January 2023 | Volume 38, Number 1
On November 21, 2022, the New York Department of Financial Services (“NYDFS") issued Insurance Circular Letter No. 13 (2022) intended to provide guidance regarding cannabis-related criminal convictions and insurance underwriting. During the Thanksgiving weekend this Circular Letter was sent by the NYDFS by email to all licensed New York insurance agents and brokers. Following that communication from the NYDFS, we have received dozens of inquiries from New York insurance agents and brokers with questions concerning what, if anything, this Circular Letter means for them. Accordingly, in this issue of The E&O Report we will review the various issues addressed in the Circular Letter and provide some guidance regarding how New York insurance agents and brokers should handle this subject.
In 2019, the State Legislature added section 160.50(5) to the New York Criminal Procedure Law (“CPL") providing for the expungement of certain marijuana related convictions. Thereafter, on March 1, 2021, the Marihuana Regulation & Taxation Act (“MRTA") was signed into law by Governor Andrew Cuomo. The MRTA repealed Penal Law Article 221, which made the possession, use, and sale of marijuana illegal and added a new Article 222 to legalize adult-use marijuana. The NYDFS issued Insurance Circular Letter 13 (2022) to provide guidance to the insurance industry regarding how to handle cannabis-related criminal convictions, since the MRTA decriminalized the possession, sale, or use of marijuana and expunged certain cannabis-related criminal convictions from people's records. The Circular Letter states that its purpose is to remind insurance “issuers"[1] that they should have procedures and controls in place to ensure that they do not inquire about or take adverse action based upon an arrest or conviction specified in New York Executive Law section 296(16), which includes any expunged cannabis-related convictions.
New York Executive Law section 296(16) is intended to prevent unlawful discriminatory practices in various transactions, including insurance. Section 296(16) states in pertinent part as follows:
It shall be an unlawful discriminatory practice, unless specifically required or permitted by statute, for any person, agency, bureau, corporation or association, including the state and any political subdivision thereof, to make any inquiry about, whether in any form of application or otherwise, or to act upon adversely to the individual involved, any arrest or criminal accusation of such individual not then pending against that individual which was followed by a termination of that criminal action or proceeding in favor of such individual as defined in section 160.50 of the Criminal Procedure Law…in connection with the…providing of… insurance to such individual…
The MRTA amended CPL section 160.50(3)(k) to provide for the termination of certain non-violent cannabis-related convictions. CPL section 160.50(5)(a) provides for the expungement of certain cannabis-related criminal records and states in pertinent part as follows:
Conviction for an offense described in paragraph (k) of subdivision three of this section shall, on and after the effective date of this paragraph, in accordance with the provisions of this paragraph, be vacated and dismissed, and all records of such conviction or convictions and related to such conviction or convictions shall be expunged…and the matter shall be considered terminated in favor of the accused and deemed a nullity, having been rendered by this paragraph legally invalid.
Based upon the above-described changes to New York Law, it is a violation of the Law for anyone to inquire about, or act adversely to any person, based upon a cannabis-related conviction that has been expunged from their criminal record. In order to prevent a violation of this Law, it is important for New York insurance agencies and brokerages to make certain that all employees are aware that they should not inquire about, or act adversely to a customer based upon any of the arrests or convictions specified in New York Executive Law section 296(16).
New York insurance agents or brokers who are working with insureds and potential insureds who are completing applications that include a question about past criminal convictions should be certain to instruct applicants who may have questions about disclosing prior criminal convictions that they may respond to questions about convictions that are specified in Executive Law section 296(16), as if the conviction had not occurred. Additionally, any insurance agents or brokers who may obtain criminal conviction information from third-party data sources in connection with the application process should make certain that they are not relying on any information related to arrests or convictions specified in Executive Law section 296(16). These are important practices that everyone in an insurance agency or brokerage should be aware of and comply with. The prudent insurance agency or brokerage that handles this issue in this manner will help ensure that they are in compliance with the governing New York Law.
Submitted by: James C. Keidel, Esq. Keidel, Weldon & Cunningham, LLP
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.
[1] "Issuers" of insurance as referred to in Circular Letter 13 (2022) includes insurers, licensed insurance producers, licensed fraternal benefit societies, the New York Automobile Insurance Plan, the New York Property Insurance underwriting Association, the New York State Insurance Fund, and the New York Medical Malpractice Insurance Plan. |