The Office of General Counsel issued the following opinion on October 23, 2003, representing the position of the New York State Insurance Department.
Re: Insurance Law Section 2108 / Adjusters
Question Presented:
Is an independent adjusters license required for an employee of a third party administrator (TPA) that adjusts workers compensation claims in New York on behalf of authorized insurers when that employee is also a hearing representative, licensed by the Workers Compensation Board to appear before the Workers Compensation Board on behalf of employers and insurance carriers?
Conclusion:
Yes, an independent adjuster license is required for each employee of a TPA that adjusts workers compensation claims in New York on behalf of authorized insurers. The Insurance Law does not provide an exemption from this requirement for an individual solely because he or she is licensed by the Workers Compensation Board to appear before it on behalf of employers and insurance carriers. In addition, the TPA itself must obtain an independent adjusters license.
Facts:
An employee of an insurance carrier that handles workers compensation claims appears at hearings before the Workers Compensation Board on behalf of his employer and its clients. The employee is considering leaving his current employment as a hearing representative and taking on different employment as an adjuster for a TPA that also handles workers compensation claims for several different insurer-clients. The employee intends to keep his license from the Workers Compensation Board and accordingly, believes that he should not be required to obtain an independent adjusters license from the New York State Insurance Department.
Analysis:
The New York State Insurance Law does not specifically define "third party administrator" and does not regulate activities of TPAs as such. However, any person or entity that engages in activities in New York that would require licensing (e.g., acting as an adjuster involving discretionary authority and not doing purely ministerial acts) must obtain the appropriate license from the New York State Insurance Department.
N.Y. Ins. Law § 2102(a)(1) (McKinney 2000) prohibits any person, firm, association or corporation from acting as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in New York without the appropriate license. Furthermore, N.Y. Ins. Law Section 2108(a)(3) (McKinney 2000) requires that no adjuster shall act on the behalf of an insurer without possessing an independent adjusters license.
N.Y. Ins. Law § 2101(g) (McKinney 2000) states in pertinent part:
(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster" as defined below:
(1) The term "independent adjuster" means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster, except that such term shall not include:
(A) any officer, director, or regular salaried employee of an authorized insurer, or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, or attorney in fact of any reciprocal insurer of Lloyds underwriter, or marine underwriting office, unless acting as an auto body repair estimator as defined in subsection (j) of this section; . . .
The licensing exemption for a salaried employee applies only to an authorized insurer, not an outside entity adjusting claims on behalf of an authorized insurer. Thus, the exemption is not applicable to the present situation. The fact that regular salaried employees are doing the adjusting is inconsequential and does not change the requirement for an adjusters license.
N.Y. Ins. Law § 2108(c)(1) (McKinney 2000), regarding licensing of adjusters, reads as follows:
(c) (1) The superintendent may issue an independent adjuster's license or a public adjuster's license to any person, firm, association or corporation, hereinafter designated as licensee, who, or which, is trustworthy and competent to act as an adjuster in such manner as to safeguard the interests of the people of this state and who, or which, has complied with the prerequisites herein prescribed.
(2) A license issued to a corporation may name as sub-licensees only the officers and directors of such corporation, and 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 as such in the license issued to a firm, association or corporation must be qualified to obtain a license as an independent adjuster or as a public adjuster, as the case may be, and for each such sub-licensee a fee must be paid at the times and at the rate hereinafter specified. Each such sub-licensee shall be authorized, pursuant to such license, to act as an independent adjuster or as a public adjuster, as the case may be, only on behalf of the licensee.
(3) Every individual applicant for a license under this section and every proposed sub-licensee shall be eighteen years of age or over at the time of the issuance of such license.
It was stated that the employee would become an employee of the TPA, which is a corporation. In those circumstances, the TPA, itself, and the individual employees who adjust claims, would each have to obtain a separate license. Only officers and directors of the corporation can be named as sub-licensees, as stated above, and every corporation must have at least one sub-licensee. The corporation may also utilize employees who are not officers or directors so long as the employee is individually licensed and is supervised by a sub-licensee.
Although the Insurance Law does provide a number of limited exemptions to the requirement for an independent adjusters license, there is no exemption for an individual solely because he is licensed by the Workers Compensation Board to appear before the Workers Compensation Board on behalf of employers and insurance carriers.
For further information you may contact Special Counsel Athan Shinas at the Albany Office.