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 November 5, 2004, representing the position of the New York State Insurance Department.

RE: Independent adjuster/Third Party Administrator

Question Presented

Does an out-of-state company acting on behalf of self-insured employers and insurers as a third party administrator ("TPA") to investigate and settle certain claims and issue checks have the necessary licenses to do such work in New York if it is licensed as an independent adjuster - casualty and as an insurance agent?

Conclusion

Yes. The type of adjusting casualty claims done by the inquirer’s client is covered by the independent adjuster’s license for casualty that it has pursuant to N.Y. Ins. Law § 2108 (McKinney Supp. 2004).

Facts

The inquirer’s client is a Delaware corporation headquartered in Illinois, with offices in over 30 states. It acts as a TPA that adjusts claims and, through the Illinois headquarters, places excess insurance coverage for workers’ compensation, general liability, and automobile insurance for self-funded group employer plans and insurers. The inquirer’s client is licensed as both an independent adjuster - casualty and as a property/casualty insurance agent. It has also filed an application to be licensed with the Workers’ Compensation Board to do workers’ compensation functions. Appearances before that Board would be made only by attorneys, not the employees of the inquirer’s client.

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) must obtain the appropriate license from the New York Insurance Department. Within the meaning of N.Y. Ins. Law § 2102, as amended by Chapter 692 of the Laws of 2003, conducting adjusting activities with a person in New York by e-mail, telephone, or mail would constitute doing business in New York, regardless of whether the claimant was a New York resident.

Under the facts presented, the inquirer’s client would be acting as an independent adjuster and as an insurance agent.

N.Y. Ins. Law § 2101(g)(1), as amended by ch. 692 of the Laws of 2003, defines independent adjuster to mean:

…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, . . .

N.Y. Ins. Law § 2102, as amended by ch. 692 of the Laws of 2003, provides that: "No person, firm, association or corporation shall act as an insurance producer 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."

N.Y. Ins. Law § 2108(a)(3) (McKinney Supp. 2004) requires that no adjuster may act on behalf of an insurer unless it is licensed as an independent adjuster. The Department considers the term "insurer" to encompass any entity that is doing an insurance business, as defined in N.Y. Ins. Law § 1101 (McKinney Supp. 2004), regardless of whether such entity must be licensed by this Department. Accordingly, the Department has consistently held that licensing is required for adjusting activities on behalf of an exempt insurer, such as a self-funded plan. If the plan consisted of a self-insured single employer, the adjuster’s license would not be required since the employer is not acting as an insurer in adjusting its own liability or workers’ compensation claims. However, if it were adjusting for a self-insured group workers’ compensation program, then the adjuster’s license would be necessary. In any event, the adjuster’s license is obviously necessary to adjust claims under the excess insurance policies.

Since individuals are encompassed within the definition in N.Y. Ins. Law § 2101(g), any individual in the inquirer’s client’s office engaging in adjusting activity that involves discretionary authority and not purely ministerial acts would need an independent adjuster’s license.

N.Y. Comp. Codes R. & Regs. tit. 11, Part 26 (2004) (Regulation 25) provides the types of licenses for independent adjusters, what their authority is in respect to each type of license, and the types of examinations that need to be taken and passed by a prospective independent insurance adjuster. As indicated therein, the independent adjuster for casualty has the authority to investigate and adjust all claims from policies of property and liability (other than automobile) insurance and workers’ compensation. Accordingly, the inquirer has the necessary licenses to conduct business in New York.

For Further information one may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.