OGC Opinion No. 05-06-16

The Office of General Counsel issued the following opinion on June 17, 2005, representing the position of the New York State Insurance Department.

Re: Licensing of Foreign HMO in NY

Question Presented:

Is XYZ Healthplan Inc. ("XYZ"), a health maintenance organization ("HMO") licensed in Florida, required to be licensed by the Department when contracts it issued in Florida incidentally cover New York residents?


No. XYZ, an unauthorized foreign HMO and lacking a medical network in New York, is exempt from licensing requirements when its New York transactions are limited to the payment of health insurance claims for those employees who happen to reside in New York.


XYZ is an HMO licensed in Florida but not in New York. It issues point-of-service policies containing an out-of-network component to Florida employers, some of which happen to have employees who reside in New York. It is not soliciting business in New York, enrolling New York groups, or issuing New York-based contracts. The claims it processes from subscribers who utilize New York providers arise as a result of the policies issued in Florida and in accordance with the terms and conditions of same.


N.Y. Ins. Law § 1101(a) (McKinney Supp. 2005) defines "insurance contract" as follows:

(1) [A]ny 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.

(2) 'Fortuitous event' means 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 § 1102(a) (McKinney Supp. 2005) prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state, unless licensed as an insurer or exempted from licensing pursuant to the Insurance Law. N.Y. Ins. Law § 1101(b)(1) (McKinney Supp. 2005) defines the term "doing an insurance business," in pertinent part, as:

(A) making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any

firm, association, or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts; . . .

(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance; . . .

(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter.

N.Y. Ins. Law § 1101(b)(2) (McKinney Supp. 2005) provides an exemption for transactions performed by an unauthorized foreign or alien insurer if effected by mail from outside of New York, provided that the insurer is licensed by its place of domicile to transact an insurance business, as follows:

Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state, but section one thousand two hundred thirteen of this chapter shall nevertheless be applicable to such insurers: . . .

(E) transactions with respect to policies of insurance on risks located or resident within or without this state (except master policies or contracts of group insurance which are subject to the requirements of subparagraph (B) hereof), which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business; . . .

The exemption in Section 1101(b)(2)(E) applies to subsequent transactions effected by mail after the policy has been principally negotiated, issued and delivered outside of New York. In the instant case, assuming that the policies in question are principally negotiated, issued and delivered outside of New York and the HMO is duly licensed in its state of domicile and authorized to do an insurance business in the jurisdiction in which the policy is placed, it would not have to be licensed in New York to perform subsequent transactions by mail in regard to that policy.

Here, XYZ falls within the aforementioned exceptions to licensing based upon the facts as represented.

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