New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on January 3, 2003, representing the position of the New York State Insurance Department.

Re: Compensation of National General Agent

Question Presented

May a bail bond insurer’s employee or unlicensed agent, whose work does not require licensing under the New York Insurance Law, share in commissions of the licensed and appointed resident bail agents?

Conclusion

In the context of the New York Insurance Law, a commission may only be paid to licensed agents or brokers; however, the New York Insurance Law does not restrict the method of payment by an insurer to its employees or agents for work that does not require a license under the circumstances specified herein.

Facts

The inquirer is a bail bond supervisor of an insurer that is domiciled in Florida and authorized in New York. The inquirer wants to know if the insurer’s national general agent is required to be licensed as an agent in New York to share in commissions of the licensed and appointed New York resident bail agents. The inquirer provided a job description, which enumerated several tasks to be performed by the national general agent. None of the enumerated tasks requires exercising discretion by the national general agent because the tasks are only administrative and do not involve soliciting, negotiating, or effectuating any deposit or bail bond; therefore, a license would not be required. The enumerated tasks include the following:

1. Identify, contact and recruit prospective bail agents;

2. Review potential bail bond agents’ credit and bond forfeiture history;

3. Ensure that bail bond agents are properly licensed and contracted between The Insurance Company (hereinafter TIC) and Administrator;

4. Confirm agent appointment status and forward initial bail powers and other documentation to agents;

5. Distribute and replace bail bond inventory based on the Administrator’s evaluation of each individual bail bond agent’s expected and actual performance;

6. Produce and deliver monthly bail bond liability, forfeiture and inventory reports to bail bond agents; monitor forfeitures, judgments and ensure that TIC meets all bail bond obligations as insurer/surety;

7. Develop, maintain and provide to TIC reports on the aggregate performance of TIC’s bail bond portfolio;

8. Ensure that all appointed bail bond agents comply with both applicable state laws and TIC’s guidelines and procedures;

9. Such other Administrative Services, as may be requested by TIC, to ensure the successful and compliant performance of TIC’s bail bond business.

The last task, number 9, is a "catch-all" category that requires the national general agent to perform "[s]uch other Administrative Services as may be requested . . . to ensure the successful and compliant performance of . . . [the] bail bond business." The following analysis assumes that the work intended to be covered by the "catch-all" phrase is also non-discretionary and administrative, and does not involve soliciting, negotiating, or effectuating any deposit or bail bond.

Analysis

Pursuant to N.Y. Ins. Law § 6802(a) (McKinney 2002):

No person, firm or corporation or any officer or employee thereof shall act in this state as an agent or solicitor of an insurer doing a bail bond business in soliciting, negotiating or effectuating any such deposit or bail bond by such insurer unless licensed by the superintendent as an agent pursuant to the provisions of this section. . . .

The national general agent would be required to obtain a license if he or she performed any of the activities described in N.Y. Ins. Law § 6802(a) (McKinney 2002). In this case, assuming that all the work performed by the national general agent is administrative and not discretionary, and does not involve soliciting, negotiating, or effectuating any deposit or bail bond, such work would not fall within the definition of the activities described in N.Y. Ins. Law § 6802(a) (McKinney 2002). Thus, the national general agent would not be required to be licensed by the New York State Insurance Department.

Under the New York Insurance Law, a commission may only be paid to licensed agents and brokers; however, the New York Insurance Law does not restrict the method of payment by an insurer to employees or agents whose work does not require a license, as in the circumstances described herein. To the extent that an insurer may compensate employees or agents for work that does not require a license from the New York State Insurance Department, such compensation would not be considered a commission.

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