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 September 23, 2004, representing the position of the New York State Insurance Department.

RE: Insurance Agent’s or Broker’s Entitlement to Insurance Commissions

Question Presented:

Do the New York Insurance Law and the regulations promulgated thereunder provide rules as to which insurance agent or broker should receive the commission on a policy when there has been a change of broker of record?

Conclusion:

No. The New York Insurance Law and the regulations promulgated thereunder do not provide such rules. However, New York courts have generally held that, absent an agreement to the contrary, a licensed insurance agent or broker earns its commission when it brings about the relationship of insurer and insured.

Facts:

On February 23, 2004, the inquirer’s insurance agency received a policy renewal that was effective April 28, 2004. On May 25, 2004, the agency received a fax from the insurer that advised that it would be processing a change of broker. Although the insurer stated that it had previously sent a letter dated May 12, 2004 to the agency regarding this change of broker, the inquirer states that agency did not receive it. As a result of the change of broker, the insurer refused to pay the agency the commission on the policy. The inquirer would like to know whether the Insurance Law provides rules as to which insurance agent or broker should receive the commission on a policy when there has been a change of broker of record.

Analysis:

The New York Insurance Law and the regulations promulgated thereunder do not provide rules as to which insurance agent or broker should receive the commission on a policy when there has been a change of broker of record. However, New York courts have generally held that, absent an agreement to the contrary, a licensed agent or broker earns its commission when it brings about the relationship of insurer and insured. See Hamond & Co., Inc. v. Risk Specialists Co. of New York, Inc., 210 A.D.2d 202, 619 N.Y.S.2d 744 (2d Dept. 1994); Western Nat. Ins. Co. v. Haph Brokerage, 277 A.D. 6, 97 N.Y.S.2d 447 (1st Dept. 1950), aff’d. 302 N.Y. 678, 98 N.E.2d 481 (1951). In accordance with this principle, absent an agreement to the contrary, the agency earned the commission pertaining to this policy, including the renewals thereof, when the policy was placed.

The inquirer was directed to review the agency’s contractual agreement with the insurer, if any exists, regarding the agency’s entitlement to receive commissions where there has been a change of broker of record.

For further information you may contact Senior Attorney Pascale Jean-Baptiste at the New York City Office.