OGC Op. No. 09-04-14
The Office of General Counsel issued the following opinion on April 22, 2009, representing the position of the New York State Insurance Department.
RE: Notice of Cancellation sent Electronically
1) May an authorized insurer send the insured a notice of cancellation of an insurance policy electronically by means of e-mail?
2) If a notice of cancellation of an insurance policy is sent to an insured electronically by means of an e-mail, what constitutes proof that the notice has in fact been sent?
1) Yes, as a general matter, an insurer may send an electronic notice of cancellation to an insured by means of e-mail if the insured has consented to receiving electronic documents.
2) An electronic record that the notice of cancellation was sent to the insured at an e-mail address for the insured on record with the insurer will suffice as proof that the notice has in fact been sent. The electronic record of the transmission must be reliable, accurate and verifiable.
The inquiry is of a general nature, without reference to particular facts.
The Electronic Security and Records Act (“ESRA”), enacted as part of Chapter 4 of the Laws of 1999 that added the State Technology Law as new Chapter 57-A of the Consolidated Laws, N.Y. Tech Law §§ 301-309 (McKinney 2005), provides the legal framework for the conduct of electronic commerce. Pursuant to N.Y. Tech Law § 305(3), electronic records are given the same force and effect as records not produced by electronic means.
The Insurance Department previously has construed laws that require notice, but do not specify the means by which notice is to be given, as allowing for electronic transmission. In Circular Letter No. 33 (1999), the Department stated that “[s]tatutes that utilize the words ‘writing’, ‘certificate’ or ‘memorandum’; or the like, permit electronic documents” and, that “[s]tatutes that provide for ‘delivery’, ‘notice’ or the like, permit electronic communications.” Likewise, in the Opinion of Office of General Counsel (“OGC”) No. 04-3-22 (March 24, 2004), the Department opined that an insurance company may provide statutorily required “written notice” electronically, and, in OGC No. 04-05-03 (May 5, 2004), the Department opined that an insurance company may notify customers of termination of their coverage by means of e-mail where the statute requires “delivering or mailing” notice.
However, under N.Y. Tech Law § 309, ESRA does not require any entity or person to use an electronic record or electronic signature. Accordingly, if any one party to the transaction does not wish, or is not able, to participate fully in an electronic transaction, the party cannot be required to do so. See Circular Letter No. 33 (1999).
Further, the use of electronic means to send a required notice is not permitted where the applicable statute specifically calls for the use of non-electronic means of giving notice. In Circular Letter No. 33, the Department advised that “there are certain statutes that contain additional requirements that, without amendment or further regulatory interpretation, may present obstacles to electronic commerce, e.g., the use of . . . United States mail, and statutory cancellation notice requirements.” For example, N.Y. Veh. & Traf. Law § 313(1)(a) provides that, as to the cancellation of an owner’s policy of liability insurance, a “notice of termination [should be sent] by regular mail, with a certificate of mailing, properly endorsed by the postal service . . . .” (Italics added.) However, N.Y. Ins. Law § 3442(n)(2)(A) (McKinney 2007, Supp. 2009), in contrast, provides that a notice of cancellation of an account group policies shall not become effective until fifteen days after the insurer mails or delivers written notice of cancellation to the group policy holder at the mailing address shown in the policy, and N.Y. Ins. Law § 3425(h)(1) provides that “[p]roof of mailing of a notice of cancellation . . . to the named insured at the address shown in the policy, shall be sufficient proof of the giving of notice . . .” Each of those statutes is silent as to the method of transmission. Consequently, so long as the policy contains the insured’s e-mail address, the required notice in both Insurance Law §§ 3442(n)(2)(A) and 3425(h)(1) may be satisfied by sending the notice of cancellation electronically.
As to what constitutes proof of mailing or delivery of a policy cancellation notice that is sent electronically, the federal Electronic Signatures in Global and National Commerce Act (“E-Sign”), 15 U.S.C.A. § 7001(d)(1), addresses the retention of records. That statute provides in pertinent part as follows:
(1) Accuracy and accessibility.
If a statute, regulation, or other rule of law requires that a contract or other record relating to a transaction in or affecting interstate . . . commerce be retained, that requirement is met by retaining an electronic record of the information in the . . . record that --
(A) accurately reflects the information set forth in the . . . 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.
Thus, if a notice of cancellation is sent to the insured electronically, the proof of mailing and delivery may also be in an electronic format. However, in order to comply with E-Sign, the notice of cancellation should be accurate and capable of verification so as to be reliable proof to show that the notice was sent to the intended recipient. See OGC No. 04-03-22 (March 25, 2004).
For further information, you may contact Supervising Attorney Samuel Wachtel at the New York City office.