The Office of General Counsel issued the following informal opinion on February 28, 2005, representing the position of the New York State Insurance Department.
Re: Surety Bond Issued Out of State
May an agent licensed in Nebraska issue a surety bond in Nebraska for performance and payment for an obligee and risk located in New York, and receive compensation for procuring from the insurer such bond without licensing as an agent in the state of New York?
Yes, as discussed below, under certain circumstances, an agent licensed in Nebraska may procure a bond and receive compensation from the insurer, provided the agent engages in none of its activities in the state of New York, by mail, telephone or otherwise.
ABC Insurance Company is authorized in both New York and Nebraska in the surety line of insurance. XYZ Surety Bonds, Inc. (Agent), is licensed as an agent in the State of Nebraska, and is a representative of ABC. Agent would like to issue a surety bond for ABC on a Nebraska contractor (Principal) doing a project for a private golf club (Obligee) in New York. Agent inquires whether licensing as an agent in the State of New York is required in order to issue the surety bond for ABC. No specific facts detailing what, if any, activities Agent will engage in with regard to New York were provided. Therefore, this opinion addresses agent activities generally.
N.Y. Ins. Law § 2101(k) (McKinney 2000 & Supp. 2005) defines "insurance producer" and provides in pertinent part:
In this article, "insurance producer" means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.
N.Y. Ins. Law § 2101(a) (McKinney 2000 & Supp. 2005) defines "insurance agent" and provides in pertinent part:
In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker . (Emphasis added)
N.Y. Ins. Law § 2102(a)(1) (McKinney 2000 & Supp. 2005) prohibits acting without a license and provides:
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.
With regard to commissions, N.Y. Ins. Law §2115(a)(1) (McKinney 2000 & Supp. 2005) prohibits an authorized insurer from paying any commission to any unlicensed person, firm, association or corporation acting as an insurance agent in New York. Additionally, N.Y. Ins. Law § 2102(e)(1) (McKinney 2000 & Supp. 2005) also provides:
No person shall accept any commission, service fee, brokerage or other valuable consideration for selling, soliciting or negotiating insurance in this state if that person is required to be licensed under this article and is not so licensed.
Under the facts provided, the obligee is located in New York and the risk is also located in New York. The presence of these two facts, standing alone, would not require the Nebraska agent to be licensed in New York. However, engaging in the activities of an agent, i.e., soliciting, negotiating or delivering the policy, and collecting commissions from such activities in New York, even if such activities take place by telephone, mail or otherwise, without licensing, would violate N.Y. Ins. Law § 2102. Thus, as long as the Nebraska agent does not engage in any activities of an agent in the State of New York, by telephone, mail or otherwise, New York licensing is not required.
For further information you may contact Principal Attorney Donald Carroll at the New York City Office.