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PIANY: Multiple Actions Needed on Producer Disclosure Regulation

Source: PIANY

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Posted on 24 Mar 2010

Kevin Ryan, President, PIANY, posted this on-line regarding New York's final version of producer disclosure regulation:

"As most everyone in the New York insurance community knows, the New York State Insurance Department has published the final version of its disclosure regulation (Reg. 194), which is scheduled to become effective Jan. 1, 2011.

From the perspective of all agents and brokers in this state, two different actions still need to be taken prior to the effective date. As circumstances dictate, these two things must be done simultaneously:

* Somebody or some group needs to test in court whether or not the NYSID has overstepped its authority in promulgating this regulation in the first place. That can be done via a legal action known as an Article 78 Proceeding. If such a suit prevails, then the regulation is deemed unenforceable and presumably the department will either drop the matter or seek legal authority from the New York Legislature.

* Somebody or some group needs to represent agent/broker interests as the department finalizes the details of compliance with the regulation, in case the legal action fails. There are still a large number of extremely important “devils” left in the details of the department’s Circular Letter, which will be written prior to the implementation date to establish compliance guidelines for the regulation.

It’s clear that these two actions are both necessary and need to take place simultaneously due to legal and practical constraints.

Soon after the regulation was promulgated in February, the Independent Insurance Agents and Brokers of New York issued a highly public proclamation that they were going to initiate an Article 78 action against the department. This position has been repeated time and again. Other trade groups have made similar but less definitive statements that they may do likewise.

This has been hailed by some in the producer community as a necessary act on behalf of the agents and brokers of the state. Perhaps it is.

PIANY and other trade groups were invited to participate in such an action. Certainly, since this option appears quite popular among some of our members, it would have been “safe” for us to simply join the suit. Over the past several weeks PIANY’s board of directors has carefully studied all of the available options and seriously considered joining the suit.

In the end, however, we have decided to not join in a suit against the department. After much analysis and consideration we have concluded that joining in the legal action is not the right thing for us to do; in fact, it is exactly the wrong thing for us to do. Please allow me to explain why we believe that.

First, any Article 78 lawsuit is going to rise or fall on the merits of the argument and the particulars of the case. It is irrelevant who files the suit, or how many people or organizations are named as parties to it. We assume that IIABNY will follow through on its repeated promise to bring the action, and they will engage competent counsel who will launch an aggressive and legally sound argument. Whether or not PIANY or any other group puts its name on that action or initiates its own lawsuit (in which case the suits would presumably be combined anyhow), the court will rule on the soundness of the argument … not the number of groups making the argument. This is not a show of force or a shouting contest; it’s a highly structured and narrowly defined legal argument.

Second, the department has made it absolutely clear that any group or individuals who participate in an Article 78 in regard to this regulation will not be engaged in any discussions regarding the development of compliance guidelines and the Circular Letter details, which (as mentioned above) will be critical if the legal action fails. Department attorneys have stated that since the matter would be in litigation, they would be prohibited from any related dealings with the litigants.

Third, during the past several months we have consulted with four attorneys who have vast experience with Article 78 actions and with the Insurance Department. While attorneys do not care to forecast rulings or give predictions, none of those with whom we consulted were overly optimistic that the suit will prevail. This is not to say it will fail, but it is to say that clearly this is quite possible.

We have thus concluded that:

* On behalf of all agents and brokers in New York there are two things that need to be done simultaneously in the end game of the disclosure issue, and it makes no sense to us to have all of the producer groups doing one but not the other.

* Having PIA join IIABNY (and/or other groups) in legal action would not improve its chances of success.

* There is a clear chance that the litigation will fail.

* Consumer groups and others with interests opposed to ours will be lobbying through active discussions with the department about details of the Circular Letter.

* It is in the best interest of our member agents and brokers to retain our seat at that table lest nobody represent producer interests in what may well be an extremely important conclusion to years of work.

We believe that the right course of action for PIA to take at this juncture is to continue to work closely with the department to ensure that our views are heard in the final details of the regulation–so that if a lawsuit does not succeed, Main Street agents/brokers will have had a voice in how we will need to comply with the regulation.

By dividing our efforts, in the end, each of the producer groups will have played an important role in what may be the most critical issue facing New York producers in many years."


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