New York Court Overturns State’s Annuity Best Interest Regulation (Regulation 187)

By Anne Shropshire, CLU
May 20, 2021

October 2022 update - New York Court of Appeals reinstates revised Regulation 187. To learn more, you can read this article: New York Regulation 187 Best Interest Rule - Back in Play

New York Supreme Court Overturns State's Annuity Best Interest Regulation (Regulation 187)

New York’s suitability and best interest regulation for life insurance and annuity sales has been struck down by the state’s Supreme Court Appellate Division as “unconstitutionally vague,” a setback for the New York Department of Financial Services (DFS).

The court issued its ruling on in favor of plaintiffs.

Background of New York Regulation 187



Industry Response to New York Regulation 187

As it turned out, the response to the amended Regulation 187 by the insurance industry was not positive. Claiming that the regulation was arbitrary, capricious, and outside DFS’ authority to create, a number of insurance industry organizations (including the Big I of New York) filed a petition in to have the revision declared invalid and void.

This challenge was denied by the trial court, and the Regulation 187 revisions went into effect: in for annuity transactions and in for life insurance transaction.

On , Justice Henry Zwack ruled that the New York DFS was within its authority to issue the best standard revisions to Regulation 187. The plaintiffs were granted an appeal, which they won on , when Regulation 187 was struck down in the Appellate Division of the New York State Supreme Court.

Ruling Against New York Regulation 187

However, the plaintiffs that backed the repudiated petition were not defeated; they appealed the decision. On , the Appellate Division of the New York State Supreme Court ruled in their favor and overturned the state’s best interest standard as set forward in the amended Regulation 187.

Among other things, the Court held:

Here, while the consumer protection goals underlying promulgation of the amendment are laudable, as written, the amendment fails to provide sufficient concrete, practical guidance for producers to know whether their conduct, on a day-to-day basis, comports with the amendment's corresponding requirements for making recommendations and compiling and evaluating the relevant suitability information of the consumer.

The full text of the court opinion, written by Justice John C. Egan, Jr., can be found here.

What’s Next for Regulation 187 and Annuity Best Interest in New York?

This is not necessarily the end of the road for Regulation 187. The New York Department of Financial Services can still file an appeal to the New York Court of Appeals, the state’s highest court. DFS can also request a stay on the Appellate Division’s decision pending an appeal.

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