The Office of General Counsel issued the following opinion on February 7, 2002, representing the position of the New York State Insurance Department.
RE: Managing Another Office.
Under the New York Insurance Law, may an insurance broker manage an additional insurance brokerage office owned by another party, open a separate premium account for the other brokerage, and deposit the other brokers checks?
A natural person licensed as an insurance broker may manage the office of another party as long as the parties agree and there is compliance with N. Y. Ins. Law § 2129 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, Part 34 (1995) (Regulation 125).
The licensee that owns the brokerage and the licensee that operates the business are each responsible for insuring compliance with the Insurance Law and Regulations. Premium monies can not be commingled with personal or operating funds. The licensee designated to be in charge of the office must be properly licensed for the type of insurance being conducted therein and be on the premises for the proper supervision of employees.
An insurance broker has been asked to manage a separate brokerage owned by another party.
The relevant statutes and regulations are described below:
N.Y. Ins. Law § 2129 (McKinney 2000) requires that each insurance office of a licensed broker be under the supervision of an appropriate licensee licensed to do the kinds of business transacted in that office, that such person must be present in the office for which he or she is responsible during all or a substantial part of its business hours each day, and that the Department be notified of the location of, and identity of licensees responsible for, satellite offices. See N.Y. Comp. Codes R. & Regs. tit. 11, Part 34 (1995) (Regulation 125). The solicitation and sale of insurance must be made by the licensed broker, not by an unlicensed employee.
N.Y. Ins. Law § 2120(a) (McKinney 2000) provides that:
Every insurance agent and every insurance broker acting as such in this state shall be responsible in a fiduciary capacity for all funds received or collected as insurance agent or insurance broker, and shall not, without the express consent of his or its principal, mingle any such funds with his or its own funds or with funds held by him or it in any other capacity.
There is no prohibition under the statute against establishing more than one premium account. Since, in this instance, there are two distinct legal entities and separately owned businesses, the broker operating the business for another must have a separate premium account for each separate business as each premium account must be in the name of the licensed producer owning such account. See also N.Y. Comp. Codes R. & Regs. tit. 11, § 20.3 (1996) (Regulation 29).
The identity of signatories on the premium account is an arrangement to be decided by the licensee owner and the licensee responsible for operating the business. There is no legal prohibition against anyone in the office signing premium checks and/or depositing money into the premium account, as long as such person has the licensees permission to do so. The licensees are ultimately held responsible by the Department for misconduct.
For further information, you may contact Associate Attorney Jeffrey A. Stonehill at the New York City office.