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Does My License Apply on Indian Reservations?

One of the great things about this job is that, on a regular basis, I get asked a really interesting question that I never had to think about before. Today's question is one of them; when I think about it, I'm surprised I've never gotten it before.

Question from an IIABNY member: The account I'm working on is located on an Indian reservation in New York. Since reservations are sovereign territories, does my New York State agent's license allow me to write business there?

Answer: I found a 2003 New York Insurance Department opinion that answered the question, "Would a risk located on an Indian reservation physically within New York be considered to be inside New York State?" The questioner pertained to compliance with the laws governing excess lines placements, but I think the principle is the same. The attorney wrote:

The first source for guidance as to whether a risk is considered in or out-of-state is N.Y. State Law §§ 2, 3, 4, 5, 6, and 7,... which establishes the boundaries of New York State. Nothing in the State Law excludes Indian reservations from being included within New York State. Also, Indian reservations are considered municipalities within the state for certain purposes. See N.Y. Exec. Law § 412(4); N.Y. Gen. Mun. Law § 854(3). Moreover, the Indian Law specifically regulates activities pertaining to reservations in New York, which further evinces legislative intent that such reservations are considered within New York.

Accordingly, it is our opinion that the Indian reservation should, for these purposes, be considered an in-state risk...

Based on this, it appears to me that a New York agent's or broker's license gives the holder authority to write business on Indian reservations.

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Insurance Dept. Opinions: Late Notice of Claims, No-Fault Insurance

The New York Insurance Department’s Office of General Counsel issued the following advisory legal opinions in May and June:

• When an injured insured is unable to return to work due to injuries arising from an automobile accident; the insured’s employer hires another person to fill the insured’s vacant position during the insured’s period of disability; and the insured cannot immediately resume her employment when she is medically cleared to return to work, the insured may recover lost wages for the period after she is medically cleared but before she actually resumes work.
• An entity need not obtain an independent adjuster’s license in New York if it only issues checks to providers on behalf of an insurer when the insurer funds the checking account and makes all decisions on the underlying claims.
• The changes to New York law with regard to late notice of claims apply to policies issued in New York but delivered outside the state and to claims-made policies. The law applies only to liability insurance policies, but insurers may include the prejudice rules in other types of policies. 
• An employee of an insurer that is adjusting a claimant’s first-party no-fault claim may not share non-public personal health information about that claimant with an employee of an affiliate insurer that is adjusting the claimant’s third-party BI claim.
• New York Insurance Law and regulations do not permit an insurer to require a corporate assignee of no-fault benefits to designate an individual of the insurer’s choice to submit to an examination under oath.

The OGC issued two other opinions pertaining to the legality of a proposed annuity contract and the applicability of a specific regulation to health care providers and accident and health insurers. All opinions issued since 2000 are available for download from the department’s Web site.

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Insurance Dept. Opinions: E-Mailed Cancellation Notices, Service Fees, Fire Ins. Fee

The New York Insurance Department’s Office of General Counsel posted 10 new advisory legal opinions on its Web site last week.

• An insurer may send an electronic notice of cancellation to an insured by means of e-mail if the insured has consented to receiving electronic documents. A reliable, accurate and verifiable electronic record that insurer sent the cancellation notice to the e-mail address for the insured on record with the insurer will suffice as proof of delivery.
• A health services provider may not bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because available coverage for basic economic loss has been exhausted. The provider also may not bill a patient and/or the patient’s health insurer treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because of a policy exclusion, such as driving while intoxicated.
• The life insurance guaranty fund protects a New York resident who resides in Florida each winter, and who purchases a variable annuity contract in Florida, from a New York authorized insurer, that has a death benefit rider not available in New York.
• A university would not commit insurance fraud if it were to waive psychiatric office visit fees of more than twenty dollars for which its students are personally responsible, and notify its students’ insurers of the waivers.
• A service fee agreement that details the service to be provided and at what price, and specifies that the agent will keep any commission earned by the agency on the sale of insurance to the client satisfies the requirements of the Insurance Law.
• After acceptance by all necessary parties of a lump-sum waiver agreement under the New York Workers’ Compensation Law, an insured’s health insurance plan is not obligated to pay future medical expenses arising from the insured’s original injury.
• The method for calculating the fire insurance fee for a businessowners policy that has separate, divisible premiums for the property and liability coverages is to multiply 100 percent of the property premium by 1.25 percent. If the property premium is divisible and there are portions that do not include the peril of fire, then the fire insurance fee is not levied on that portion of the property premium. However, if the property premium is not divisible, then the fire insurance fee is levied on the whole property premium. If inland marine coverage is included in a businessowners policy and the premium is divisible, it is not subject to the fire insurance fee.

