OGC Opinion No. 06-12-18
The Office of General Counsel issued the following opinion on December 22, 2006 representing the position of the New York State Insurance Department.
Re: Group Disability Insurance, New York Resident
Issue
May an insurer not authorized in New York cover a New York resident who is an employee of the policyholder under a group short term disability insurance policy issued to an employer outside of New York?
Conclusion
So long as the policy is validly issued in the jurisdiction where the employer is located and there is no direct solicitation in New York, such coverage may be provided.
Facts
A regulatory consultant to insurance companies inquired on behalf of a client. An insurer that is not authorized to transact an insurance business in New York issued a group short term disability policy to an employer in the District of Columbia (DC), which is a jurisdiction in which the client is licensed. While most of the insured's employees are resident in DC or another jurisdiction where the client is licensed, there is one employee who is resident in New York. This employee periodically visits the employer's DC office. The employer desires to enroll the New York resident for the short term disability coverage during one of the employee's periodic visits to DC.
Analysis
New York Insurance Law § 1102(b) (McKinney 2000) prohibits the doing of an insurance business without a license. There is an exception, however, in New York Insurance Law § 1101(b)(2): (McKinney 2000):
(2) 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 [service of process on unauthorized insurers] shall nevertheless be applicable to such insurers: . . . (B) transactions with respect to . . . group accident and health . . . : (i) where such groups conform to the definitions of eligibility contained in . . . (II) the following subparagraphs of paragraph (1) of subsection (c) of section four thousand two hundred thirty-five of this chapter: (aa) subparagraph (A), . . . and (ii) where the master policies or contracts were lawfully issued without this state in a jurisdiction where the insurer was authorized to do an insurance business; . . . .
Employer-employee groups for health insurance (including short term disability policies) are defined in New York Insurance Law § 4235(c)(1)(A) (McKinney 2000 and 2007 Supplement).
New York Insurance Law § 3201(b)(1) (McKinney 2000 and 2007 Supplement) provides:
No policy form shall be delivered or issued for delivery in this state unless it has been filed with and approved by the superintendent as conforming to the requirements of this chapter and not inconsistent with law. A . . . group accident and health . . . insurance certificate evidencing insurance coverage on a resident of this state shall be deemed to have been delivered in this state, regardless of the place of actual delivery, unless the insured group is of the type described in: . . . (B) section four thousand two hundred thirty-five except subparagraph (D) where the group policy is issued to a trustee or trustees of a fund established or participated in by two or more employers not in the same industry with respect to an employer principally located within the state, . . . .
Accordingly, based upon the facts presented, the client could issue a certificate in DC to the New York resident employee, or it could send the certificate to the New York resident by mail. The certificate would not have to qualify under New York Law, nor would it be subject to New York approval.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.