The Office of General Counsel issued the following opinion on October 31, 2003, representing the position of the New York State Insurance Department.

Re: N.Y. Ins. Law § 1101 Doing an Insurance Business

Question Presented:

Does the offering of protection by a certified public accountant, for a fee, against the cost of additional professional fees, should a client’s tax return be selected for audit by the Internal Revenue Service or state taxing authority, constitute the doing of an insurance business?


Without additional information concerning the specifics of a program we are unable to respond to the question other than in a general fashion.


A certified public accountant that prepares tax returns for clients would like to offer clients protection, for a fee, against the cost of additional professional fees should their tax return be selected for audit by the Internal Revenue Service.


Under New York law, no person or entity may do an insurance business without a license. N.Y. Ins. Law § 1102(a) (McKinney 2003). The "doing of an insurance business" is defined, inter alia, as "making, or proposing to make, as insurer, any insurance contract." N.Y. Ins. Law § 1101(b)(1)(A) (McKinney 2003). "Insurance contract" is defined in N.Y. Ins. Law § 1101(a)(1) (McKinney 2003) as follows:

"Insurance contract" means any 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.

A "fortuitous event" is defined 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." N.Y. Ins. Law § 1101(a)(2) (McKinney 2003). The doing of an insurance business also includes "making, or proposing to make, as warrantor, guarantor, or surety, any contract of warranty, guaranty of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the warrantor, guarantor or surety." N.Y. Ins. Law § 1101(b)(1)(B) (McKinney 2003).

The Insurance Department has opined concerning other practices by tax preparers that because of their nature as a warranty would not be regarded as doing an insurance business. For guidance concerning permissible practices, please see the March 28, 2000 and July 24, 2000 Office of General Counsel opinions.

For further information you may contact Special Counsel Athanasios Shinas at the Albany Office.