The OGC declined to express an opinion on a Medicare question; it also posted opinions pertaining to insurance company investments and the legality of a specific discount medical plan. Visit the department’s Web site to download any opinion issued since 2000.

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Insurance Dept. Opinions: Rebating, Referral Fees, and the Life Guaranty Fund

The New York Insurance Department’s Office of General Counsel issued seven opinions during the second half of April:

• Insurers are not required to maintain paper underwriting and claim files in their New York offices for policies written in the New York Free Trade Zone, after they have converted the files into electronic format and stored them on servers located outside of New York.
• A licensed insurance agent or broker may not offer its employer clients free access to a third-party online vendor that provides certain services, as this access would violate the rebating laws.
• A broker may pay referral fees to an unlicensed employee of a federal credit union and may make the payment contingent upon the broker being able to provide the prospective insured with a quote. While the broker may not make the fee contingent on the sale of the policy, he may pay the referral fee based upon the number of employees of the employer referred. 
• Insurance regulations permit a health insurance policy to exclude benefits provided under a workers’ compensation policy.
• The life insurance guaranty fund provides coverage up to $500,000 to a New York resident insured under an individual long-term care policy purchased in New York, should the issuing insurer become insolvent.

The other two opinions pertained to prompt payment requirements for accident and health insurance and payment obligations of the Insurance Department to the City of Albany. Visit the department’s Web site to find any opinion issued since 2000.

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N.Y. No Fault Coverage for Car Passenger

Question from an IIABNY member: Our insured’s son drove a car that had been purchased before adding it onto the policy. According to the New York No-Fault endorsement, there is coverage from the day of purchase. However, the company has denied coverage because the named insured did not purchase the vehicle; her son purchased it.

Can the passenger injured in the crash get coverage for his injuries from his parents' policy? He is a minor age 18 or 19 and in college. Should the parents submit to their carrier under PIP?

IIABNY response: The NY PIP endorsement states in part:

Subject to the exclusions and conditions set forth below, an eligible injured person is:

(a) the named insured and any relative who sustains personal injury arising out of the use or operation of any motor vehicle;…

This coverage does not apply to personal injury sustained by:...

(b) any relative while occupying, or while a pedestrian through being struck by, any motor vehicle owned by the relative with respect to which the coverage required by the New York Comprehensive Motor Vehicle Insurance Reparations Act is not in effect;

(c) the named insured or relative while occupying, or while a pedestrian through being struck by, a motor vehicle in New York State, other than the insured motor vehicle, with respect to which the coverage required by the New York Comprehensive Motor Vehicle Insurance Reparations Act is in effect; however, this exclusion does not apply to personal injury sustained in New York State by the named insured or relative while occupying a bus or school bus, as defined in sections 104 and 142 of the New York Vehicle and Traffic Law, unless that person is the operator, an owner, or an employee of the owner or operator, of such bus or school bus;

(e) any person while occupying a motorcycle;

(f) any person who intentionally causes his or her own personal injury

(g) any person as a result of operating a motor vehicle while in an intoxicated condition or while his ability to operate such vehicle is impaired by the use of a drug (within the meaning of section 1192 of the New York Vehicle and Traffic Law);  or

(h) any person while:

(1) committing an act which would constitute a felony, or seeking to avoid lawful apprehension or arrest by a law enforcement officer;

(2) operating a motor vehicle in a race or speed test;

(3) operating or occupying a motor vehicle known to that person to be stolen;  or

(4) repairing, servicing or otherwise maintaining a motor vehicle if such conduct is within the course of a business of repairing, servicing or otherwise maintaining a motor vehicle and the injury occurs on the business premises;

(i) the named insured or relative while not occupying a motor vehicle or a motorcycle when struck by a motorcycle in New York State with respect to which the coverage required by the New York Comprehensive Motor Vehicle Insurance Reparations Act is in effect;

