paperless environment by which it would electronically store all underwriting and claim files from all three offices on a server located in its Atlanta office. All underwriters and claims personnel would have a direct connection to the server and access to these files. The inquirer asks whether ABC is required under the New York Insurance Law or regulations promulgated thereunder to maintain paper underwriting and claim files in its New York office for policies written in the New York Free Trade Zone, after it converts such files into an electronic format and stores them on a server located in its Atlanta Office.
A number of statutory and regulatory provisions are germane to the inquiry. N.Y. Insurance Law § 6302(a) (McKinney 2000) authorizes the Superintendent to issue a "special license" to an authorized insurer, as specified in § 6302(c).
N.Y. Comp. Codes R. & Regs. tit. 11, Part 16 (Regulation 86) sets forth, inter alia, requirements for record maintenance and examination of insurers licensed under Insurance Law § 6302 to write special risk insurance. Section 16.9(a) (Regulation 86) reads as follows:
(a) An insurer granted a special risk license by the superintendent pursuant to section 6302 of the Insurance Law shall maintain in this State an underwriting office:
(1) that shall be under the control of the insurer's management and staffed with personnel who are charged with the responsibility for making underwriting decisions relating to policies issued pursuant to this Part; and
(2) in which the insurer shall maintain the underwriting files, experience statistics, financial and other records, applicable to business underwritten and transacted under section 6302 of the Insurance Law, subject to examination by the Insurance Department as often as the superintendent deems necessary.
11 NYCRR § 16.9(a) expressly requires underwriting files and other records for policies written in the New York Free Trade Zone to be maintained in an underwriting office in New York.
11 NYCRR Part 243 (Regulation 152), establishes the minimum record retention requirements for insurers and is not inconsistent with the requirements for record maintenance set forth in 11 NYCRR § 16.9. Therefore, it applies to a New York special risk insurer such as ABC. Specifically, 11 NYCRR § 243.1 defines the term "insurer" to mean "an authorized insurer, as such term is defined in Insurance Law, section 107(a)(10)." That statute, in turn, reads as follows:
(a) In this chapter, unless the context otherwise requires: . . . (10) "Authorized insurer" means an insurer authorized as such to do an insurance business in this state in compliance with this chapter, by reason of a license so to do issued and in force pursuant to the laws of this state or of a corporate charter granted and in force pursuant to the laws of this state, but not including any insurer herein exempted from compliance with the requirement that it obtain a license to do business.
Therefore, New York licensed special risk insurers are subject to the record retention requirements of 11 NYCRR Part 243.
As to policy records and claim files, 11 NYCRR § 243.2(b) provides, in relevant part, as follows:
(b) Except as otherwise required by law or regulation, an insurer shall maintain:
(1) A policy record for each insurance contract or policy for six calendar years after the date the policy is no longer in force or until after the filing of the report on examination in which the record was subject to review, whichever is longer.
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(4) A claim file for six calendar years after all the elements of the claim are resolved and the file is closed or until after the filing of the report on examination in which the claim file was subject to review, whichever is longer.
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Because the record retention requirements set forth above provide more specific details regarding the types of records that an insurer must maintain, as well as the specific retention periods that insurers must follow, they are supplemental to, and do not conflict with, 11 NYCRR § 16.9(a) (Regulation 86). Additionally, 11 NYCRR Part 243 (Regulation 152) clearly envisions that the requirements contained therein should be applied in conjunction with any other requirements of the Insurance Law and corresponding regulations that do not conflict with the requirements of Regulation 152. See 11 NYCRR § 243.2(a) & (b).
11 NYCRR § 243.3(a)(1) permits insurers to maintain records in any "durable medium", which is defined in 11 NYCRR § 243.1(c) as follows:
[A] medium for maintaining a record where the properties of such medium provide reasonable assurances against tampering with the information contained in the original and degradation of any reproduction generated, and where the reproduction is an exact copy of the original. The medium may include paper; facsimile; or photographic, micrographic, magnetic, optical, mechanical or electronic media.
Electronic records constitute a "durable medium" that is an acceptable means of record retention under Regulation 152. See Office of General Counsel ("OGC") Opinion No. 07-11-05; OGC Opinion. No. 04-02-17; OGC Opinion No. 03-06-25; and OGC Opinion No. 00-03-09.
11 NYCRR § 243.3(a)(3) further provides: "Upon transfer of an original record to a durable medium, the insurer may destroy the original record after assuring that all information contained in the original record, including signatures, handwritten notations, or pictures, is contained in the durable medium."
Accordingly, when the record retention requirements of 11 NYCRR Part 16 (Regulation 86) are read in conjunction with those set forth in 11 NYCRR Part 243 (Regulation 152), it is clear that a New York-licensed special risk insurer such as ABC may convert its paper underwriting and claim files into an electronic format that constitutes a durable medium, and such electronic files shall be deemed to satisfy the requirements of 11 NYCRR § 16.9(a)(2) so long as such electronic records may be easily accessed from ABC's New York office.
For further information, you may contact Associate Attorney Pascale Jean Baptiste at the New York City office.
1 "Free Trade Zone" is the term commonly used to refer to special risk insurance written pursuant to Article 63 of the New York Insurance Law.