The Office of General Counsel issued the following opinion on June 25, 2001 representing the position of the New York State Insurance Department.
Re: New York Automobile Insurance Plan and Service Fees for Faxed Checks.
Question Presented:
Does the New York Automobile Insurance Plan ("NYAIP") permit brokers to charge the insured a separate $5.00 fee for processing faxed checks for premium payments?
Conclusion:
No. Such fee is not permissible pursuant to the current version of the NYAIP.
Facts:
The inquirer is a law firm that represents a company that processes premium payments on behalf of New York brokerages certified to write business under the NYAIP. Currently, many insureds make their premium payments directly to their brokers in cash, and the brokers then issue their own checks and fax them to client for same day processing. As the volume of faxed checks has been increasing, the inquirers client would like to recoup the cost of this convenient way of making same day payments from the insured. Therefore, the inquirer would like to know whether the client, through the broker, may charge an insured a $5.00 fee in connection with the clients processing a faxed check for a premium payment that it receives directly from the broker.
Analysis:
Section 21 of the NYAIP (March 1, 2001), entitled "Commission and Compensation to Producers of Record" provides in pertinent part as follows:
C. $40 Maximum Service Fee
The Maximum service fee charged by a producer is applicable to all risks except commercial automobiles, private passenger fleets, and miscellaneous vehicles as enumerated in Section 6.A.e.(1) which are used for business.
A service fee not to exceed $40 may be charged per policy year involving the same producer and applicant/insured.
In addition to the $40 maximum service fee mentioned above, producers may charge an applicant/insured for actual disbursements for the following services only:
1. Use of express mail
2. Use of certified mail
3. Use of Electronic Submission Procedure (other than PASS)
4. Obtaining of MVRs for non-New York operators.
Thus, Section 21 C of the NYAIP makes clear that, in addition to the $40 maximum service fee, service producers may charge insureds only for the enumerated services, which does not include a fee for processing faxed checks. The broker, of course, may include the $5.00 fee within its maximum $40 service fee. Accordingly, pursuant to the current version of the NYAIP, producers may not charge separate fees for processing faxed checks.
For further information, you may contact Attorney Pascale Joasil at the New York City office.