The Office of General Counsel issued the following informal opinion on May 8, 2001, representing the position of the New York State Insurance Department.
Re: Corporate Independent Adjusters License
1. What licenses, if any, are required for a non-resident corporation that will collect premiums and adjust accident and health claims on behalf of a group health client (employer) that has a few New York residents?
2. May an employee who is not an officer or director be listed as a sub-licensee of a corporation for purposes of obtaining an independent adjusters license?
1. A person who engages in investigating and adjusting claims on behalf of an insurer must obtain an independent adjusters license pursuant to N. Y. Ins. Law §§ 2101 and 2108 (McKinney 2000). Adjusting claims on behalf of a group health plan clearly falls within the definition of an independent adjuster, requiring an independent adjusters license.
2. No. Pursuant to N.Y. Ins. Law § 2108(c)(2) (McKinney 2000), a license issued to a corporation may name as sub-licensees only the officers and directors of such corporation.
The Inquirer is negotiating a contract with a group health client/ employer that might insure a few New York residents. The client has a $40,000 deductible and will purchase excess insurance to cover any amounts above $40,000. The Inquirer will be providing third party administration services that only include collecting premiums and handling the health claims of the health plans employees.
While there is no licensing or registration requirement for third party administrators as such, a person or entity, including a third party administrator, performing functions which do require licensing, such as acting as an adjuster, consultant or agent, must be so licensed.
N. Y. Ins. Law § 2101(g)(1) (McKinney 2000) defines an independent adjuster as:
[a]ny 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 of investigating and adjusting claims arising under 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.
The inquirer states that a non-resident corporation would be providing third party administration services (collecting premiums and handling claims) on behalf of what he characterizes as a partially self-insured group health plan/employer. Although the inquirer characterizes the group health plan as being "partially self-insured", the plan is not insuring its own risks but is insuring the risks of its employees. Thus, it is an insurer, not a partial "self-insurer". Most group health plans or employer-provided insurance plans, other than multiple-employer welfare arrangements (MEWAs), are governed by the federal Employee Retirement and Income Security Act of 1975 ("ERISA"), 29 U.S.C.A. §§ 1001 1461, as employee welfare benefit plans. The group health plan, as an ERISA-covered employee welfare benefit plan is, more likely than not, exempted from many provisions of the New York State Insurance Law and is not required to be licensed as an insurer in New York. However, the fact that a group health plan may be exempted pursuant to ERISA or other sections of the Insurance Law from certain licensing requirements, does not create a similar exemption for an independent adjuster acting on behalf of such health plan. An independent adjuster is defined as a person who acts on behalf of an insurer. Notwithstanding the exemption, the plan is acting as an insurer. As such, any person adjusting claims for a group health plan, must obtain an independent adjusters license.
In making a determination as to whether the proposed activity constitutes investigating and adjusting claims pursuant to N. Y. Ins. Law § 2101(g)(1) (McKinney 2000), the question that needs to be answered is whether such activity requires the exercise of discretionary authority conferred by the insurer, as opposed to ministerial tasks. Tasks such as reviewing, processing and adjusting claims, authorizing payments, issuing and signing checks, handling inquiries from insureds, evaluating the merits of a loss, and making recommendations to the insurer, all constitute discretionary acts requiring an independent adjusters license.
The collection of premiums is unrelated to the claims functions. Without more, the mere collection of premiums does not require licensing as an agent or otherwise under the Insurance Law.
The inquirer also questioned whether a corporation may include employees who are not officers or directors as sub-licensees. N. Y. Ins. Law § 2108(c)(1) and (2) (McKinney 2000) states:
The superintendent may issue an independent adjusters license or a public adjusters license to any person, firm, association or corporation, hereinafter designated as licensee, who, or which, is trustworthy and competent to act as an adjuster in such manner as to safeguard the interests of the people of this state and who, or which, has complied with the prerequisites herein prescribed.
A license issued to a corporation may name as sub-licensees only the officers and directors of such corporation, and a license issued to a firm or association may name as sub-licensees only the individual members of such firm or association. Each sub-licensee named as such in the license issued to a firm, association or corporation must be qualified to obtain a license as an independent adjuster or as a public adjuster, as the case may be, and for each such sub-licensee a fee must be paid at the times and at the rate hereinafter specified. Each sub-licensee shall be authorized, pursuant to such license, to act as an independent adjuster or as a public adjuster, as the case may be, only on behalf of the licensee. (emphasis added).
Pursuant to N. Y. Ins. Law § 2108(c)(2) (McKinney 2000), any license issued to a corporation may name only the officers and directors as sub-licensees. In addition, each named sub-licensee (officer or director) must be qualified to obtain a license as an independent adjuster. Although a regular employee may not be listed as a sub-licensee by the corporation, such employee may engage in adjusting of claims if he or she is licensed individually as an independent adjuster. It would be a violation of N.Y. Ins. Law § 2102(a)(1) (McKinney 2000) if a person adjusts claims in New York on behalf of an insurer without a New York independent adjusters license.
For further information you may contact Attorney D. Monica Marsh, at the New York City Office.