OGC Opinion No. 05-01-04

Re: Interest on Life Claim Payments


For purposes of New York Insurance Law § 3214, does the phrase "date of payment" refer to the date that the beneficiary receives payment or the date that payment is made by the company?


The phrase "date of payment" refers to the date that the payment is made by the company.


The inquiry was general in nature and did not provide any specific factual background.


New York Insurance Law § 3214 mandates the payment of interest on life insurance policy claim payments, and provides, in pertinent part, as follows:

If no action has been commenced, interest upon the principal sum paid to the beneficiary or policyholder shall be computed daily at the rate of interest currently paid by the insurer on proceeds left under the interest settlement option, from the date of the death of an insured or annuitant in connection with a death claim on such a policy of life insurance or contract of annuity and from the date of maturity of an endowment contract to the date of payment and shall be added to and be a part of the total sum paid.

N.Y. Ins. Law § 3214(c)(McKinney 2000).

This statute was enacted to discourage the practice of delaying the prompt payment of death benefits by imposing a financial disincentive for doing so, i.e., the addition of interest to the amount of death benefits payable. This inquiry relates to the definition of the period of time for which such interest is added. The statute does not further define the phrase "date of payment," and nothing in its legislative history provides any guidance regarding this issue. As a practical matter, however, it appears that the most logical interpretation of the phrase "date of payment" in this context is the date on which payment is made by the company (i.e., the mailing of a check to the beneficiary or the electronic transfer of funds to the beneficiary's account). This conclusion is justified because defining the "date of payment" in that way enables the company to calculate exactly how much interest is owed. Were the term defined to mean the date of receipt by the beneficiary, uncertainty would exist as to how much interest should be paid, given the inevitable variances in the length of time it would take the beneficiary to receive the payment through the mails.

It is further noted that the Department requires companies to provide additional interest payments to beneficiaries in instances where the delivery of the check for the proceeds of a policy is delayed due to the action (or inaction) of the company or its agent.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.