An insurance law firm is warning its clients that if they are not licensed to transact business in New York State, they should review their agents’ activities to ensure they are not engaging in prohibited insurance transactions in the state.
The legal alert by lawyers at Carlton Fields Jorden Burt deals with a consent decree entered into between the state and MetLife March 31, and a lawsuit filed in New York Federal Court by American International Group earlier this month.
The lawsuit deals with whether states have authority to require an insurer to pay taxes if the insurer is selling the products in the state only through subsidiaries licensed in other states.
The legal alert was published as New York and AIG sparred in Federal Court over whether federal courts can have primary jurisdiction in the dispute.
The legal alert says insurers and their agents should also review business activity “that overly energetic government attorneys might mistakenly view as violative of New York law.” The alert was written by Robert B. Shapiro and Scott C. Shine, of Carlton Field’s Washington office.
The two say it is “also worth noting” that the New York Department of Financial Services “might have a much different idea of what type, if any, of penalty to assess if the amount of business written in New York by an unauthorized insurer were much smaller than the premiums written in the current case.”
The dispute involves two former AIG subsidiaries, American Life Insurance Company (ALICO) and Delaware American Life Insurance Company (DelAm). They were sold to MetLife in 2010 as part of the AIG divestitures required to pay off the federal government, which rescued it in 2008, and return to private control. MetLife and AIG announced the probe was underway in securities filings in November.
Earlier this month, MetLife said it would pay $50 million in fines and another $10 million to avoid prosecution, to settle the case, and also agreed to cooperate in the state’s prosecution of AIG on the issue.
But, on April 8, AIG filed suit.
The suit acknowledges that New York has the authority to regulate the business of insurance issued to residents in New York, but it does not have authority to regulate the business of insurance issued to foreign insureds who live outside of New York.