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

The Office of General Counsel issued the following informal opinion on June 26, 2001, representing the position of the New York State Insurance Department.

Re:  Applicability of Exemptions From Licensing as an Independent Adjuster under N.Y. Insurance Law § 2101(g)(1)

Questions Presented:

1. Does N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) exempt from the requirement of an independent adjuster’s license a "Manager" company (Manager) that provides adjusting services to two authorized property/casualty insurers who are owned by the same parent company as the Manager?

2. Does N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) exempt from the requirement of an independent adjuster’s license, persons employed by the Manager and who are appointed as officers or directors of both authorized property/casualty insurers who are owned by the same parent company as the Manager?

3. Does N.Y. Ins. Law § 2101(g)(1)(B) (McKinney 2000) exempt from the requirement of an independent adjuster’s license a company that is owned jointly by two authorized property/casualty insurers and which provides adjusting services, in addition to other types of insurance services, to the two authorized property/casualty insurers that own it? Would this company be considered an "adjustment bureau" under the exception for licensing as an independent adjuster?

Conclusions:

1. Yes. N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) exempts from the requirement of an independent adjuster’s license a Manager that provides claims, underwriting, policyholder services, investment, producer management, collection and handling of premiums and other funds, reinsurance, accounting and financial, marketing support and product development and administration, information technology and legal and governmental relation services to two authorized property/casualty insurers who are owned by the same parent company as the Manager, provided that the Manager is a managing general agent (MGA), including being a licensed agent.

2. No. N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) does not exempt from the requirement of an independent adjuster’s license persons that are employed by the Manager although appointed as officers or directors of both authorized property/casualty insurers. These employees of the Manager must be licensed as an independent adjuster, unless otherwise exempted.

3. Yes. N.Y. Ins. Law § 2101(g)(1)(B) (McKinney 2000) exempts from the requirement of an independent adjuster’s license a company that is owned jointly by two authorized property/casualty insurers and which provides adjusting services, in addition to other types of insurance services, to the two authorized property/casualty insurers that own it. This company would be considered an "adjustment bureau" under the exception for licensing as an independent adjuster. However, the company may have to be licensed pursuant to other provisions of the Insurance Law, based upon certain of its functions.

Facts:

As provided, the facts are as follows:

Two property/casualty insurers, Insurer A and Insurer B, are owned by a common parent corporation ("Parent"). Both Insurer A and Insurer B are licensed to do an insurance business in New York. Parent also directly owns a stock subsidiary ("Manager") that provides services to Insurer A and Insurer B, including claims, underwriting, policyholder services, investment, producer management, collection and handling of premiums and other funds, reinsurance, accounting and financial, marketing support and product development and administration, information technology and legal and governmental relations. Thus, Insurer A, Insurer B and Manager are each direct subsidiaries of Parent. Manager provides services to no unaffiliated insurer or other unaffiliated person. Services provided by Manager to Insurer A and Insurer B are on an "at cost" basis. Persons employed by the Manager for claims services devote substantially all their time to the claims services provided by the Manager.

Also, the claims services provided by Manager to Insurer A and Insurer B include acts described as acts of an "independent adjuster" as defined in the Insurance Law.

The facts concerning question no. 3 are different from the above. For question no. 3, assume that the Manager is owned jointly by Insurer A and Insurer B (instead of being a sister company to each.)

Analysis:

N.Y. Ins. Law Section 2102(a)(1) (McKinney 2000) prohibits any person, firm, association or corporation from acting as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in New York without the appropriate license. In addition, N.Y. Ins. Law Section 2108(a)(3) (McKinney 2000) requires that no adjuster shall act on the behalf of an insurer or on behalf of an insured unless he or she is licensed as an independent adjuster.

Question 1:

N.Y. Ins. Law Section 2101(g) (McKinney 2000) states in pertinent part:

(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster" as defined below:

(1) The term "independent adjuster" means 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 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, 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 of Lloyds underwriter, or marine underwriting office, unless acting as an auto body repair estimator as defined in subsection (j) of this section; (emphasis added).

As stated above, N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) exempts a manager of an authorized insurer from the requirement of an independent adjuster’s license. The term "manager" is defined in the newly promulgated First Amendment to Regulation 120 (N.Y. Comp. Codes R. & Regs. tit. 11, Part 33 (2001), emergency regulation). Section 33.2(c) states that a managing general agent (MGA) is any person, firm, association or corporation that:

(1) manages all or part of the insurance business of an insurer (including the management of a separate division, department or underwriting office);

(2) acts as an insurance agent as defined in section 2101(a) of the Insurance Law for such insurer, whether known as a managing general agent, manager, or other similar term, or acts as an insurance broker as defined in section 2101(c) of the Insurance Law; and

(3) has the authority to accept or reject risks on behalf of the insurer or cede or assume reinsurance on behalf of the insurer.

A "manager" under Section 33.2(c)(2) must be an MGA under Regulation 120, including being licensed as an agent. The regulation is in the process of being amended to clarify this.

According to the facts, Insurers A and B are authorized in New York. However, whether or not the parent company is an authorized insurer was omitted. N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) exempts from licensing a manager of an authorized insurer, therefore, if Manager meets the definition of an MGA (which includes being a licensed insurance agent) and Manager manages an authorized insurer, then the Manager would be exempt from the requirement of an independent adjuster’s license in adjusting claims on behalf of that insurer.

Question 2:

N.Y. Ins. Law § 2101(g)(1)(A) (McKinney 2000) exempts "any officer, director, or regular salaried employee of an authorized insurer" from the requirement of an independent adjuster’s license.

While the persons employed by the Manager would be also appointed as officers or directors of both authorized property/casualty insurers, they would not be exempt from the requirement of an independent adjuster’s license since they are not acting in such capacity but acting as employees of the Manager. These employees of the Manager would have to be licensed as an independent adjuster, unless otherwise exempted, since the exemption is for employees of an authorized insurer, and not for employees of the Manager.

Question 3:

N.Y. Ins. Law Section 2101(g)(1)(B) (McKinney 2000) exempts "any adjustment bureau or association owned and maintained by insurers to adjust or investigate losses, or any regular salaried employee or manager thereof who devotes substantially all of his time to the business of such bureau or association . . ." from the requirement of an independent adjuster’s license.

Therefore, since the company in this fact pattern is owned by two authorized insurers, the company would be considered an adjustment bureau and exempt from the requirement of an independent adjuster’s license. The insurer would be responsible for the activities of the company in this and other situations where licensing as an adjuster is not required.

This entire opinion is limited to the function of adjusting claims. There are certain other functions, such as those involving underwriting and reinsurance that may require licensing in other capacities. No opinion is rendered regarding these other functions without a more detailed explanation of the activities that would be conducted.

For further information, you may contact Senior Attorney Meredith S. Kaufer.