The Office of General Counsel issued the following informal opinion on September 5, 2001, representing the position of the New York State Insurance Department.
Re: Licensing of Consultants
Is a person who represents insureds in New York required to be licensed by the Insurance Department when the services to be provided in exchange for a fee consist of reviewing health insurance policies, checking the explanation of benefits for errors, monitoring prompt payment, dealing with medical providers if late in submitting claims or careless in using proper codes, and negotiating a health insurance claim with the insurer to help insureds receive better financial compensation?
Yes. Although certain functions presented appear to be adjusting claims on health insurance policies, for which a public adjusters license as defined under N. Y. Ins. Law §2101 (g)(2) (McKinney 2000) is not necessary, other functions come within the meaning of consultant, for which a license pursuant to N. Y. Ins. Law § 2107 (McKinney 2000) is required.
No specific fact pattern is provided. Mr. A uses the term "claims assistance professional" to categorize the health insurance consulting work to be done on behalf of the insured. Mr. A also indicates that the fee to be charged would be by the hour or as a percentage of the additional benefit amount obtained.
N. Y. Ins. Law § 2101 (g)(2) (McKinney 2000) defines a public adjuster as:
any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts or aids in any manner on behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims for loss or damage to property of the insured in this state caused by, or resulting from, any of the risks as enumerated in paragraphs four [through] ten and subparagraphs (B) and (C) of paragraph twenty of subsection (a) of section one thousand one hundred thirteen of this chapter,. . . or who, or which, advertises for, or solicits employment as an adjuster of such claims, and shall also include any person who, for money, commission or any other thing of value, solicits, investigates, or adjusts such claims on behalf of any such public adjuster. (Emphasis added).
Although in this instance the person would appear to be adjusting claims on behalf of an insured, health insurance, a risk listed in N. Y. Ins. Law § 1113 (a)(3) (McKinney 2000), is not included under N. Y. Ins. Law § 2101 (g)(2) (McKinney 2000) and accordingly, no license is required under the Insurance Law. The Department offers no opinion as to whether such adjusting activities would be prescribed by any other law.
Use of the term "claims assistance professional" or any other terminology not mentioned in the N. Y. Insurance Law does not provide an exemption from the obligations of such law when the actual duties fall within a category of activity for which the law requires licensing, in this case, an insurance consultant, under N. Y. Ins. Law § 2107 (McKinney 2000).
The duties in this instance involve, among other things, examining health insurance policies and advising the insureds as to coverage and what benefits are available thereunder. The Insurance Law requires that someone doing this type of work must be licensed as an agent, broker, or insurance consultant.
N. Y. Ins. Law § 2102 (b)(1) (McKinney 2000) provides:
Unless licensed as an insurance agent, insurance broker or insurance consultant, no person, firm, association or corporation shall in this state identify or hold himself or itself out to be an insurance advisor, insurance consultant or insurance counselor.
N.Y. Ins. Law § 2102 (b)(2) (McKinney 2000) provides:
No person, firm, association or corporation shall use any other designation or title which is likely to mislead the public or shall hold himself or itself out in any manner as having particular insurance qualifications other than those for which he may be otherwise licensed or otherwise qualified.
In addition, N.Y. Ins. Law § 2102 (b)(3) (McKinney 2000) provides:
Unless licensed as an insurance agent, insurance broker or insurance consultant with respect to the relevant kinds of insurance, no person, firm, association or corporation shall receive any money, fee, commission or thing of value for examining, appraising, reviewing or evaluating any insurance policy, annuity or pension contract, plan or program or shall make recommendations or give advice with regard to any of the above.
In this instance, the person will be reviewing and examining the policy and advising the client as to what extent coverage exists under it. As a result, such person would need to be licensed as an insurance agent, broker, or consultant to perform those services or to accept compensation for such services.
Mr. A indicated that the fee to be charged for the services provided would be either on an hourly rate or a contingency fee basis as a percentage of the additional amount recovered.
N. Y. Ins. Law § 2119 (a)(1) (McKinney 2000) provides:
No person licensed as an insurance agent, broker or consultant may receive any fee, commission or thing of value for examining, appraising, reviewing or evaluating any insurance policy, bond, annuity or pension or profit-sharing contract, plan or program or for making recommendations or giving advice with regard to any of the above, unless such compensation is based upon a written memorandum signed by the party to be charged and specifying or clearly defining the amount or extent of such compensation.
Thus, fees may be charged on an hourly rate or contingency fee basis as long as there is a written agreement signed by the party to be charged, in this instance, the insured, clearly specifying the amount or extent of the compensation.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City office.