Litigation

The question to New York State Insurance Department was as follows:

An insurance agent who occasionally put advertisements in journals for charitable dinners for non-profit groups would like to state in such advertisements that: "For every new policy written, we will make a donation to the [synagogue, church] (or to any other charity of your choice)." The advertisement for health insurance, might go further and state that: "For every new health insurance policy, we will donate $25 per employee to the [synagogue, church] (or to any other charity of your choice)."

The agent would not advertise any percent of commission nor refund money to his clients.

The response by the New York State Insurance Department was:

"No, the contribution would constitute an improper inducement in violation of  NY Insurance Law Sections 2324 and 4224 (McKinney 1985)

The New York State Insurance Department Office of Genral Counsel reasoned:

"According to the express language of N.Y. Ins. Law Section 2324, insurance agents and brokers are prohibited from directly or indirectly offering rebates or inducements other than an article of merchandise not exceeding $5 in value, in connection with the sale of insurance, when such rebates or inducements are not specified in the policy or contract of insurance. N. Y. Ins. Law Section 4224 prohibits an agent or broker from offering any inducement directly or indirectly.

In this instance, although the insured would receive no direct benefit inasmuch as the donations would go to charity, the very nature of the proposal would amount to a benefit (albeit indirectly) to a prospective insured to induce him to place his insurance business through your company".

Settlement professionals, structured settlement brokers should be mindful of this opinion when creating their advertising and solicitation strategy. Lawyers as well as charitable organziations, including trial lawyer associations should be mindful of same in their fundraising efforts.