New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

Andrew M. Cuomo
Governor

James J. Wrynn
Superintendent

OGC Op. No. 11-01-06

The Office of General Counsel issued the following opinion on January 28, 2011, representing the position of the New York State Insurance Department.

Re: Purchase of Marketing List

Question Presented:

Does the mere sale of a contact list of supporters by a charity, foundation, or association to an insurance agent that is licensed in New York to sell accident and health insurance constitute a referral under New York Insurance Law § 2114 (McKinney Supp. 2010)?

Conclusion:

No. The mere sale of a contact list of supporters by a charity, foundation, or association to an insurance agent that is licensed in New York to sell accident and health insurance does not constitute a referral under Insurance Law § 2114.

Facts:

The inquiry is general in nature, without reference to specific facts.

Analysis:

Insurance Law § 2114(a) permits an insurance agent that sells life and accident and health insurance to compensate a person, firm, association or corporation for making a referral to the insurance agent. 1 Insurance Law § 2114(a)(3) 2 and (4) read as follows:

(3) No insurer, fraternal benefit society or health maintenance organization doing business in this state and no agent or other representative thereof shall pay any commission or other compensation to any person, firm, association or corporation for services in soliciting, negotiating or selling in this state any new contract of accident or health insurance or any new health maintenance organization contract, except to a licensed accident and health insurance agent of such insurer, such society or health maintenance organization, or to a licensed insurance broker of this state, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.

(4) Services of the kind specified in this subsection shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.

The mere sale of a list of supporters by a charity, foundation, or association to an insurance agent does not constitute a “referral” under Insurance Law § 2114(a)(4), because the non-licensee has not made a “referral” or recommendation to its supporters to purchase insurance from the agent. Nor has the non-licensee, in merely selling its list of supporters, acted as an insurance agent under Insurance Law § 2101 (i.e., procuring, soliciting, or selling insurance), for which a license would otherwise have been required under Insurance Law § 2102.

Because the mere sale of a list of supporters to an insurance agent, who will solicit long term care insurance to those supporters, does not constitute a referral under Insurance Law § 2114(a)(4), the insurance agent may compensate the charity, foundation, or association based on the actual purchase of insurance. Thus, the price of such list may be based upon a percentage of sales made to supporters named on the list. See Office of General Counsel Opinion (“OGC Op.”) Nos. 10-01-03 (January 6, 2010), 03-09-07 (September 9, 2003) and 01-03-16 (March 21, 2001), and the Insurance Department’s Circular Letter No. 5 (2001).

If, however, the sale of the list is accompanied by the charity, foundation, or association making a referral or recommendation to purchase insurance from the insurance agent, or other similar affirmative act, then the price of the list may not be based on a percentage of sales, pursuant to Insurance Law § 2114(a)(1). See OGC Op. No. 02-04-33 (April 29, 2002).

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.

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1 Insurance Law §§ 2115 and 2116 contain similar requirements with respect to property/casualty insurance agents and insurance brokers, respectively.

2 Although Insurance Law § 2114(a)(4) is deemed repealed effective September 10, 2011, pursuant to L.2000, c. 418, § 12, and L.1997, c. 3, § 7, we expect that the Legislature will extend it again, as it has several times in the past.