Reg 187: Big “I” Victorious In Key Legal Battle

Court sides with BIG “I” in Win for Agents and Brokers

Onerous and Confusing Regulation 187’s Controversial  “Best Interest” Standard Called “Unconstitutionally Vague”

The New York Supreme Court handed a big win to the BIG “I” and to agents and brokers in the state as it reversed a 2019 ruling that the DFS was within its authority when it issued Regulation 187. Regulation 187, went into effect on August 1, 2019.

In what some have called a bit of regulatory overreach, the regulation endeavors to ensure that recommendations made by a producer – in the regulation it relates to the sale of annuities and life insurance policies – should meet a standard of probity, inasmuch as the producer must act in the “best interest” of the consumer when making recommendations.

 The court ruling determined that the language was “unconstitutionally vague”.

Here is the court’s wording specifically: “While the consumer protection goals underlying promulgation of the amendment are laudable, as written, the amendment fails to provide sufficient concrete, practical guidance for producers to know whether their conduct, on a day-to-day basis, comports with the amendment’s corresponding requirements for making recommendations and compiling and evaluating the relevant suitability information of the consumer”.

 While the decision could be appealed to the New York Court of Appeals, the state’s highest court, the matter appears settled for now. The state may request a stay on the Appellate Division’s decision pending an appeal to the state Appeals Court

 CIBGNY is understandably happy with the ruling and would like to acknowledge the hard work of Big I New York on this legislative win

In a letter to members, BIG “I” called the win “a monumental victory for independent insurance agents” with its  unanimous ruling. The Big I alone among New York produced groups continuously challenged the amendment since November 2018.

 “Today’s ruling is a victory, not just for the state’s independent insurance agents and brokers, but for our customers,” said David MacLachlan, CPCU, Big I NY Chair of the Board. “This regulation has been virtually impossible for brokers to meaningfully comply with, raising concerns that many would stop selling life insurance and leave customers without the trusted advice they need.”

Lisa Lounsbury, CAE, President and CEO of Big I New York, said, “As advocates for their customers, independent insurance agents share the NYSDFS’s interest in protecting consumers; but the so-called ‘best interest’ regulation did the opposite. It provided little if any protection beyond the already robust laws of conduct and accountability for insurance agents, and actually harmed consumers by reducing access to affordable life insurance products and the trusted advice of an agent.”

 Big I New York was represented by the firm of Keidel, Weldon, and Cunningham of White Plains. Jim Keidel, the association’s counsel, said, “I am very pleased with the court’s unanimous decision finding that the amended Insurance Regulation 187 is unconstitutional. It is apparent from reading the decision that the judges took the time to understand the serious issues and problems that this regulation creates.”