So, under the parents’ PIP coverage, any “relative” (i.e., a child or other person related to the named insured by blood who regularly resides in the insured’s household, including any such person who regularly resides in the household, but is temporarily living elsewhere) is covered for injuries arising out of the use or operation of any motor vehicle. Under this provision, the 18 year-old college student has coverage for his injuries. He would not have coverage if:

• He was injured by a vehicle he owned and that did not carry PIP coverage

• He was injured while occupying someone else’s vehicle that did have PIP coverage (unless it was a bus or school bus)

• He was injured while riding a motorcycle

• He intentionally injured himself

• He was injured while driving under the influence of alcohol or illegal drugs

• He was injured while committing a felony, trying to outrun the police, racing, driving a vehicle he knew was stolen, or repairing a vehicle on the premises of a repair shop where he worked

• He was injured when struck by a motorcycle that had PIP coverage.

In your situation, he was injured while occupying his friend’s car, and your insured's company has determined that this car did not carry PIP coverage. Therefore, the second bullet point should not apply, none of the other bullet points appear to apply, and he should be able to recover under his parents’ PIP coverage.

Disciplinary Actions Report: Lay Off Those ‘High Pressure Tactics’

The New York Insurance Department issued its periodic report of disciplinary actions against companies, agents, brokers and adjusters on March 3. Here are some of the transgressions for which various licensees have received penalties:

• Cancellation notices, part 1: If you’re going to issue cancellation notices for non-payment of auto insurance premiums, get the facts straight. One insurer paid a $10,000 fine for displaying “incorrect information with respect to the amounts of the civil penalties that can be paid to avoid suspension of an insured’s motor vehicle registration.”
• Cancellation notices, part 2: The law says you have to give the insured 15 days’ notice when cancelling for non-payment. One insurer can give you 10,000 reasons why you shouldn’t forget to do that.
• Cancellation notices, part 3: The law allows insurers to cancel new auto policies for any reason during the first 60 days. However, they do have to give at least one reason why they’re doing it. The price tag for not giving a reason: $25,000.
• What can you say to an insurer that paid a $119,500 fine, except: Don’t violate your rate filings; don’t violate your form filings; document your underwriting files; give reasons for your actions when you send conditional renewal notices; advise your insureds that they’re entitled to loss information when you send conditional renewal and non-renewal notices; hire a new compliance officer…
• When you hire a producer, make sure that person’s license hasn’t been revoked. $750 lesson learned.
• A life agent paid a $500 fine for signing a life insurance policy payment request form as a witness to the signing of the form by the client, when he did not actually witness the signing.
• Several health agents wrote checks to the department for engaging in “high pressure tactics” in the door-to-door sale of Medicare supplemental policies. The fines ranged from $500 to $1,000.
• Finally, a Florida agent did New York business after her New York license expired, then she left that detail off her relicensing application. Telling partial truths cost $500.

Insurance Dept. Opinions: Flex-Rating, Life Agent Advertising, New Types of Policies

The New York Insurance Department’s Office of General Counsel continued its recent pattern of having little to say in January. The six new opinions for the second half of the month gives them a grand total of 12 to ring in the New Year.

• New York law prohibits an insurer from marketing a policy intended to protect the value of a retirement account in the event of divorce.
• An automobile dealer may offer its customers an Automotive Replacement Coverage plan that provides a discount toward the purchase of a replacement vehicle when there is a total loss of the original vehicle due to theft, collision or comprehensive causes. However, the amount of the discount cannot exceed the dealer’s cost, and the plan administrator may not indemnify the dealer.
• A provision in a vacation rental lease agreement that affords the renter a full or partial refund of his or her security deposit where the renter cancels for any reason and the amount of the refund that is due is dependent only upon the timing of the cancellation does not meet the definition of insurance in New York law.
• An insurer may use flexible rating for private passenger automobiles predominantly used for business purposes if the automobiles are not used for the transportation of persons for hire. N.Y. Insurance Law Sect. 3426 governs insurance policies that cover private passenger autos predominantly used for business purposes.
• A co-operative property-casualty insurance company may not purchase share certificates from a federally-insured credit union.
• A life insurance agent or broker, in soliciting structured settlement annuities, may not lawfully use a brochure published by a trade association that states, “state insurance guaranty associations provide an additional level of protection for future structured settlement recipients.”

All OGC opinions issued since 2000 are available on the department’s Web site.

