Court Decision on Regulation 208

Contrary to the Supreme Court’s July 5, 2018 determination, the Appellate Division found that Insurance Law Section 6409(d) (concerning the giving of “other consideration or valuable thing”) is “unambiguous,” has a rational basis, and is subject to broad construction by DFS. Although Regulation 208 is now considered “a valid exercise of DFS’s general legislative authority and an appropriate elaboration of Insurance Law S. 6409(D),” the Court severed two provisions from the Regulation. Specifically, it agreed with the Supreme Court’s conclusion that, “there is no rational basis for DFS to impose an absolute ban on the collection of certain fees by in-house closers while permitting independent closers to collect the same fees as long as the fees are reasonable and the requisite notice is provided to consumers.” It also found no rational basis for capping fees for certain ancillary searches at 200%. Thus, the Appellate Division concluded that, “the invalid regulations are severable from the remainder of Insurance Regulation 208 so that the entire Regulation need not be annulled in its entirety.” The decision can be read by downloading it here.