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 April 29, 2002, representing the position of the New York State Insurance Department.

Re: Sale of life insurance

Questions Presented:

1. May a financial and insurance services firm put a law firm on retainer for legal work?

2. May an attorney obtain a license to sell life insurance and investment products and receive commissions in New York State?

3. May a financial and insurance services firm pay a law firm for client referrals?

4. If the law firm merely provides a list of names to be pursued as leads, does this qualify as a referral?

Conclusion:

1. There is nothing in the New York Insurance Law prohibiting a financial and insurance services firm putting a law firm on retainer for legal work. The Department offers no opinion about what work arrangements are permissible under any other laws or guidelines applicable to attorneys.

2. An attorney may obtain a license to sell life insurance pursuant to N.Y. Ins. Law Article 21 (McKinney 2000 and Supp. 2001-2002). The Department offers no opinion about what work arrangements are permissible under any ethical guidelines applicable to attorneys.

3. Yes. Within the rules contained in N.Y. Ins. Law § 2114 (McKinney Supp. 2001-2002), referrals are allowed.

4. No. Selling a membership list, without more, would not be considered to be a referral and does not violate N.Y. Ins. Law §§ 2102 or 2114 (McKinney Supp. 2001-2002) .

Facts:

No facts were provided.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney 2001), concerning the licensing of agents, brokers, reinsurance intermediaries and adjusters, states in the relevant part:

No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.

After all the licensing requirements are met, the Department, pursuant to N.Y. Ins. Law, Article 21 (McKinney 2000 and Supp. 2001-2002), will issue a license to an applicant. Nothing in the New York State Insurance Law prevents attorneys from obtaining a license to sell life insurance if such attorney fulfills all such licensing requirements. Thus, an attorney may apply to be licensed to sell life insurance pursuant to N.Y. Ins. Law Article 21 (McKinney 2000 and Supp. 2001-2002).

Nothing in New York Insurance Law prohibits a financial and insurance services firm from putting a law firm on retainer. The Department offers no opinion about what work arrangements are permissible under any other laws, or guidelines applicable to attorneys. Questions regarding sale of non-insurance investment products must be directed to the appropriate authorities as this Department only opines on New York State Insurance law.

N.Y. Ins. Law § 2114(a) (McKinney Supp. 2001-2002) prohibits, among other things, payment of commissions or other compensation by an insurer to someone not licensed to sell life insurance. However, referrals by an unlicensed person for compensation to a licensed insurance agent or broker may be allowed if such referral complies with N.Y. Ins. Law § 2114(a). N.Y. Ins. Law § 2114(a)(1) and (4) state in the relevant part:

(a)(1) No insurer . . . doing business in this state shall pay any commission or other compensation to any person, firm or corporation, for any services in obtaining in this state any new contract of life insurance or any new annuity contract, except to a licensed life insurance agent of such insurer . . . or to an insurance broker licensed under subparagraph (A) of paragraph one of subsection (b) of section two thousand one hundred four of this article, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.

(4) . . . Services of the kind specified in this subsection shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.

Accordingly, pursuant to § 2114(a), referrals by an unlicensed person for compensation to a licensed insurance agent or broker are permitted if there is no discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.

N.Y. Ins. Law § 2114(a)(1) (McKinney Supp. 2001-2002) also does not prohibit licensees from purchasing from non-licensees lists of potential customers to solicit because the unlicensed person is not acting in a manner that requires licensing, such as procuring, soliciting or otherwise selling insurance. The price of such list may be based upon a percentage of actual sales made from it because the purchase of customer lists does not constitute referrals under § 2114. If, however, the sale of the list is accompanied by a referral or recommendation to the potential customer, then the price of the list may not be based upon a percentage of sales and must comply with N.Y. Ins. Law § 2114(a)(1) (McKinney Supp. 2001-2002).

For further information you may contact Senior Attorney Susan A. Dess at the New York City Office.