by John Darer CLU ChFC CSSC
An interesting opinion has been posted on the website of the New York State Insurance Department, by its General Counsel, concerning an attempt at tying two different services revolving around an insurance sale. The July 23, 2007 opinion suggests that such tying is not in compliance with the insurance law (N.Y. Ins. Law § 4224).
Excerpts from the opinion:
"The inquirer is a licensed life and accident and health insurance broker. The inquirer reports that some of his clients have been approached by other agents or brokers who provide, at no charge to their clients, the services/benefits described herein. The inquirer asks whether he may lawfully offer these services/benefits, or whether they would constitute illegal rebates or inducements within the meaning of Insurance Law § 4224." (the anti-rebating statute)
Question "May a payroll company that is affiliated with an insurance agent or broker charge lower fees for payroll administration services to a client who purchases insurance from the agent or broker?"
New York State Insurance Department Response " No. A payroll company that is affiliated with an insurance agent or broker may not charge lower fees for payroll administration services to a client who purchases insurances from the agent or broker, as that would constitute a rebate or inducement that violates Insurance Law § 4224."
Question "May a bank that is affiliated with an insurance agent or broker provide a lower interest rate, loan approval or reduced banking fees to a banking client who purchases insurance from the agent or broker?"
New York State Insurance Department Response "No. A bank that is affiliated with an insurance agent or broker may not provide a lower interest rate, loan approval or reduced banking fees to a banking client who purchases insurance from the agent or broker, as that would constitute a rebate or inducement that violates Insurance Law § 4224.
High Impact Litigation, Inc. and High Impact Structures, LLC are related companies based out of Englewood, Colorado. One does Exhibits and Animations for lawyers and the other is a structured settlement broker which is also affiliated with the Delta Group of settlement companies. The companies share a website and marketing "catelog" which clearly emphasizes a national business and national intent to solicit its services and/or distribute product, including its graphics and exhibits, structured settlement annuities AND securities products (as an aside no broker dealer appears to be identified on the latter).
Structured Settlements 4Real has obtained the following recent advertisement apparently produced by High Impact Litigation, Inc. and/or High Impact Structures, LLC Download high_impact_discount_for_structure_consideration_ad.pdf.
The ad, which offers a $3,500 exhibit credit for every $1,000,000 structured, seems to fly in the face of the above New York State Insurance department opinion. The High Impact ad clearly states that the amount of the discount or exhibit credit depends on the amount structured". There's the tie in. High Impact claims that "the program does not violate state insurance rebating statutes". I don't know what to think. Do I believe High Impact or do I believe the New York State Insurance department?
High Impact also claims a patent pending, Application Serial Number 60/858,128 which is purportedly entitled "Discount Exhibits/Animations for Structured Settlement Consideration". If in fact the above New York Insurance Department opinion is on point. or close to it, I personally don't see how public policy would allow such a patent claim to be issued. Do you?
Another troubling thing about this are these three statements in the High Impact advertisement
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"The credit can be applied to legal exhibits and/or animations purchased for the case involving the structure"
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"If legal exhibits and/or animations were not purchased for the case involving the structure, the credit may be used for future exhibit and/or animation purchases on other cases" (Underlined and bolded for empasis).
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"This credit may be transferred to other firm associates and/or other colleagues you choose to refer to High Impact Litigation, Inc."
I am already at odds with statement #1 and am curious about whether it complies with New York Law. Don't statements 2 and 3 put the lawyer in conflict of interest with his/her client? Couldn't the use of the discount "on other cases" be scrutinized. Just how do you (the lawyer) disclose to your client that you are recommending a big structure to, that someone else is getting a big discount as a result of their agreeing to structure? I'm also interested in what other insurance regulators think of this practice?
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