OGC Opinion No. 06-03-17

The Office of General Counsel issued the following opinion on March 28, 2006, representing the position of the New York State Insurance Department.

Re: Consumer Complaint Log Under Regulation 64

Question:

Must an authorized insurer maintain an ongoing central log of all complaints received?

Conclusion:

Yes, an authorized insurer is required by Regulation 64 [N.Y. Comp. Codes R. & Regs. tit. 11, Part 216 (1983)] to maintain a log of all complaints it receives, irrespective of whether the complaints were also lodged with the New York State Insurance Department. The conclusion set forth in O.G.C. Opinion No. 03-11-22 (November 28, 2003)¹ is thus reversed.

Facts:

Following an examination of a life insurer that revealed that it possessed no complaints on its complaint log, this Office was asked to revisit its prior Opinion on the captioned issue.

Analysis:

Office of General Counsel Opinion No. 03-11-22 (November 28, 2003) (the "2003 Opinion") held that an authorized insurer's complaint log need only contain copies of complaints against it only where a complaint was also made to the Insurance Department. On reconsideration, this conclusion is reversed.

Regulation 64, N.Y. Comp. Codes R. & Regs., tit. 11, Part 216 (1984) governs unfair claims settlement practices and claim cost control measures. Section 216.4 thereof governs generally an insurer's failure to acknowledge pertinent communications. Each subdivision thereof addresses a different subject. Subdivisions 216.4 (c) and (e) respectively mandate the establishment of an internal complaint department to address complaints made to the Insurance Department and the maintenance of a central complaint log. Those subdivisions provide, in pertinent part, as follows:

N.Y. Comp. Codes R. & Regs., tit. 11, § 216.4(c) and (e) (1984).

The 2003 Opinion concluded that the maintenance of a log of complaints [mandated under subdivision (e)] was restricted only to those complaints filed with the Department of Insurance [i.e., the complaints investigated and resolved under subdivision (c)]. This reading of the regulation, however, is unnecessarily strict. First, it is not supported by the structure of the regulation. An examination of Section 216.4 indicates that each subdivision thereof imposes separate requirements,² each of which has a distinct aim. The interpretation contained in the 2003 Opinion requires subdivisions (c) and (e) to be interdependent.

Second, reading the requirement in (e) as being limited to the complaints that must be acted upon pursuant to subdivision (c) is not justified by the language in either subsection. In particular, subdivision (e) specifically requires an insurer to "register and monitor all complaint activity" (emphasis supplied). The most straightforward reading of that phrase leads to the conclusion that the log must document all complaints and not just those made to the Department.

Finally, requiring insurers to maintain a log of all complaints is much more useful for regulatory purposes. As noted by the Life Bureau, the Department benefits from the existence of comprehensive complaint logs in that, on examination, it can better determine if the complaints received by the company exhibit a pattern of conduct. Logs containing only those complaints that were made to the Department would provide no new data to the examiner.

Accordingly, section 216.4(e) should be interpreted as requiring the maintenance of a log of all complaints received by an authorized insurer, and not just those complaints that were reported to the Department. The conclusion of the 2003 Opinion is thus reversed.

For additional information you may contact Supervising Attorney Michael Campanelli at the New York City office.

¹ NILS Opinion No. 2003-323.

² Specifically, subsection (a) requires acknowledgement of claims within 15 days; subsection (b) requires replies to other pertinent information within 15 days; subsection (c) requires the establishment of a department to deal specifically with complaints made to the Department; subsection (d) requires the prompt provision of claim information to the Department upon request; and subsection (e) requires the maintenance of a log of all complaints.