|George E. Pataki
Gregory V. Serio
The Office of General Counsel issued the following opinion on January 21, 2003, representing the position of the New York State Insurance Department.
RE: Premium Finance Agreements
1) May a New York wholesale insurance broker enter into a premium finance agreement with an insured and then assign the premium finance agreement to a licensed premium finance company while only guaranteeing payment of the premium finance fee or some other nominal amount?
2) May a licensed broker employ a Department-approved assumed name when entering into a premium finance agreement with an insured, obtaining the requisite "separate memorandum" from the insured, and then assigning such premium finance agreement as described above?
1) As previously concluded by this Office, nothing in the New York Insurance Law precludes a New York wholesale insurance broker from entering into a premium finance agreement with an insured and then assigning the premium finance agreement to a licensed premium finance company while only guaranteeing payment of the premium finance fee or some other nominal amount.
2) A licensed broker may employ a Department-approved assumed name when entering into a premium finance agreement with an insured, obtaining the requisite "separate memorandum" from the insured, and then assigning such premium finance agreement as described above.
An inquiry, which did not set forth any specific facts, sought confirmation of a previously issued opinion of this office.
Assignment of Premium Finance Agreement
An inquirer asked for confirmation that the position set forth in Office of General Counsel Opinion NILS No. 99-80 (July 1, 1999) remains accurate under the New York Insurance Law. In that Opinion, the underlying facts involved a wholesale insurance broker that was acting as the initial issuer of premiumfinance agreements, which it would subsequently assign to a premium finance company. The wholesale broker only guaranteed payment of premium finance fee or another nominal amount. The wholesale broker and the retail broker received compensation from the premium finance agency.
OGC Opinion 99-80 concluded that, where there were no additional indirect charges being recouped by the premium finance agency from the insured, neither the wholesale broker nor the retail broker would be required to obtain the statutorily required signed memorandum from the insured under N.Y. Ins. Law § 2119(c)(1) (McKinney 2000).1 However, if the insured was charged fees by the premium finance agency by which it would recoup its payments to the brokers, the insured must sign a § 2119 memorandum from each licensee that is compensated acknowledging that the retail and wholesale broker would be receiving compensation from the premium finance agency. Under the facts presented, the insured was paying compensation to the wholesale broker pursuant to the finance agreement issued by the wholesale broker. This is because the insured would indirectly be paying the broker's compensation. See Office of General Counsel Opinion No. 94-80 (Sept. 22, 1994). Therefore, a § 2119 memorandum separate and apart from the finance agreement defining the amount of such compensation was required to be signed by the insured.
There has been no change in the Insurance Law or Regulations subsequent to the issuance of OGC Opinion 99-80 that would require a reversal of its conclusion. Accordingly, it continues to be valid.
Use of Assumed Name
The second inquiry involves the issue of the name under which the broker may carry out the activities described above. Specifically, it was asked whether a licensed broker may use a Department-approved assumed name when entering into a premium financing agreement. The use of an "assumed name" is a licensing issue. N.Y. Insurance Law §2102(a)(1) (McKinney 2000) governs the licensing of agents, brokers and adjusters, and provides in pertinent part, as follows:
(a)(1) 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.
Pursuant to N. Y. Ins. Law § 2102(a) (McKinney 2000), after all requirements are met, the Department will issue a license to an applicant to operate under a specific name. The licensee must use that name in advertising or transacting business unless the applicant gets permission from the Department's Licensing Bureau to use another name and makes the proper filing with the county clerk. If the licensee uses a name other than one it is licensed under, it is, in essence, doing business without a license in violation of N. Y. Ins. Law 2102(a) (McKinney 2000).
Of further relevance to the inquiry is N.Y. Insurance Law §1102(g)(1) (McKinney 2000), which sets forth the Departments name approval authority. That section prohibits the use of potentially misleading or confusing names, and provides, in pertinent part, as follows:
No license to do an insurance business, or to act as an insurance agent, agency or broker, shall be granted to any person, firm, association, corporation, or joint-stock company proposing to do business under a name identical with, or so similar to as to be likely to deceive or mislead the public, the name of any insurer then licensed or authorized to do any kind of insurance business within this state, or of any proposed domestic insurance corporation whose name has been approved or of any domestic corporation, organized but not yet licensed, which has not forfeited its charter because of non-use; provided, the superintendent may, in his discretion, upon satisfactory proof of an appropriate resolution of any insurance corporations board of directors, grant a license to do any different kind of insurance business to another person, firm, association, joint-stock company, insurance agent, agency or broker, or insurance corporation, having a similar, but not identical, name. Notwithstanding any other provision of this article, the superintendent may refuse to grant a license to do an insurance business, or to act as an insurance agent, agency or broker, to any person, firm, association, corporation or joint-stock company proposing to do business under a name which is likely to deceive or mislead the public in this state.
This opinion is limited to an interpretation of the Insurance Law and no opinion is expressed regarding any other law. In particular, questions regarding the Banking Law should be addressed to the Banking Department, which regulates premium financing and the licensing of premium finance agencies.
For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.
No insurance broker may receive any compensation, other than commissions deductible from premiums on insurance policies or contracts, from any insured or prospective insured for or on account of the negotiation or procurement of, or other services in connection with, any contract of insurance made or negotiated in this state or for any other services on account of such insurance policies or contracts including adjusting of claims arising therefrom, unless such compensation is based upon a written memorandum, signed by the party to be charged and specifying or clearly defining the amount or extent of such compensation.