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 February 6, 2006, representing the position of the New York State Insurance Department.

Re: Licensing as an Independent Adjuster in New York.

Question Presented:

Pursuant to the New York Insurance Law, would ABC Co. be required to become licensed as an independent adjuster in New York to perform the activities described in this letter?

Conclusion:

ABC Co. would not be required to become licensed as an independent adjuster in New York if it only issues claim payments directly on the insurer's check stock without having any discretionary authority regarding claim payments and collects premiums from employer groups and maintains such premiums in a fiduciary account in the name of the insurer. However, the inquirer stated that ABC Co. may also perform activities such as eligibility, claims processing and customer service in New York. Since the inquirer has failed to respond to our requests for further information, we can not provide a definitive response regarding whether such activities require licensing under the New York Insurance Law.

Facts:

ABC Co. is licensed as a Health Care Service Plan in the state of California under the Department of Managed Health Care. As a Third Party Administrator (TPA), ABC Co. has contracts with and receives administrative fees from various insurers to administer vision plans. The insurers market their insurance products to various companies that pay premiums to the insurers and the insurers pay an administrative fee for vision claims processing services provided by ABC Co. ABC Co. has obtained its Certificate of Authority to Transact Business (CATB) with the intent of being a TPA in New York for fully insured routine vision plans. However, at this time, ABC Co. is not administering any vision plans for employers located in New York.

ABC Co. previously requested an opinion from the Department regarding whether its activities required licensing as an independent adjuster in New York. In an opinion dated April 6, 2001, the Department stated that the conclusion reached in the Counsel's Corner opinion, entitled "Third Party Administrators" from the bulletin dated March/April 1988, would apply to ABC Co. since it would have no contact with insureds during the application process, would not collect premiums, nor have any discretionary authority regarding claim payments. The inquirer stated that since this opinion was issued some changes have occurred with respect to the activities that ABC Co. will perform in New York. ABC Co. will issue the claim payments directly on the insurer's check stock, but will not have any discretionary authority regarding claim payments. It will collect premiums from employer groups and maintain such premiums in a fiduciary account in the name of the insurer. ABC Co. may also perform activities such as eligibility, claims processing, customer service, and accounting duties on behalf of fully-insured groups. The inquirer would like to know whether these activities would require licensing as an independent adjuster in New York.

Analysis:

At the outset it should be noted that there is no licensing or registration requirement for TPA’s as such under the New York Insurance Law. However, any person or entity, including a TPA, that performs functions that require licensing as an independent adjuster or otherwise must be accordingly licensed.

N.Y. Ins. Law § 2102(a)(1) (McKinney Supp. 2006) provides, in relevant part, as follows:

No person, firm, association or corporation shall act as an . . . 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 § 2101(g) (McKinney Supp. 2006) provides, in relevant part, as follows:

(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster" as defined below:

(1) The term "independent adjuster" means 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 . . .

In accordance with the above, entities that adjust claims on behalf of insurers or exempt insurers must be licensed as independent adjusters in New York. In determining what constitutes the adjusting of claims under section 2101, this Department considers whether the duties performed in the handling of a claim requires the exercise of discretionary authority conferred by the insurer, as opposed to the performance of strictly ministerial tasks. Past opinions have held that activities such as reviewing and processing claims, authorizing payments, issuing and signing checks (after making the determination to issue the check), handling inquiries from insureds, evaluating the merits of a loss, making recommendations to the insurer, are all discretionary acts, while acts such as data processing are ministerial in nature.

In the present case, activities such as issuing claim payments on the insurer's check stock without having any discretionary authority regarding claim payments and collecting and maintaining premiums in a fiduciary account in the name of the insurer are ministerial in nature and would not constitute the adjusting of claims within the purview of section 2101(g)(1), and thus, ABC Co. would not be required to become licensed as an independent adjuster in New York to perform such activities. However, the inquirer stated that ABC Co. may also perform activities such as eligibility, claims processing and customer service in New York. Since the inquirer has failed to respond to our requests for further information, we can not provide a definitive response regarding whether such activities require licensing under the New York Insurance Law.

This opinion is limited to an interpretation of the New York Insurance Law. No opinion is rendered on any other laws.

For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.