The Office of General Counsel issued the following opinion on August 18, 2004 representing the position of the New York State Insurance Department.
Re: Ownership of a property/casualty insurance agency
Question Presented
Does New York Insurance Law permit a non-licensed individual to own a controlling interest in a privately owned property/casualty insurance agency?
Conclusion
Yes, as long as the non-licensed person does not share the commissions earned by the property/casualty agency, but only shares in the overall profits of the business, and does not engage in behavior that requires a New York Insurance License.
Facts
No facts were provided.
Analysis
N.Y. Ins. Law § 2115(a)(1) (Mckinney Supp. 2004), which is entitled "[p]roperty/casualty insurance agents; commissions," states in relevant part:
No insurer doing business in this state, and no agent or other representative thereof, . . . shall pay any commission or other compensation to any person, firm, association or corporation for acting as insurance agent in this state, except to a licensed insurance agent . . . .
In relevant part, N.Y. Ins. Law § 2101(a) (Ch. 687 of the Laws of 2003) defines an insurance agent as ". . . any authorized or acknowledged agent of an insurer, . . . who acts as such in the solicitation of, negotiation for, or sale of, an insurance, . . . " N.Y. Ins. Law § 2102(a) (1) (Ch. 687 of the Laws of 2003) states in relevant part that "[n]o person, firm, association or corporation shall act as an insurance producer . . . 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." N.Y. Ins. Law § 2101(k) (Ch. 687 of the Laws of 2003) defines, in relevant part, "insurance producer" to be ". . . an insurance agent, . . . or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance. . . . "
Pursuant to N.Y. Ins. Law § 2115(a)(1) (Mckinney Supp. 2004), a non-licensed person who owns any interest in a property/casualty insurance agency may not share the commissions earned by the property/casualty agency. Nor may this person sell, solicit or negotiate insurance contracts, pursuant to N.Y. Ins. Law § 2102(a) (1) (Ch. 687 of the Laws of 2003). However, this person may share in the overall profits generated by this insurance agency.
In conclusion, please refer to N.Y. Ins. Law § 2103(i) (Mckinney Supp. 2004) and N.Y. Ins. Law § 2324 (Mckinney Supp. 2004) concerning limitations on the placement of insurance through the agency on certain specified property or risks.
For further information one may contact Senior Attorney Susan Dess at the New York City Office.