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The Office of General Counsel issued the following opinion on September 20, 2007 representing the position of the New York State Insurance Department.

RE: Direct Repair Program Promotion

Question Presented:

May an insurer provide a $20.00 gift card for gasoline to a customer service representative (“CSR”) who is not licensed as an insurance agent and/or to a licensed insurance agent for informing an insured of an insurer’s Direct Repair facilities?


Yes. An insurer may provide a $20.00 gift card for gasoline to a customer service representative (“CSR”) who is not licensed as an insurance agent and/or to a licensed insurance agent for informing an insured of an insurer’s Direct Repair facilities. The insurer must be mindful, however, that its agents and representatives may not violate N.Y. Ins. Law § 2610(b) (McKinney 2006), which prohibits an insurer from steering an insured to a particular repair facility.


An insurer (the “Company”) has a Direct Repair Program (“DRP”) for automobile repairs that may be needed in the event of covered collision losses. Under the DRP, several repair facilities in a variety of geographic locations are pre-approved by the Company as DRP facilities.1

The Company is considering instituting a program to promote the use of DRP facilities (the “Promotion Program”), which would operate as follows: When one of the Company’s insureds contacts his or her agent to report a collision loss, the agent and/or customer service representative employed by the agency would remind the insured of the existence of the DRP and refer the insured to the Company’s website for a listing of DRP facilities or provide the insured with the names and addresses of DRP facilities in the insured’s area. The final decision as to where any repair will take place rests with the insured. The terms of the Promotion Program further provide that the agent/CSR will notify the Company of the insured’s collision and of the referral to a DRP facility. If it turns out that the insured in fact utilizes a DRP facility, the Company would send the agent/CSR a $20 gift card for the purchase of gasoline. The stated aim of the program is to provide an incentive for the promoting the use of the DRP.


The inquiry references Insurance Law § 322. That statute states:

No licensed insurance agent, licensed insurance broker, licensed adjuster, authorized insurer or representative of such insurer shall directly or indirectly request, procure or accept any payment from a motor vehicle repairer for referring any motor vehicle repair business to such repairer.

Insurance Law § 322 does not prohibit the Promotion Program, because the Promotion Program does not involve “payments” by a repair facility to an insurer. Rather, the program features payments by an insurer to agents and/or CSRs.

Although Insurance Law § 322 does not render the Promotion Program unlawful, the analysis of the issue presented does not end with that statute. Of particular relevance is Insurance Law § 2610 (McKinney 2006), which reads as follows:

Collision or comprehensive coverage on motor vehicles; claims; repairs.
(a) Whenever a motor vehicle collision or comprehensive loss shall have been suffered by an insured, no insurer providing collision or comprehensive coverage therefor shall require that repairs be made to such vehicle in a particular place or shop or by a particular concern.
(b) In processing any such claim (other than a claim solely involving window glass), the insurer shall not, unless expressly requested by the insured, recommend or suggest repairs be made to such vehicle in a particular place or shop or by a particular concern.

As provided in subsection (b) of the statute,2 insurers are prohibited from recommending or suggesting that an insured utilize a specific repair facility (unless the insured has in fact asked for a recommendation). The purpose of this provision is to prevent the steering of insureds to facilities favored by the insurer.

Although the Promotion Program does not in and of itself constitute a per se violation of § 2610(b), it is nevertheless foreseeable that incentivizing the Company’s agents or CSRs to “remind” insureds of the existence of the insurer’s DRP may well lead to violations of the statute. Accordingly, before implementing the Promotion Program, the Company should ensure that detailed guidelines are established and telephone scripts are drafted that specify the information that will be passed on to insureds by agents and CSRs.

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


1 It is asserted that repairs effected at DRP facilities benefit the insured in a number of ways (e.g., the insured receives priority service, payment to the shop is made directly by the Company, and the Company provides the insured with a lifetime guarantee on the repairs).

2 This subsection, as formerly interpreted by the Department in the now-withdrawn Circular Letter No. 16 (2000), was challenged by the industry.  See Allstate Insurance Co. v. Serio, 98 N.Y. 2d 198, 746 N.Y.S. 416 (2002), which construed the statute as follows:

The literal language of section 2610(b) restricts when an insurance company can make recommendations or suggestions that repairs be performed at a particular shop.   The statute does not regulate speech on subjects other than recommendations or suggestions about particular shops, nor does the statute regulate the content or placement of material promoting an insurance company’s repair program, nor does the statute regulate discussion or distribution of its text. 

Id. at 205, 746 N.Y.S. 2d at 420.  See also Circular Letter No. 14 (2003), which provides that the Department will enforce the statute in accordance with the Court of Appeals’ interpretation.

Department of Financial Services


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