The Office of General Counsel issued the following opinion on January 5, 2004, representing the position of the New York State Insurance Department.
Re: Force Place Insurance for Office Equipment
When a corporation ("Lessor") leases office equipment to a business "(Lessee)" under an agreement where the Lessee is required to provide insurance coverage for the protection of the equipment throughout the term of the lease but fails to do so and therefore the Lessor obtains a force place policy covering the equipment, is the lessor required to be licensed as a premium finance company?
No. The Lessor would not need to be licensed as a premium finance company when obtaining a force place policy to cover its leased equipment.
The inquirer described a situation wherein a Lessor corporation leases office equipment to a Lessee business under an agreement that requires the Lessee to obtain insurance coverage, in order to protect the leased equipment. When the Lessee fails to obtain insurance, the Lessor obtains a force place policy covering the equipment and pursuant to the lease agreement, bills the Lessee for the cost of the premium and related charges.
Pursuant to N.Y. Banking Law § 554(7) (McKinney Supp. 2004), a premium finance agency is defined as:
(a) a person engaged, in whole or in part, in the business of entering into premium finance agreements with insureds, including a bank if so engaged; or
(b) a person engaged, in whole or in part, in the business of acquiring premium finance agreements from insurance agents or brokers or other premium finance agencies, including a bank if so engaged and an insurance agent or broker who is licensed as a premium finance agency and who holds premium finance agreements made and delivered by insureds to him or his order.
Under the facts posed by the inquirer, the Lessor, who is in the business of leasing office equipment, meets neither of the definitions of a premium finance agency, as it is neither in the business of entering into premium finance agreements with insureds or of acquiring premium finance agreements from insurance agents or brokers or other finance agencies. Rather, the fact that the Lessor pays premiums on the force place policy protecting its leased equipment and bills the Lessee for repayment is simply a provision of a lease agreement between the two parties, which governs the rights and obligations of both the Lessor and Lessee and is intended to protect the Lessors interests in its own property.
Therefore, there is no requirement that the Lessor be licensed as a premium finance agency under such circumstances.
For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.