The Office of General Counsel issued the following opinion on December 3, 2004, representing the position of the New York State Insurance Department.
Re: New York Automobile Insurance Plan & Service Fees
If a New York licensed insurance broker charged an applicant, who applied for a New York Automobile Insurance Plan (NYAIP) personal private passenger automobile insurance policy, a $40.00 service fee for services rendered in obtaining such policy; and if such policy is subsequently cancelled; may the broker charge the applicant an additional $40.00 service fee for obtaining a second NYAIP policy for the insured during the policy year of the first policy?
No. Under the NYAIP, an insurance broker may only charge a single service fee of $40.00 or less per policy year when involving the same producer, and applicant or insured. Accordingly, the broker may not charge the applicant an additional $40.00 service fee because the policy year of the initial policy has not expired.
The following facts were provided:
1. On March 1, 2004, an insured applies for an NYAIP policy to run until February 28, 2005. The broker charges a $40.00 service fee.
2. The policy is cancelled on May 1, 2004 for a cause other than the conduct of the broker (e.g., by the premium finance company for nonpayment, or the insured disposed of his vehicle and did not require insurance).
3. The same applicant returns to the same broker on June 1, 2004 for a new application.
4. The broker wishes to charge a $40 service fee for this second application.
Regarding the service fees that a producer may charge, Section 21(c) of the NYAIP Rules provides the following:
The maximum service fee charged by a producer is applicable to all risks except commercial automobiles, private passenger fleets, and miscellaneous vehicles as enumerated in Section 6.A.1.e.(1) which are used for business.
A service fee not to exceed $40 may be charged per policy year involving the same producer and applicant/insured.
In addition to the $40 maximum service fee mentioned above, producers may charge an applicant/insured for actual disbursements for the following services only:
1. Use of express mail.
2. Use of certified mail.
3. PASS and/or identification cards generated through a vendor approved by the Plan.
4. Use of the Electronic Submission Procedure (through a vendor approved by the Plan).
5. Obtaining of MVRs for non-New York operators.
Accordingly, under the NYAIP, an insurance broker may only charge a single service fee of $40.00 or less per policy year when involving the same producer, and applicant or insured. Therefore, under the facts presented, the broker may not charge the applicant an additional $40.00 service fee because the policy year of the initial policy has not yet expired.
For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.