Filed Under:Agent Broker, Commercial Business

No insurance limits for NY employers who hire ex-convicts, says new regulation

Many employers want to give ex-convicts jobs, but they have had a difficult time finding commercial crime insurance.
Many employers want to give ex-convicts jobs, but they have had a difficult time finding commercial crime insurance.

A new regulation in New York State will prohibit insurers from excluding companies from commercial crime policies if they employ people who have been convicted of a crime.

The New York Department of Financial Services' new rule, said to be the first of its kind, prohibits insurers from excluding or limiting coverage for loss or damage caused by an employee with a criminal record, as long as the companies considered factors outlined in state law when hiring workers with criminal records.

Commercial crime policies cover losses not covered by other insurance policies for acts such as robbery, theft, extortion and fraud by employees.

New York's Department of Financial Services superintendent Maria Vullo said the idea behind the regulation, which takes effect Jan. 12, is to prevent companies from being penalized because they made good-faith efforts to hire people in accordance with state law prohibiting discrimination against individuals based on criminal records with specific exceptions.

"So long as every business owner follows the letter of the law, we should encourage more companies to hire prospective employees rather than punish someone for a mistake in the past," Vullo said in a statement.

First regulation of its kind

Department of Financial Services officials added that with an estimated 2.3 million residents having criminal convictions, employers should not be penalized from doing all they can to hire ex-convicts they believe can be productive workers. Gov. Andrew Cuomo said the regulation is the first of its kind in the United States.

Cuomo said in a statement that it will be "one more step to restore fairness and dignity to our society while also increasing public safety by providing opportunity and reducing recidivism."

But the president of a state trade group for property and casualty insurers said they already have flexibility to provide commercial crime policies without a new rule.

"The insurance marketplace is already providing commercial crime coverage for employers who hire individuals who have been incarcerated," Ellen Melchionni, president of New York Insurance Association Inc., said in a statement Tuesday. "Insurance companies are resolving this issue by crafting a customized policy during the underwriting process or through policy endorsements. Mandating coverage takes away from a company's ability to work with their policyholders to develop solutions in the most effective manner."

The financial services department said the amendment to state Insurance Regulation 209 stemmed from a recommendation by Cuomo's Council on Community Re-entry and Reintegration. The panel said it heard complaints from companies who had sought to hire ex-convicts about difficulties securing commercial crime coverage.

Passing the test

State Correction Law Sections 752-753
expressly prohibit unfair discrimination in employment against people convicted of one or more criminal offenses, though it allows employers to make exceptions based on certain kinds of professional licensure, or in areas in which workers' criminal activities call into question their ability to safely perform the "duties or responsibilities" of their jobs.

Under the Correction Law, employers must perform a test when deciding to hire ex-convicts and in which jobs to place them. The test includes evaluating the crimes they were convicted of, how long it has been since their convictions, the seriousness of their offenses and other factors.

The new financial services department regulation declares that it would constitute an unfair or deceptive practice for insurers to deny commercial crime coverage within commercial risk insurance for employers who have properly balanced the law and made an employment determination favorable to an ex-convict.

John Kiernan, president of the New York City Bar Association, which has been working to promote re-entry into society for people with criminal records, hailed the new rule.

"It will eliminate the Catch-22 currently faced by employers trying to comply with state law but also to obtain the insurance they need to protect their businesses," Kiernan said in a statement. "Insurance Regulation 209 will increase employment opportunities and permit individuals with criminal records to turn their lives around, which is consistent with the sate's policy and efforts to support our communities."

Related: Does you commercial crime policy cover loss from an imposter's fraud?

Joel Stashenko, a reporter for our sister publication, the New York Law Journal, can be reached at or on Twitter @JoelStashenko.

Originally published on New York Law Journal. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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