The Office of General Counsel issued the following informal opinion on May 5, 2000, representing the position of the New York State Insurance Department.
Re: Circular Letter 5 (2000) Independent Adjusters Administration of Dental Claims.
Do Company A Life Insurance Corp. ("ALIC") and/or its wholly owned subsidiaries Company B Life Insurance Company ("BLIC") and Company C Assurance ("C Assurance") have to become licensed as independent adjusters in order to "administer" dental claims in New York on behalf of affiliated insurers, unaffiliated insurers and/or self funded group plans with New York employees?
Yes. ALIC and/or BLIC and C Assurance would have to become licensed as independent adjusters in order to "administer" dental claims in this state on behalf of affiliated insurers, unaffiliated insurers and/or self funded group plans with New York employees.
The inquiry received by the Department states that ALIC currently administers group dental insurance claims for BLIC pursuant to an administrative services agreement. At some future time, C Assurance may enter into a similar arrangement with BLIC to administer group dental claims. In addition, BLIC, ALIC and C Assurance may enter into agreements to provide administrative services only, including the administration of claims, for self insured group dental arrangements.
The letter states that approximately 60% of the dental claims are processed through an automatic adjudication process involving no human participation or discretion. These claims are automatically processed and paid.
Approximately 40% of the claims are subject to additional review for a variety of reasons. This further review may be warranted for clerical errors on the claim form (i.e. incomplete address and invalid zip code) or, in some cases, for more significant problems with the claim that may require a consultant's review, an examiner's review or a response to a complaint. This additional review is done to ensure that the claims are being processed in accordance with the dental insurance policy.
Four percent of the claims require an even more complex review by a dental consultant who will review the claim along with x-rays and attachments, presumably to determine the amount which should be paid by the insurer to the claimant.
N.Y. Ins. Law Section 2101(g)(1)(McKinney Supp. 2000) defines "independent adjuster" as:
any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work or investigating and adjusting claims arising under the insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster, except that such term shall not include:
(A) any officer, director or regular salaried employee of an authorized insurer, or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, or attorney in fact of any reciprocal insurer or Lloyds underwriter, or marine underwriting office unless acting as an autobody repair estimator as defined in subsection (j) of this section.
N.Y. Ins. Law Section 2108(a)(3)(McKinney 1985) states that no adjuster shall act on behalf of an insurer unless licensed as an independent adjuster.
In determining whether the "administration" of the dental claims fits within the above definition, the Department considers whether the functions being performed are discretionary, or merely ministerial. If they are simply ministerial, licensing is not required. However, if ALIC and/or BLIC and C Assurance will be exercising discretionary authority on behalf of other insurers or self-funded plans then they will be acting as independent adjusters, as that term is defined in the Insurance Law and licensing as an independent adjuster will be required. Prior Department opinions have concluded that reviewing and processing claims, handling inquiries from insureds, evaluating the merits of a claim and making recommendations to the insurer are all discretionary acts.
In the circumstances you describe, ALIC, BLIC and C Assurance will all be adjusting at least a portion of the claims and licensure as independent adjusters will be required. This is so even if the adjustment activities are on behalf of affiliates and self-funded group dental plans.
Since at least 1950, this Department has taken the position that the licensing exemption for an authorized insurer which is articulated in N.Y. Ins. Law Section 2101(g)(1)(A)(McKinney Supp. 2000) only applies to the adjustment of a claim that is the obligation of such authorized insurer. The exception, like the similarly worded exception for employees of insurers under the "insurance agent" definition, (N.Y. Ins. Law Section 2101(a)(1)(McKinney Supp. 2000) logically applies to the insurer's own business. The Department has consistently stated that neither the affiliated nature of the companies nor the fact that the adjustment is being performed on behalf of self-insurers alters the licensing requirement.
For further information you may contact Associate Attorney Rochelle Katz at the New York City Office.