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 August 6, 2001, representing the position of the New York State Insurance Department.

RE: Sharing of Commissions or Fees by Licensed Insurance Brokers

Question Presented:

Is it permissible under the New York Insurance Law for licensed insurance brokers to share commissions or fees?

Conclusion:

Yes. The Insurance Law and Insurance Department regulations promulgated thereunder do not preclude licensed insurance brokers from sharing commissions or fees that arise from insurance placements or insurance services rendered. However, insurance brokers are prohibited from receiving commissions or fees that arise from insurance placements or insurance services rendered to a New York State governmental unit unless the insurance brokers actually place the insurance or render insurance services to a New York State governmental unit.

Facts:

No specific facts were provided.

Analysis:

An insurance broker's receipt of fees for insurance services rendered generally is regulated by N.Y. Ins. Law § 2119 (McKinney 2000). The sharing of commissions or fees by insurance brokers from non-New York State business is generally not prohibited by the Insurance Law or Insurance Department regulations promulgated thereunder.

The exception to the general rule that insurance brokers are not precluded from sharing commissions or fees is contained in N.Y. Ins. Law § 2128 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11 § § 29.1-29.6 (1980) (Regulation 87). N.Y. Ins. Law § 2128(a) (McKinney 2000) states, in pertinent part:

[N]o . . . insurance broker . . . shall receive any commissions or fees or shares thereof in connection with insurance coverages placed for or insurance services rendered to the state, its agencies and departments, public benefit corporations, municipalities and other governmental subdivisions in this state, unless such . . . insurance broker . . . actually placed insurance coverages on behalf of or rendered insurance services to the state, its agencies and departments, public benefit corporations, municipalities and other governmental subdivisions in this state.

The sharing of commissions or fees by insurance brokers from a New York State governmental unit is permissible only if such activity is in compliance with N.Y. Ins. Law § 2128 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11 §§ 29.1-29.6 (1980) (Regulation 87). If the insurance broker receives a fee or commission arising from insurance placements or insurance services rendered to a New York State governmental unit, the insurance broker must complete a "Governmental Insurance Disclosure Statement" pursuant to N.Y. Comp. Codes R. & Regs. tit. 11 §§ 29.5 and 29.6 (1980) (Regulation 87).

For further information, you may contact Senior Attorney Robert Freedman at the New York City Office.