The Office of General Counsel issued the following opinion on January 30, 2003, representing the position of the New York State Insurance Department.
Re: Entitlement to Commissions after Expiration of Brokers License
May an insurance agency pay commissions to a currently unlicensed insurance broker if the commissions originate from insurance policies that the broker produced through such agency when he was licensed?
Yes. Absent an agreement to the contrary, an insurance agency may pay such commissions to the currently unlicensed insurance broker, who does not perform any service functions that require a license, because he earned the commissions by bringing about the relationship of insurer and insured when he was licensed.
A New York insurance agency (the "Agency") plans to pay a currently unlicensed broker (the "Broker") the commissions derived from insurance policies produced through the Agency when the Broker was licensed.
N.Y. Ins. Law § 2116 (McKinney Supp. 2003) prohibits authorized insurers, and the officers, agents or other representatives of such insurers, from paying any commission or other compensation to any unlicensed person, firm, association, or corporation acting in New York State as an insurance broker. However, absent an agreement to the contrary, a licensed broker earns its commissions when it brings about the relationship of insurer and insured, and remains legally entitled to such commissions after the loss of its brokers license. Office of General Counsel Opinion No. 02-04-18 (2002); see Hamond & Co. v. Risk Specialists Co. of N.Y., 210 A.D. 202, 203 (2d Dept 1994). Therefore, unless otherwise agreed, the Agency may pay the unlicensed Broker, who does not perform any service functions that require a license, the commissions that he earned from insurance policies that he produced through the Agency prior to the expiration of his license.
For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.