New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on January 9, 2006, representing the position of the New York State Insurance Department.

RE: Broker of Record Letters.

Question Presented:

Do the New York Insurance Law and the Department Regulations promulgated thereunder provide rules as to which insurance broker should receive the commission on a policy when there has been a change of broker of record letter filed with the insurer?

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 broker earns its commission when it brings about the relationship of insurer and insured. The inquirer was directed to review the agreements, if any, between its brokerage company and the insurer and between the broker and the insured.

Facts:

The inquirer is a licensed insurance broker employed by an insurance brokerage. He would like to start his own company and bring with him the clients he has been servicing at the brokerage. He would like to have his potential personal clients sign a change of broker of record letter in order to collect commissions from the insurer.

Analysis:

A broker of record letter is a written statement signed by an insured advising an insurer that a particular broker or agent shall act as the insured’s representative. A broker of record letter is not a creation of statute or regulation; it was developed by the insurance industry as a means of conducting business transactions.

There are no laws or regulations relating to procedures concerning broker of record letters nor are there any notification requirements relating thereto. Whether notification must be given to the former broker that a broker of record letter was filed naming a new broker is dependent upon the terms of the broker-insured, and broker-insurer, agreements. Such contractual matters are not regulated by the Department.

New York courts have generally held that, absent an agreement to the contrary, a licensed 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, you would earn the commission pertaining to any policy, including the renewals thereof, when the policy was placed.

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