| May 2016 |
Volume 28, Number 5 |
A New Age for Advertising
Over the past few decades, our reliance upon the Internet has grown stronger. With it has come different ways to disseminate information. While traditional television, radio and magazine advertisements continue to remain popular, advertising has steadily expanded to the Internet. In this issue of The E&O Report, we will review some of the Internet-related compliance issues agents and brokers should be aware of.
Don't forget about IIABNY's annual Errors and Omissions Loss Control Seminar series that returns May 3 in Buffalo and continues with four other live classroom sessions through May 19. The series concludes June 8 with a live, videoconference seminar simulcast to 14 locations throughout the New York. Register online. |
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In New York Department of Financial Services Circular Letter (No. 5 (2001), the DFS explained that it “does not consider the mere maintenance of a passive website that is accessible to New York residents containing information about specific products or services to constitute solicitation under New York Insurance Law. A website that merely contains advertisements for insurance products or services also does not constitute solicitation.” However, in that same opinion, the DFS advised “Internet advertisements can appear in many forms, including banners, tiles, hypertext links, frames or embedded links,” all of which must comply with applicable statutory and regulatory guidelines and restrictions applicable to advertisements in any other medium.
In fact, more recently, Office of General Counsel Opinion (OCG 10-11-07) found the use of a “LinkedIn profile page or similar website for the promotion of insurance, insurers, or insurance agents or brokers constitutes an advertisement, announcement or statement under the New York Insurance Law.”
In another opinion, the DFS explained that the analysis of whether a document constitutes an advertisement turns on “whether [the ad is] designed to be used or [is] actually used, to induce the public to purchase, increase, modify, reinstate or retain a policy.” OCG Opinion 03-01-23.
As the definition of what constitutes an advertisement is a murky one and since almost any type of presence on the Internet, such as a page on Facebook, has the potential to be defined as an “advertisement,” it is important to recognize some of the more common advertising pitfalls.
It appears two statutes seem to get the most attention by the DFS with respect to interpretation:
· N.Y. Insurance Law § 2122(b) requires “in all advertisements, public announcements, signs, pamphlets, circulars and cards that refer to an insurer, set forth therein the name in full of the insurer referred to and the name of the city, town or village in which it has its principal office in the United States.”
However, one need not specifically reference an insurance carrier in order to implicate NY Insurance Law Section 2122. The state Insurance Department (now part of DFS) found this statute applicable in advertisements that invite potential customers to: (1) compare rates; (2) save money; (3) take advantage of low rates; or (4) other words to that effect. In those situations, unless the advertisement refers to a specific insurer or group of insurers with whom the coverage may be placed, the department concluded the advertisement is deceptive and misleading.
For example, one advertisement evaluated by the DFS stated:
YOUNG DRIVERS! Don’t pay outrageous insurance premiums! We guarantee to save you money! SERIOUSLY GUARANTEE!
Beneath this language was a picture of a woman. Next to the picture was the statement “I saved over $102 on my car insurance,” which was attributed to a particular speaker. The department found the advertisement violated N.Y Insurance Law. §2122 as well as N.Y. Penal Law §190.20, which addresses false advertising, because it guaranteed an outcome and made reference to a specific dollar amount. The department explained its reasoning as follows:
[a]n advertisement guaranteeing to save the insured money, as well as an advertisement guaranteeing satisfaction with the services provided by an insurance agency are both misleading. It cannot be guaranteed that every insured can save money by purchasing insurance through the advertised insurance agency, nor can it be guaranteed that every insured will be satisfied with the services provided.
General Counsel Opinion 6-10-2004. The department also noted in its opinion that changing the word “guarantee” to “promise” would not resolve the issue. The DFS further noted that by referencing a specific amount saved “this advertisement must be making reference to a specific insurer,” requiring the advertisement to mention the name of the insurer as well as other information mandated under N.Y. Insurance Law § 2122. The department has also found reference to potential savings up to a particular amount or an average dollar amount saved across the board similarly refers to a specific insurer and must comply with reporting requirements of that section.
However, the department expressly distinguished that scenario from a situation that discusses potential savings by using a particular producer who has the ability to shop around and obtain a more favorable rate for an insured. (See General Counsel Opinion 6-22-2005). The department also noted that “[i]f an agent represents several insurers, uses general language and does not mention specific prices in the advertisement, it would fall outside the bounds of N.Y. Insurance Law § 2122(b) (McKinney 2000) and would not constitute a violation thereof.”
In another example, the department evaluated an advertisement that stated the agency “provides affordable policies for all trade contractors.” The proposed advertisement listed sample contractor’s liability rates with the shortened names of the insurance companies being quoted as well as the name of the city in which each has its principal office. The agency also proposed to include a statement at the bottom of the advertisement, stating that it complies with N.Y. Insurance Law § 2122. The department found that language false and misleading because “the company does not provide every type of contractor policy nor can the company assert that coverage for every contractor would be affordable even for those types that it does not provide.” The department also noted that when referring to the insurer, the full name must be used along with the city, town or village in which the carrier maintains its principal office in the United States. Further, the department advised that “[a]n advertisement may not contain a statement stating that it complies with the N.Y. Insurance Laws and Regulations unless such statement is accurate. Otherwise, the statement itself may be misleading.” General Counsel Opinion 1-11-2006.
Examples of other language the department found to trigger the disclosure requirements of N.Y. Insurance Law § 2122(b):
· An advertisement regarding “black car & taxi insurance renewals” that announce “lowest available rates” without reference to specific insurance companies;
· An advertisement directed to a specific class of drivers, announcing “new lower rate available” and referring to a specific carrier having “a special new lower rate,” without providing the principal office of the referenced insurer.
The department found each of the above to be in violation of N.Y. Insurance Law § 2122.
We note Senate Bill S2360 is currently before the New York Senate. It proposes to delete the requirement for advertisements referring to an insurer to include the insurer’s full name and principal office (though this would not eliminate the need to refer to the insurer by name in circumstances identified by the DFS as misleading in the absence of such information). The proposed change merely eliminates having to provide some of the more specific information regarding the identified insurer. However, unless and until this regulation is passed, full company information continues to be required.
The prudent insurance agent or broker should ensure he or she is aware of and complies with the requirements of New York law regarding advertising. Doing so will help the agency or brokerage steer clear of the DFS with potential advertising-related issues or problems.
In one OCG Opinion, the NYDFS advised that “[w]hether the presence of a New York licensed agent’s hypertext link on another company’s website constitutes ‘solicitation’, within the meaning of N.Y. Insurance Law §2101 (McKinney 1985 & Supp. 2000), by the website owner, depends upon the wording and character of the link.” General Counsel Opinion 7-14-2000 (#2).
Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker’s errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kwcllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island and Philadelphia, Pennsylvania.
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