Insurance Dept. Opinions: Wrap-Ups, Credit Cards, & More on Same-Sex Married Couples

The flow of advisory legal opinions coming out of the New York Insurance Department’s Office of General Counsel has slowed to a trickle. Here’s what they had to say in December:

• An insurer may limit credit card use to the payment of only a certain percentage of premiums, so long as the percentage is the same for all classes of applicants and insureds under a particular insurance product.
• An owner or general contractor that has given a subcontractor a change order on a non-public construction project, which is insured by a wrap-up policy, may not require the subcontractor to increase the credit it applied to its bid.
• A retail employee may not sell optional insurance coverage to a customer who opens a store credit card, but she may secure and furnish information for the purpose of certain types of insurance, provided she does not receive a commission from the insurance sale.
• Nothing in the Insurance Law or regulations addresses whether an insurer may settle no-fault cases with one attorney when the insurer is specifically aware that another attorney is the attorney of record.
• The department’s circular pertaining to recognition of same-sex marriages performed in other states applies to group policies including long-term disability, short-term disability and term life.
• An insurer must negotiate directly with an insured prior to issuing a notice of rights letter when the insurer has negotiated with a repair facility that has not been designated by the insured, and was unable to reach a settlement with that facility. The insurer’s letter must be issued when choice of repair facility was not explicitly a subject of negotiation with the motor vehicle repair facility. An insurer in a negotiation is not required to shift from its initial negotiating position on labor rates, or any other negotiable issue, so long as its initial position is taken in good faith.

The department issued other opinions pertaining to adjuster licenses, insurer-to-insurer payments in no-fault claim situations, and assets of insolvent insurers. Look for these and all other department opinions issued this decade on its Web site.

Surcharging a Personal Auto Premium for a Claim in Reserve

Question from IIABNY member: Hoping you can answer a question on personal auto for me. Can the company charge for an accident if nothing has been paid but reserve has been set up?

Answer: This is what N.Y. Insurance Regulation 100 (Noncommercial Private Passenger Automobile Insurance Merit Rating Plans) says (11 NYCRR 169.1(c)): 

Claims for bodily injury: A surcharge may be imposed for an occurrence involving bodily injury (including a no-fault injury subject to article 51 of the Insurance Law) provided the motor vehicle was in operation and the insured was at fault. The establishment of a residual bodily injury liability reserve shall not in itself imply that the insured was at fault. An additional surcharge may not be imposed for bodily injury, if the accident which resulted in the bodily injury is already surchargeable under subdivision (a) of this section.

Subdivision (a) sets the property damage threshold for chargeability of PD claims (i.e., losses with dollar amounts below the threshold are not chargeable).

Based on this regulation, an insurer can surcharge for a bodily injury accident if the insured was at fault. Nothing prevents an insurer from surcharging for an accident for which a reserve is set up, but the insurer cannot point to the reserve as being proof that the insured was at fault. Examples:

1. Insured strikes a pedestrian in a crosswalk and is ticketed for running a red light. Insurer sets up a $50,000 reserve but has paid nothing at the time of the next renewal. The insurer can surcharge for this because a reasonable person could look at the facts and conclude the insured was at fault.

2. Insured, while making a left turn, strikes another vehicle making a left turn. The other driver suffers a neck injury, and the insurer puts up a $25,000 reserve. The facts are unclear as to which vehicle had the right of way. Unless the insurer has some other reasonable basis for determining that its insured was at fault, it may not surcharge for this accident.

NY Insurance Dept.: Interest & Attorney Fees Are Outside No-Fault Limits

The Coverage Counsel blog has been reporting on attorney Larry Rogak's opinion and subsequent over-ruling by the New York Insurance Department on a No-Fault question. Mr. Rogak based his opinion on a 2003 advisory legal opinion from the department's Office of General Counsel, which stated that attorneys' fees are compensable from a No-Fault insurer. Attorney Roy Mura, who writes the Coverage Counsel blog, disagreed with Mr. Rogak's conclusion that payment of interest and attorneys' fees reduce the limits available to pay No-Fault benefits. Mr. Rogak took the question to the department.

While nothing is yet in writing, a "highly placed member" of the department verbally agreed with Mr. Mura. According to Mr. Rogak's report, the member's opinion is that, "Neither interest, nor statutory attorney's fees, reduce available PIP limits under any circumstances."

It will be interesting to read the formal opinion when it is published on the department's Web site. In the mean time, this may be vital information for agents whose clients await No-Fault benefits.