The Office of General Counsel issued the following opinion on August 31, 2004, representing the position of the New York State Insurance Department.

Re: Penalties for Appleton Rule Violations N.Y. Ins. Law § 1106 (McKinney 2000)

Question Presented:

If an authorized foreign or alien insurer violates the Appleton Rule, as codified in N.Y. Ins. Law § 1106 (McKinney 2000), what sections of law imposing penalties are available to the Department?


Licenses of foreign and alien insurers may be revoked pursuant to N.Y. Ins. Law § 1104 (McKinney Supp. 2004). The general penalty provision is N.Y. Ins. Law § 109 (McKinney 2000), imposing a maximum monetary penalty of $500 for each violation of the Insurance Law.


None were provided.


Since the question lacks a factual foundation, the analysis is general in nature as to what penalty might apply if an authorized foreign or alien insurer were to violate what is now N.Y Ins. Law § 1106 (McKinney 2000). The Superintendent has a broad range of possible penalties, one of which would be the revocation of the insurer's New York licenses, following notice and a hearing, for the failure to comply with any Insurance Law requirement (including the formerly named "Appleton Rule," now codified as stated) and if the Superintendent determined that "such revocation is reasonably necessary to protect the interests of the people of this state…." pursuant to N.Y. Ins. Law § 1104(a) (McKinney Supp. 2004). As stated in N.Y. Ins. Law § 1106(f) (McKinney 2000): "No foreign insurer and no United States branch of an alien insurer which does outside of this state any kind or combination of kinds of insurance business not permitted to be done in this state by similar domestic insurers hereafter organized, shall be or continue to be authorized to do an insurance business in this state, unless [exempted by the Superintendent]…." Accordingly, the penalty provided here is revocation of licenses or denial of license applications. Similar provisions are contained in paragraphs (c), (d), and (e) of § 1106. N.Y Ins. Law § 109 (McKinney 2000) permits the imposition of a penalty that shall be in addition to any non-monetary penalty otherwise provided by law, following notice and a hearing, whereby the Superintendent may order the insurer to pay a penalty of not more than $500 for each offense.

For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.