N.Y. Insurance Law § 2502: Designation of particular insurer, agent or broker in property financing transactions and other unfair practices

* § 2502. Designation of particular insurer, agent or broker in

property financing transactions and other unfair practices. (a)(1) No

person, firm, or corporation engaged in the business of financing the

purchase of real or personal property, lending money on the security

thereof, or servicing a mortgage thereon, and none of its trustees,

directors, officers, agents or other employees, shall require, as a

condition precedent to financing any such purchase or making any such

loan or renewing or extending any such loan or mortgage or performing

any other act in connection therewith, that the person, firm or

corporation for whom the transaction is undertaken negotiate any policy

of insurance or renewal thereof covering such property through a

particular insurance company, agent or broker.

(2) State chartered banking institutions and federally chartered

banking institutions shall not extend credit, lease or sell property of

any kind, or furnish any services, or fix or vary the consideration for

any of the foregoing, on the condition or requirement that the customer

obtain insurance from such institution, its affiliate or subsidiary, or

a particular insurer, agent or broker, provided, however, that this

prohibition shall not prevent such institution from engaging in any

activity described in this subdivision that would not violate section

106 of the Bank Holding Company Act Amendments of 1970, as interpreted

by the Board of Governors of the Federal Reserve System. This

prohibition shall not prevent a state chartered banking institution or

federally chartered banking institution from informing a customer that

insurance is required in order to obtain a loan or credit, that loan or

credit approval is contingent upon the customer's procurement of

acceptable insurance, or that insurance is available from such

institution; provided, however, that the state chartered banking

institution or the federally chartered banking institution shall also

inform the customer in writing that his or her choice of insurance

provider shall not affect the institution's credit decision or credit

terms in any way. Such disclosure shall be given prior to or at the time

that any such institution or person selling insurance on the premises

thereof solicits the purchase of any insurance from a customer who has

applied for a loan or extension of credit.

(b) This section shall not prevent the exercise of any right to

approve or disapprove of the insurance company selected to underwrite

the insurance, except that in exercising such right, whether pursuant to

this section or any other law, such person, firm, or corporation and its

trustees, directors, officers, agents and employees shall not:

(1) discriminate against an insurance company which issues a policy of

insurance that is non-assessable as to any designated mortgagee or any

secured creditor designated as a loss payee because of the insurer's

type of organization, or

(2) refuse to accept an insurance policy because it was not negotiated

through a particular insurance company, agent or broker.

(c) No such person, firm or corporation shall, in connection with

compliance with a covenant to insure, require that the person, firm or

corporation for whom the purchase of the property is financed or to whom

a mortgage loan is made or who owns the property shall pay a fee or

other charge as a condition to accepting, during the unexpired term of a

policy then held, another policy of insurance in substitution therefor.

No state chartered banking institution or federally chartered banking

institution shall require a debtor, insurer, or insurance agent or

broker to pay a separate charge in connection with the handling of

insurance that is required in connection with a loan or other extension

of credit or the provision of another traditional banking product solely

because the insurance is being provided by an insurance agent or broker

which is not the state chartered banking institution or federally

chartered banking institution or any subsidiary or affiliate thereof.

(d) Except with respect to a flood insurance policy or a credit

unemployment insurance policy, group credit life insurance policy, a

group credit health, group credit accident or group credit health and

accident policy, or similar group credit insurance covering the person

of the insured, when a customer obtains insurance and credit from a

state chartered banking institution or federally chartered banking

institution, then the credit and insurance transactions shall be

completed through separate documents. The expense of insurance premiums

may not be included in the primary credit transaction without the

express written consent of the customer.

(e) Any state chartered banking institution or federally chartered

banking institution and any subsidiary or affiliate thereof which is

licensed to sell insurance in this state shall maintain separate and

distinct books and records relating to its insurance transactions,

including all files relating to and reflecting consumer complaints, and

such insurance books and records shall be made available to the

superintendent for inspection upon reasonable notice.

(f) For the purposes of this section, the terms "state chartered

banking institution" and "federally chartered banking institution" shall

have the same meanings as set forth in subdivision one of section

twelve-a of the banking law.

* NB Effective until September 10, 2029

* § 2502. Designation of particular insurer, agent or broker in

property financing transactions. (a) No person, firm or corporation

engaged in the business of financing the purchase of real or personal

property, lending money on the security thereof, or servicing a mortgage

thereon, and none of its trustees, directors, officers, agents or other

employees, shall require, as a condition precedent to financing any such

purchase or making any such loan or renewing or extending any such loan

or mortgage or performing any other act in connection therewith, that

the person, firm or corporation for whom the transaction is undertaken

negotiate any policy of insurance or renewal thereof covering such

property through a particular insurance company, agent or broker.

(b) This section shall not prevent the exercise of any right to

approve or disapprove of the insurance company selected to underwrite

the insurance, except that in exercising such right, whether pursuant to

this section or any other law, such person, firm, or corporation and its

trustees, directors, officers, agents and employees shall not:

(1) discriminate against an insurance company which issues a policy of

insurance that is non-assessable as to any designated mortgagee or any

secured creditor designated as a loss payee because of the insurer's

type of organization, or

(2) refuse to accept an insurance policy because it was not negotiated

through a particular insurance company, agent or broker.

(c) No such person, firm or corporation shall, in connection with

compliance with a covenant to insure, require that the person, firm or

corporation for whom the purchase of the property is financed or to whom

a mortgage loan is made or who owns the property shall pay a fee or

other charge as a condition to accepting, during the unexpired term of a

policy then held, another policy of insurance in substitution therefor.

* NB Effective September 10, 2029