New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel has issued the following informal opinion on March 5, 2001, representing the position of the New York State Insurance Department.

Re.: Permissible Activities of Unlicensed Officer and Employees of Licensed Agents

Question Presented:

What is the permissible scope of activity of an unlicensed officer or employee of a licensed insurance agent?

Conclusion:

Section 2101(a)(1) exempts from the definition of "insurance agent" any regular salaried officer or employee of the licensed insurance agent who does not solicit or accept applications or orders for insurance contracts outside of an office of the agent, and who does not receive a commission or other compensation that is directly dependent upon the amount of business written. The statute permits a licensed insurance agent to act through and delegate activities to its officers or employees in the office but does not specify particular agency functions that may be so delegated. Provided that the insurer or other principal does not prohibit the delegation and that the law does not otherwise prohibit the delegated activity, any such in-office delegation is within the discretion of the licensee, who must exercise reasonable judgment based upon considerations such as: (1) the nature and complexity of the task being delegated; (2) the education, training, experience and other personal qualifications of the officer or employee who will be performing the task; and (3) the type and extent of supervision and internal controls that will be in place. At all times the licensee and any sublicensee remain fully responsible for the actions of the licensee’s officers and employees. Outside the office, an unlicensed officer or employee may not engage in any activity that is not clerical or administrative.

Facts:

An attorney has inquired as to the specific activities that non-licensed officers and employees of licensed insurance agents may engage in inside the agent’s office.

Analysis:

Pursuant to N.Y. Ins. Law § 2102 (McKinney 2000), no person, firm, association or corporation may act as an insurance agent in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of the Insurance Law.

N.Y. Ins. Law § 2101 (a) (McKinney 2000) defines an insurance agent to mean, in pertinent part:

(a) In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker, except that such term shall not include:

(1) any regular salaried officer or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance agent, who does not solicit or accept from the public, outside of an office of such insurer, health maintenance organization or agent, applications or orders for any such contract, if such officer or employee does not receive a commission or other compensation for his services which commission or other compensation is directly dependent upon the amount of business done[.]

The statute permits a licensed insurance agent to act through and delegate activities to its officers or regularly salaried employees in the office (where the compensation is not directly dependent upon the amount of business) but does not specify particular agency functions that may be so delegated. Provided that the insurer or other principal does not prohibit the delegation and that the law does not otherwise prohibit the delegated activity, any such in-office delegation is within the discretion of the licensee, who must exercise reasonable judgment based upon considerations such as: (1) the nature and complexity of the task being delegated; (2) the education, training, experience and other personal qualifications of the officer or employee who will be performing the task; and (3) the type and extent of supervision and internal controls that will be in place. At all times the licensee and any sublicensee remains fully responsible for the actions of the licensee’s officers and employees.

Outside the office, an unlicensed officer or employee may not engage in any activity that is not clerical or administrative. It should also be noted that an office of the agent means either the main office or a satellite office, established in accordance with N.Y. Ins. Law § 2129 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. § 11 Part 34 (1995) (Regulation 125). An unlicensed officer or an employee may not engage in non-clerical or administrative activities by telecommuting from a home office.

We stress that the unlicensed officer or employee that engages in any delegated activity does so only on behalf, and in the name, of the licensee, via the authority so delegated by the licensee. The licensed agent, and any sublicensee of a corporate or partnership agency, must properly supervise the non-licensee and will be held strictly accountable by the Department for the activities of the unlicensed person. Accordingly, it is incumbent upon the licensee and sublicensee to ensure that the unlicensed person is adequately trained, trustworthy, and aware of the limits on his or her ability to act on behalf of the licensee. Where a licensee has more than one sublicensee, the licensee should clearly delineate the supervisory responsibilities for each sublicensee so that each such unlicensed employee is under the supervision of at least one sublicensee.

While the statute may permit an agent to delegate activities in the office, an insurer, as the principal, may prohibit the agent from delegating, or otherwise restrict such delegation by the agent to non-licensees. For example, it is important to note that in placing business with the New York Automobile Insurance Plan, no such delegation to an unlicensed person is permitted. An insurance agent that subsequently violates such prohibition or restriction may be found by the Superintendent to be acting in an untrustworthy or incompetent manner.

To the extent that the views expressed in this letter are contrary to prior opinions of this Department, such opinions are superseded by this opinion.

Please note that the broad scope of permissible activities by an agent’s officer or employee does not apply to other licensees. For example, the unlicensed employee of a licensed insurance broker in the office is limited to clerical or administrative duties, where the employee is regularly salaried and receives no commission or other compensation directly dependent upon the amount of business done. N.Y. Ins. Law § 2101 (c)(2) (McKinney 2000).

For further information regarding this opinion, you may contact its author, Senior Deputy Superintendent & General Counsel Kevin M. Rampe, at the New York City Office.