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 May 13, 2002, representing the position of the New York State Insurance Department.

RE: Limited Liability Company and Licensing as Broker

Questions Presented:

1) May a limited liability company1 which is licensed as an insurance brokerage, be owned by members who are not licensed as insurance brokers and who do not manage, operate, or otherwise take an active role in the business of the insurance brokerage?

2) May a limited liability company that does not possess an insurance broker’s license manage the affairs of a licensed insurance brokerage?

Conclusions:

1) A limited liability company that is licensed as an insurance brokerage must name at least one member as a sub-licensee who is qualified to obtain an insurance broker’s license, pursuant to N.Y. Ins. Law § 2104 (McKinney 2001-2002 Interim Pocket Part).

2) A limited liability company that does not possess an insurance broker’s license may not manage, supervise, direct, aid, or act as, an "insurance broker" as that term is defined in N.Y. Ins. Law § 2101(c) (McKinney 2000). However, such company may manage and supervise other aspects of the insurance brokerage that are unrelated to insurance broker activities (e.g., accounting, supervising non-broker staff, etc.).

Facts:

No specific facts were provided.

Analysis:

N.Y. Ins. Law § 2101(c) (McKinney 2000) provides the definition of an "insurance broker", and it states in relevent part:

In this article, "insurance broker" means any person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance or annuity contract or in placing risks or taking out insurance, on behalf of an insured other than himself or itself or on behalf of any licensed insurance broker . . . .

N.Y. Ins. Law § 2102(a)(1) (McKinney 2000) requires insurance brokers to be licensed:

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.

A "firm" may be licensed as an insurance brokerage pursuant to N.Y. Ins. Law § 2104(a)(1) (McKinney 2001-2002 Interim Pocket Part), which states:

The superintendent may issue an insurance broker’s license to any individual, firm, association or corporation, hereinafter designated as "licensee", who or which is deemed by him trustworthy and competent to act as a broker in such manner as to safeguard the interests of the insured, and who or which is otherwise qualified as herein required, and who or which has complied with the prerequisites herein prescribed.

N.Y. Ins. Law § 107(a)(2) (McKinney 2001-2002 Interim Pocket Part) defines a "firm" to mean "a partnership, limited or unlimited, general or special."

The Department takes the position that a limited liability company more closely resembles a firm than any other type of business entity. Thus, for purposes of the Insurance Law, the Department treats a limited liability company as a "firm."

N.Y. Ins. Law § 2104(b)(1) (McKinney 2001-2002 Interim Pocket Part) requires a firm, and thus an LLC, that is licensed as an insurance broker to name a natural person as a sub-licensee, who must be qualified, as described in § 2104, to obtain an insurance broker’s license. Section 2104(b)(1) states in relevant part:

Such license shall confer upon the licensee authority to act in the state as insurance broker, and upon every natural person named as sub-licensee in such license authority to act in this state as insurance broker in the name of and on behalf of such licensee[.]

A firm, and, therefore, a limited liability company, may only name individual members as sub-licensees pursuant to § 2104(b)(2), which states:

[A] license issued to a firm or association may name as sub-licensees only the individual members of such firm or association. Each sub-licensee named in such license must be qualified to obtain a license as an insurance broker. . . .

Thus, a limited liability company that is licensed as an insurance brokerage must name at least one member who is a natural person as a sub-licensee, who must be qualified under § 2104 to obtain an insurance broker’s license.

The statutory requirement of having a natural person as a sublicensee becomes evident when considering the necessity of being able to determine who is responsible for a licensee’s wrongdoing. In the case of a licensee that is an entity, there must be an individual who can be held accountable for such acts.

With respect to the inquiry regarding a limited liability company that does not possess an insurance broker’s license, such company may not manage, supervise, direct, aid, or act as, an insurance broker because it is impermissible to perform such acts without a license pursuant to N.Y. Ins. Law §§ 2101 and 2102 (McKinney 2000). However, such company may manage and supervise other aspects of the insurance brokerage that are unrelated to insurance broker activities (e.g., accounting, supervising non-broker staff, etc.).

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


1The Limited Liability Company Law was enacted in 1994. N.Y. Ltd. Liab. Co. Law § 102(m) (McKinney 2001-2002 Interim Pamphlet) provides as follows: "Limited liability company’ and ‘domestic limited liability company’ mean, unless the context otherwise requires, an unincorporated organization of one or more persons having limited liability for the contractual obligations and other liabilities of the business (except as authorized in section six hundred nine of this chapter), other than a partnership or trust, formed and existing under this chapter and the laws of this state."