OGC Op. No. 11-01-07
The Office of General Counsel issued the following opinion on January 28, 2011 representing the position of the New York State Insurance Department.
Re: Insurance Agent or Broker Co-Sponsoring Seminar with Law Firm
May a licensed insurance agent or broker co-sponsor seminars with a law firm in order to provide general insurance advice to employers?
Yes. A licensed insurance agent or broker may co-sponsor seminars with a law firm in order to provide general insurance advice to employers, as long as the seminars do not violate Insurance Law §§ 2324, 4224, or any other applicable provision of the Insurance Law.
The inquirer states that she represents an entity that holds insurance agent and broker licenses to sell property/casualty, life, and accident and health insurance in New York. The inquirer’s client proposes to enter into a transaction with a law firm whereby both entities will co-sponsor for employers seminars for employers that focus on insurance and employment risk management issues. Her client will describe issues that may arise in the administration of employers’ benefits programs, including employee benefits, and employment practices liability insurance (“EPLI”). The inquirer’s client may also discuss: appropriate language for employee handbooks; COBRA rights and benefits; federal health care reform legislation; expected future market conditions for health insurance; claims, coverages and exclusions under EPLI policies; employment discrimination issues; and employer best practices. Invitations to the seminar will be sent by e-mail blasts, sometimes to a particular trade association, and mass mailings. However, the invitations are not only sent to insurance clients. Furthermore, the inquirer states that there will be no incentive given to attend the program, other than the information provided, nor will there be any dissemination of information about, or solicitation of, any particular insurance product. In other words, the seminars are open to the general public and to special groups without regard to insured status, and no obligation is imposed upon attendees to apply for or purchase insurance through the insurance producer.
In addition, the inquirer states that there will be no legal or financial relationship between the client and the law firm, and that these seminars will not be held for any one specific employer.
As a general matter, an insurer or insurance producer may not provide or offer to provide an insured or potential insured with any special benefit or discount, including any rebate from the premium, or any service or other incentive in conjunction with the sale of insurance, that is not specified in the policy or contract. 1 Insurance Law §§ 2324 applies to most property/casualty insurance, and Insurance Law § 4224 applies to life, annuities, and accident and health insurance. Insurance Law § 2324 states:
(a) No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker, or shall give, sell or purchase, or offer to give, sell or purchase, as an inducement to the making of such insurance or in connection therewith, any stock, bond or other securities or any dividends or profits accrued thereon, nor shall the insured, his agent or representative knowingly receive directly or indirectly, any such rebate or special favor or advantage, provided, however, a licensed insurance agent or a licensed insurance broker may retain the usual commission or underwriting fee on insurance placed on his own property or risks, if the aggregate of such commissions or underwriting fees will not exceed five percent of the total net commissions or underwriting fees received by such licensed insurance agent or insurance broker during the calendar year.
In an Office of General Counsel (“OGC”) Opinion dated April 26, 2001, the OGC opined that a life insurer may conduct free information seminars regarding insurance that are open to the general public and to special groups provided that the seminars are open without regard to insured status, and no obligation is imposed upon attendees to apply for or purchase insurance through the insurer, because there is no inducement in that instance. The same analysis applies to an insurance producer, since Insurance Law §§ 2324 and 4224 make no distinction between an insurer and a producer in this regard.
In the present case, the producer: 1) would open the seminars to the public; 2) would not present the seminars to any particular employer; 2) would not hold the seminars in any particular employer’s office; 3) would not take into account insured status; 4) would not impose obligations upon attendees to purchase insurance; and 5) would not provide any incentive for people to attend the seminar. Accordingly, based on the inquirer’s description, the seminars seem to be of the sort permitted in the April 26, 2001 opinion.
Finally, a prohibition against tie-in sales is also intrinsic in the prohibition against inducements. 2 These interdependent or “tie-in” sales involve inseparable transactions whereby the purchase of “supporting business” is tied into the purchase of insurance. See e.g., OGC Opinion dated February 1, 1987. Inasmuch as the sale of the insurance and the sale of legal services are all part of the same transaction, the sale of the insurance constitutes an “inducement” to the purchase of the legal services, and vice versa. See e.g., OGC Opinion dated November 19, 1956. Therefore, the inquirer’s client may not tie-in the provision of legal services with the sale of insurance. Simply put, any insurance sales or provision of legal services should not arise as part of the same transaction.
For further information, you may contact Senior Attorney Sapna S. Maloor at the New York City office.
1 Even if the policy or contract specifies a particular good or service and makes it available to all persons of the same class, the Department still may find the endorsement unacceptable, if the policy or contract and/or the insurer’s activities run afoul of any other relevant provisions of the Insurance Law, separate and apart from the rebating and inducement provisions. Thus, in reviewing policy or contract forms, the Department looks to see that the goods or services offered in the policy or contract have a legitimate nexus to the insurance coverage provided under the policy or contract, and are necessarily or properly incidental to the insurer’s insurance business. See Insurance Law § 1113(a); see also Insurance Law §§ 1106, 1610, 1714 and 4205.
2 Only the statutory language of Insurance Law § 4224 uses the term “interdependent sales,” but that term is inherent in the statutory language of Insurance Law § 2324 insofar as Insurance Law § 2324 prohibits an extraneous inducement to procure sales. See e.g., Ollendorf Watch Co. v. Pink, 279 N.Y. 32 (1938).