Posted on 20 Oct 2010
Oral arguments were heard on Oct. 15, 2010 in the case brought by insurance producers against Regulation 194, the New York State Insurance Department’s new disclosure regulation.
Counsel for the producers addressed legal arguments to the Supreme Court of New York State, Albany County, challenging the regulation in two main areas: the authority of the NYSID to promulgate such a rule; and the facts supporting its position in doing so.
Richard G. Liskov of Chadbourne & Parke LLP argued that Insurance Law contains no statutory basis that would support the adoption of a commission disclosure rule. In fact, he said the existence of the Section 2119 fee disclosure law represents the limit of legislative intent by prescribing the only requirement in this area.
Arguing on the factual questions, Liskov stated that the NYSID has produced insufficient justification for its position. He asserted that a disclosure requirement imposed on all licensed producers is an unreasonably broad response to wrongdoing by a few major brokers and challenged the NYSID’s contention that Regulation 194 won’t be unduly burdensome on regulated parties. Moreover, Liskov said, the rule is “irrational” in excluding from its disclosure requirement producers who have no direct customer contact but maintain decision-making power over the placement of the risk.
Defending the NYSID’s authority to issue Regulation 194, Assistant Attorney General Megan M. Brown maintained that it is intended to fill in substantive gaps in Insurance Law by defining standards of trustworthy conduct by licensed insurance producers under Section 2110. She cast doubt on the accuracy of producers’ affidavits as to the projected expense of compliance. Brown said the need for a formal rule became obvious after the NYSID’s limited disclosure guidance in Circular Letter 22 (1998) failed to avert brokers’ wrongdoing, as uncovered in 2004 through a joint investigation by the NYSID and the attorney general.