September 2022 | Volume 37, Number 9
As we reported to you previously, in November 2018, an Article 78 legal proceeding was filed in the Albany County Supreme Court jointly by both Big I NY and PIA NY, acting together, to challenge the First Amendment to NY Insurance Regulation 187. The title of the amended regulation that is the subject of the legal challenge is Suitability and Best Interests in Life Insurance and Annuity Transactions.1 An Article 78 proceeding is a legal action that is brought to challenge the activities of an administrative agency. The purpose of the Article 78 legal proceeding was to have the court declare that the First Amendment to the Regulation that was promulgated by the New York Department of Financial Services (“NYDFS”) was invalid and should be stricken. The First Amendment to Regulation 187 was approved by NYDFS Superintendent Maria T. Vullo on July 17, 2018, and it took effect on August 1, 2019.
In the December 2018 issue of The E&O Report, we reviewed the six separate and distinct legal arguments that we made in support of the petition to have the court annul the Amended Regulation. In response to the Article 78 petition, in August 2019, Justice Henry Zwack of the Albany County Supreme Court issued an Order denying the petition and holding that the First Amendment to Regulation 187 was proper.
After the Order denying the Article 78 petition was issued by Justice Zwack, the Big I New York Board made the decision to move ahead with the legal challenge to the Amended Regulation and proceed with an appeal of the court’s decision to the New York Appellate Division, Third Department. PIA decided not to participate in the appeal. The appellate papers were briefed and fully submitted to the court by both sides in early 2021. Thereafter, on April 29, 2021, the Appellate Division Third Department issued a unanimous decision in which it held that Regulation 187 as amended is unconstitutional. In its decision, the Third Department stated the following:
Here, while the consumer protection goals underlying promulgation of the amendment are laudable, as written, the amendment fails to provide sufficient concrete, practical guidance for producers to know whether their conduct, on a day-to-day basis, comports with the amendment’s corresponding requirements for making recommendations and compiling and evaluating the relevant suitability information on the consumer. Additionally, once a recommendation is deemed to have been made, the guidelines with respect to the suitability information that producers must obtain from the consumer and the suitability considerations that must necessarily be disclosed are inadequate to the extent that they rely upon subjective terms that lack long recognized and accepted meanings and provide insufficient guidance with respect to how producers must conduct themselves in order to comply with the amendment.
As we reported to you in the June 2021 E&O Report, the DFS appealed the Third Department’s decision to the New York Court of Appeals. The Court of Appeals is the highest court in the New York State Court System. The appeal has now been fully briefed by both sides and the oral argument has been scheduled for the morning of September 8, 2022.2 Interestingly, the appeal will not be argued at the Court of Appeals courthouse in Albany, but instead will be argued at the Fulton County courthouse, located in Johnstown, NY. The reason for this change in location for the argument is because on the morning of September 8th, there will be a ceremony commemorating the 250th anniversary of the Fulton County courthouse and the Court of Appeals judges will be there to participate in the celebration.3 The argument of our appeal will take place following the 250th anniversary ceremony. If you would like to watch the September 8th argument of the appeal live, you can do so by clicking on the link for “Live Oral Arguments Webcast” on the right-hand side of the New York Court of Appeals web page.4 If you are unable to watch the argument live that day, there is an oral argument archive located on the Court of Appeals website.
We are hopeful that the Court of Appeals will ultimately affirm the decision issued by the Appellate Division, Third Department and agree that the Amended Regulation 187, as enacted, is unconstitutional. We will advise you of the outcome of the appeal once the Court of Appeals issues its decision. If any Big I NY member has a question regarding the association’s legal challenge to Regulation 187, please contact Big I NY’s Director of Government Relations, Scott Hobson, at shobson@biginy.org. Or, you can always contact me by telephone at 914-948-7000 or by email at jkeidel@kwcllp.com.
Submitted by:
James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP
1 The caption of the Article 78 Petition is Independent Insurance Agents and Brokers of New York, Professional Insurance Agents of New York State, Inc., et al. v. The New York State Department of Financial Services and Maria T. Vullo; The Albany County Supreme Court Index Number for the action is 907005-18. 2 If a Big I NY member would like to review copies of any of the legal papers for this matter that were filed in connection with the article 78 petition, the appeal to the Appellate Division Third Department, and the appeal to the Court of Appeals, they are all available for members to log on to the association website and review at: https://www.biginy.org/discover/ac/Pages/Regulation%20187/default.aspx 3 The Fulton County New York courthouse is the oldest continuously operating courthouse in New York state and one of the oldest in the country. The Fulton County courthouse was only partially finished on September 8, 1772, when the first court session was convened there.
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, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida. |