OGC Op. No. 10-12-10

The Office of General Counsel issued the following opinion on December 9, 2010 representing the position of the New York State Insurance Department.

RE: Repatriation and Funeral Contracts

Questions Presented:

Under the facts described below, does the contract promising funeral services, including repatriation of remains, constitute an insurance contract?

Conclusions:

Yes. The contact promising repatriation of remains constitutes an insurance contract because it obligates one party (the insurer) to provide another party (insured/beneficiary) with funeral services, including repatriation of remains (a benefit of pecuniary value) upon the happening (the death) of one of the persons covered by the agreement (a fortuitous event).

Facts:

The inquirer reports that she represents a company located in Colombia that proposes to market and sell a contract to Colombian nationals residing in New York. Under the contract, the company agrees to provide certain funeral and repatriation services in the event of the death of a purchaser or any of persons selected by the purchaser to be covered, whom the purchaser may designate at the time the purchaser enters into the contract with the client, or 365 days after purchase. Some of the funeral services may be provided in New York, and others would be provided in Colombia. The repatriation services would include transportation of a corpse or ashes to Colombia.

Analysis:

N.Y. Ins. Law § 1102(a) (McKinney 2006) is germane to the query. The statute prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state, unless licensed as an insurer or exempted from licensing. Insurance Law § 1108 provides exemptions from the licensing requirement for certain entities, none of which applies to the situation presented here.

Insurance Law § 1101(b)(1), in turn, defines the term “doing an insurance business” in pertinent part as follows:

(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 . . . .

Insurance Law § 1101(a)(1) defines “insurance contract” as follows:

(a)(1) [A]ny 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.

Insurance Law § 1101(a)(2) defines “fortuitous event” as “any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.”

The inquirer questions whether death is a fortuitous event since death is an inevitable event. Although death is inevitable, its timing is fortuitous. In this case, the death of one of the parties listed in the contract during the term of the agreement is a fortuitous event that is beyond the control of the insurer or the insured/beneficiaries. Any such contract providing benefits upon the death of a person has long been recognized as insurance in this state, and specifically life insurance. Insurance Law § 1113(a), which defines the kinds of insurance in this state, defines life insurance under paragraph (1) thereof, in pertinent part, to mean “…every insurance upon the lives of human beings, and every insurance appertaining thereto…”

The inquirer also questions whether a contract providing services rather than a monetary benefit can constitute an insurance contract. But as noted above, Insurance Law § 1101(a)(1) speaks in terms of conferring a “benefit of pecuniary value,” which may include the giving of money or the provision of goods or services that have a monetary value. See, e.g., People by Abrams v. American Motor Club, Inc., 133 A.D.2d 593 (1st Dep’t 1987) (a “prepaid collision service contract sold” by American Motor Club under which the Club would repair vehicles damaged by collision, fire, theft, windstorm, hail, flood, malicious mischief, or vandalism constitutes insurance). See also Opinion of Office of General Counsel Nos. 08-08-10 (August 27, 2008) and 06-12-02 (December 4, 2006).

The contract described above meets the definition of an insurance contract in that it obligates one party (the insurer) to provide another party (insured/beneficiary) with funeral services, including repatriation of remains (a benefit of pecuniary value) upon the happening the death of one of the persons covered by the agreement (a fortuitous event). Further, the parties who are covered by the contract clearly have a material interest that would be adversely affected by their deaths. Thus, all of the elements of Insurance Law § 1101(a) are satisfied, the contract described above constitutes an insurance contract, and the offering and issuance of the contract constitutes the doing of an insurance business. Therefore, any company offering the contract must obtain an insurance license from the Department in order to offer the contract in New York State.

For further information you may contact Senior Attorney Brenda M. Gibbs at the Albany Office.