Disciplinary Actions Against Insurers, Agents, Brokers & Adjusters
So far in 2012 the New State Department of Financial Services (DFS) has not issued any publicly available Office of General Counsel Opinions. A review of the most recent disciplinary actions taken by the DFS against insurance companies, agents, brokers, and adjusters (released September 10, 2012), sheds some light on what areas have been the focus of the DFS’ attention. For starters, at least 10 licensees were recently revoked for failing to make certain disclosures to the DFS in regards to disciplinary actions taken by other state insurance departments and/or failing to notify the DFS of changes in business locations. Notably, each licensee that was revoked failed to respond to DFS investigatory letters. A handful of other licensees were revoked as a result of certain felony convictions such as tax fraud, scheme to defraud (involving misappropriation of insurance premiums), grand larceny, or conspiracy to commit bribery.
Other penalties were addressed to respondents who acted as agents, brokers or adjusters in New York after their licenses had expired or to those who operated under a name that had not been approved by the DFS.
Certain insurance companies were fined for issuing special risk insurance policies without the authority to write in the free trade zone while agents were fined for facilitated unauthorized insurers in doing an insurance business in New York by soliciting, negotiating and/or delivery annuity contracts in New York.
Other fines involved providing false information on applications for life insurance. One agent’s license was revoked for submitting applications for reinstatement of certain life insurance policies when the proposed insureds named in the applications did not make requests for reinstatement of the policies.
But health insurers were the heaviest hit licensees this period with one health insurer fined over $1 million for failing to provide written notice to its group contract holders of the availability for coverage for adults and children with biologically based mental illness and for children with serious emotional disturbance. Other health insurers were fined for the same or similar conduct with penalties ranging from $21,000 to $191,000. Yet another health insurer was fined $995,000 for failing to send proper explanations of benefits statements to members who had claims involving the purchase of pharmaceutical drugs and for denying certain instances of emergency treatment. Atleast six health insurers were fined in amounts ranging from $1900 to $95,100 for failing to pay claims within the time limitations specified in Section 3224 of the Insurance Law, also known as the Prompt Pay Law.
As a result, agents, brokers, adjusters and insurers should be mindful of applicable New York Insurance Laws and Regulations, timely disclose other fines, convictions, and business locations, and always respond to DFS inquiries! This article is for informational purposes only and is not intended to give legal advice. Please contact Sari Gabay-Rafiy, Gabay-Rafiy & Bowler LLP at 212-941- 5025 or gabay@gabaybowler.com for questions about New York State Insurance Laws and Regulations, assistance with DFS inquiries or hearings, and any contracts or other commercial business matters.
