The Office of General Counsel issued the following informal opinion on January 2, 2002, representing the position of the New York State Insurance Department.
Re: Licensing Requirements for Unauthorized Insurers.
Questions Presented:
1. Is an unauthorized insurer, a subsidiary of a medical school located in New York, required to be licensed in New York where it provides malpractice liability insurance to the students of the medical school, even if the policies are issued and delivered outside of New York?
2. Does a licensed attorneys adjusting activities on behalf of such an unauthorized insurer in New York bring the insurer within the definition of doing an insurance business?
Conclusions:
1. It depends on the circumstances. The Department can not provide the inquirer with a definitive answer based upon the limited facts provided.
2. No, provided that the adjusting activities result from policies that are issued or delivered outside of New York, in compliance with section 1101 (b)(2)(E).
Facts:
A medical school and its clinic are located in New York and its students provide medical services at the clinic and at other unaffiliated health care institutions in New York. The medical school owns a subsidiary, domiciled in the Cayman Islands that provides malpractice liability insurance to the medical school students relative to the services that they render at the clinic and at other health care institutions in New York. A law firm, located in New York, adjusts claims on behalf of the insurer that arise out of these activities.
Analysis:
The inquirer asked whether an unauthorized insurer, a subsidiary of a medical school located in New York, is required to be licensed in New York where it provides malpractice liability insurance to the students of the medical school, even if the policies are issued and delivered outside of New York. Since the inquirer did not provide sufficiently detailed facts, this response will be general in nature.
Generally, New York law does not preclude an insured from obtaining insurance from outside of New York, but it regulates the activities of the insurer in New York, whether performed by mail or otherwise from outside New York.
N.Y. Ins. Law § 1102(a)(McKinney 2000) prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state, unless licensed as an insurer or exempted from licensing pursuant to the Insurance Law.
N.Y. Ins. Law § 1101(b)(1)(McKinney 2000) defines the term "doing an insurance business" in pertinent part as:
(A) making, or proposing to make, as an insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts.
(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance.
(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter.
N.Y. Ins. Law § 1101(b)(2) (McKinney 2000) provides an exemption for transactions performed by an unauthorized foreign or alien insurer if effected by mail from outside of New York, provided that the insurer is licensed by its place of domicile to transact an insurance business. N.Y. Ins. Law § 1101(b)(2)(E) (McKinney 2000) provides in pertinent part as follows:
(b)(2) Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state, but section one thousand two hundred thirteen of this chapter shall nevertheless be applicable to such insurers.
(E) transactions with respect to policies of insurance on risks located or resident within or without this state (except master policies or contracts of group insurance which are subject to the requirements of subparagraph (B) hereof), which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business.
The exemption in section 1101(b)(2)(E) applies to subsequent transactions effected by mail after the policy has been negotiated, issued and delivered outside of New York. In the instant case, assuming that the policies in question are negotiated, issued and delivered outside of New York and the insurer is authorized to do an insurance business in its place of domicile, it would not have to be licensed in New York to perform subsequent transactions by mail.
With respect to group property/casualty policies, the Department considers each certificate under a master policy as a separate insurance policy. Thus, if this is a group policy issued to the school, the insurer would not come within the exemption contained in section 1101(b)(2)(E), unless the master policy and each of the certificates are principally negotiated, issued and delivered outside of New York.
While the Insurance Law generally prohibits the placement of insurance in New York by unauthorized insurers, one exception to the general prohibition is where the placement is through a New York licensed excess line broker. In placing the insurance, the excess line broker must comply with the requirements of N.Y. Comp. Codes R. & Regs. tit.11, § 27(1999)(Regulation 41) and N.Y. Ins. Law §§ 2105, 2118 and 2130 (McKinney 2000).
The inquirer further questioned whether an attorneys adjusting activities on behalf of an unauthorized insurer in New York brings the insurer within the definition of doing an insurance business.
N.Y. Ins. Law § 2101(g)(1)(McKinney 2000) defines the term "independent adjuster" in pertinent part as follows:
(g)(1) [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 except that such term shall not include: . . .(emphasis added).
(E) any licensed attorney at law of this state. . .
Thus, section 2101(g)(1), provides an exemption for licensed attorneys who investigate and adjust claims on behalf of an insurer. The Department has interpreted the word "insurer" to include both authorized insurers (those licensed in New York) and unauthorized insurers, including those that are exempt from licensing. Moreover, N.Y. Ins. Law § 2117(f)(McKinney 2000) permits an attorney to represent an unauthorized insurer in the litigation or settlement of claims in New York.
In the instant case, it would be permissible for a licensed attorney to adjust claims on behalf of an unauthorized insurer and such activities would not bring the insurer within the definition of doing an insurance business in New York under section 1101.
However, N.Y. Ins. Law § 1214 (McKinney 2000) prohibits any person from adjusting losses for a foreign insurance corporation, which has not executed and filed a written appointment of the superintendent as its true and lawful attorney, upon whom all lawful processes in any proceeding against it may be served. Thus, the attorney may adjust on behalf of the unauthorized insurer if the insurer has filed such a written appointment with the Department.
For further information, you may contact Attorney Pascale Joasil at the New York City office.