OGC Opinion No. 05-11-25

The Office of General Counsel issued the following opinion on November 21, representing the position of the New York State Insurance Department.

RE: Circular Letter No. 6 (2005) and registered representatives

Question Presented

Does Circular Letter No. 6 (2005) apply to a broker/dealer that is not affiliated with a life insurer?


Although the Circular Letter was addressing specific concerns arising out of policies issued to insurance companies, their insurance agents and the representatives of the insurers' securities broker/dealer affiliates, the principles enunciated in the Circular Letter are equally applicable to a policy issued to a broker/dealer and its representatives.


No specific facts are provided. The inquirer asks whether the Circular Letter imposes rules with respect to a broker/dealer that is not affiliated with a life insurer and which purchases a policy of insurance covering both it and its representatives.


Circular Letter No. 6 (2005) is itself not a rule or regulation but merely constitutes the Department’s interpretation of the existing law and regulations. It was drafted with specific situations in mind, which the Department believed violated the Insurance Law. However, the principles enunciated therein are equally applicable to other circumstances, including the one that the inquirer posits; namely, a policy issued to a securities broker/dealer covering both it and its representatives.

Section 153.1(g) of 11 NYCRR 153 (Regulation 135), defines "group insurance policy" as follows:

(g) Group policy means:

(1) a policy underwritten and issued on a collective basis of:

(i) property/casualty insurance insuring the interests of two or more persons or entities; or

(ii) liability insurance insuring a Federal purchasing group or its members;

(2) where an insurer elects to issue a single policy with a first-named insured and additional insureds, such policy shall not be considered a "group policy" in regard to the following:

corporations or other entities under common control as defined in section 107(a)(16) of the Insurance Law, with regard to their related interests;

franchisors and their franchisees, with regard to their related interests;

(iii) members of a partnership or joint venture, with regard to their related interests;

(iv) family members, but only for purposes of policies subject to Section 3425 of the Insurance Law; or

(v) shared interests, provided that such shared interests exist among all additional insureds, and only to the extent of such shared interests.

Unless the broker/dealer and the representatives come within one of the exceptions contained above, or where the representatives are the employees of the broker/dealer and the policy is issued to the broker/dealer, the policy would be a group insurance policy and would have to comply with Regulation 135. For example, if the representatives are independent contractors and not employees, then the policy would be a group insurance policy.

Under such circumstances, the policy may not be issued except to a purchasing group formed pursuant to the requirements of N.Y. Ins. Law Article 59 (McKinney 2000), the Federal Liability Risk Retention Act 15 U.S.C. §§ 3901, et seq. ("LRRA") and 11 NYCRR 310) (Regulation No. 134).and where the policy is in compliance with Regulation No. 135. Specifically, the policy may not contain an overall group policy aggregate and the broker/dealer holding the master policy may not require the representatives to purchase the coverage.

For further information one may contact Principal Attorney Paul A. Zuckerman at the New York City Office.