The Office of General counsel issued the following informal opinion on November 26, 2002, representing the position of the New York State Insurance Department.
Re: Bank Check Storage
Question Presented
May an authorized insurer use a commercial banks product that will result in the bank returning to the authorized insurer the front and back copies of the cancelled checks on a CD ROM, rather than the original hard copy cancelled checks?
Conclusion
Yes, if the authorized insurer can satisfy the record retention requirements set forth in 11 NYCRR Part 243 (2002), Regulation 152.
Facts
The inquirer represents a commercial bank that has both retail (individual) and corporate customers. In order to save postage, the bank wants to stop returning to its customers the original, hard copy checks after such checks have been cancelled. The bank wants to only send its customers copies of the checks on CD ROM discs which would be available to the insurance company within 15 days of the close of the cycle in which the checks were cancelled. The bank would only maintain the original, hard copy checks for 90 days from the close of the cycle in which the checks were cancelled. After that, only computer imaged copies of both the front and back of each check would be stored for seven years at the bank. Copies of such checks would be stored in an off-site back-up system, along with the banks other records.
Analysis
11 NYCRR Part 243 (2002), Regulation 152, sets forth the requirements of record retention by authorized insurers. Pursuant to 11 NYCRR Part 243(1)(b), "[r]ecords means books, records, files, securities, data compilations and other documents." Pursuant to 11 NYCRR Part 243(1)(c):
Durable medium means 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.
The records required for retention and the required period of retaining such records for examination is set forth in 11 NYCRR Part 243(2). Pursuant to 11 NYCRR Part 243(2)(a):
In addition to any other requirement contained in Insurance Law, section 325, any other section of the Insurance Law or other law, or any other provision of this Title, every insurer shall maintain its claims, rating, underwriting, marketing, complaint, financial, and producer licensing records, and such other records subject to examination by the superintendent, in accordance with the provisions of this Part.
Pursuant to 11 NYCRR Part 243(2)(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. . . . . A policy record shall include:
(i) the policy term, basis for rating, and return premium amounts, if any;
. . . .
(iv) other information necessary for reconstructing the solicitation, rating, and underwriting of the contract or policy.
. . . .
(4) A claim file for six calendar years after all 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. A claim file shall show clearly the inception, handling and disposition of the claim, including the dates that forms and other documents were retrieved.
. . . .
(7) A financial record necessary to verify the financial condition of an insurer, including ledgers, journals, trial balances, annual and quarterly statement workpapers, evidence of asset ownership, and source documents, for six calendar years from its creation or until after the filing of the report on examination in which the record was subject to review, whichever is longer.
. . . .
(8) Any other-record for six calendar years from its creation or until after the filing of a report on examination or the conclusion of an investigation in which the record was subject to review.
. . . .
(d) An insurer shall require, by contract or other means, that a person authorized to act on its behalf in connection with the doing of any insurance business, including a managing general agent, an administrator, or other person or entity, shall comply with the provisions of this Part in maintaining records that the insurer would otherwise be required to maintain. Notwithstanding the above, the insurer shall be responsible if the person or entity fails to maintain the records in the required manner.
(e) The records shall be readily available and easily accessible to the superintendent in accordance with Insurance Law, section 310. The records shall be in a readable form. . . . Upon request of the superintendent, the insurer shall provide a hard copy of the record, or, if the record is maintained in a medium which is used by the superintendent, the insurer may provide the record in that medium. Failure to produce and provide a record within a reasonable time frame shall be deemed a violation of Insurance Law, section 308 unless the insurer can demonstrate that there is a reasonable justification for that delay.
. . . .
Pursuant to 11 NYCRR Part 243(3), the standards for maintenance and production of records are as follows:
(a) (1) Records and indices of records required to be maintained under this Part may be maintained in any durable medium.
(2) Where the original record was not a paper document, an insurer shall be able to produce information or data which accurately represents a record of communications between a person or entity and the insurer or accurately reflects a transaction or event.
(3) 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.
(4) If the insurer does not retain the original paper record, or if there was no original paper record, a duplicate or back-up system sufficient to permit reconstruction of the record shall be established at a separate location. The record may be retained in any form permitted by this Part.
. . . .
(5) An insurer shall establish and maintain a records retention plan. The plan shall include a description of the types of records being retained, the method of retention, and the safeguards established to prevent alteration of the records. Such plan shall be provided to the superintendent upon request. The insurer shall certify the accuracy of any records that are provided in accordance with its record retention plan.
If, after examining the product offered by the bank, an insurance company was satisfied that such product met the requirements for record retention specified in 11 NYCRR Part 243 (2002), Regulation 152, then the insurance company could use the product.
For further information you may contact Senior Attorney Susan A. Dess at the New York City Office.