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 April 11, 2006, representing the position of the New York State Insurance Department.

Re: Adjusting Workers' Compensation Claims.

Questions Presented:

1. Must an authorized insurer that writes excess workers' compensation insurance and its employees be licensed as independent adjusters to adjust workers' compensation claims under excess policies that were issued by the authorized insurer?

2. Must an authorized insurer that writes excess workers' compensation insurance and its employees be licensed as independent adjusters to adjust workers' compensation claims that were self-insured by an employer?

Conclusions:

1. No. An authorized insurer that writes excess workers' compensation insurance and its employees are not required to be licensed as independent adjusters to adjust workers' compensation claims under excess policies that were issued by the authorized insurer.

2. An authorized insurer that writes excess workers' compensation insurance and its employees are not required to be licensed as independent adjusters to adjust workers' compensation claims that were self-insured by a single employer. However, entities and their employees that adjust workers' compensation claims on behalf of employer self-insurance groups must be licensed as independent adjusters under the New York Insurance Law. See analysis below.

Facts:

The inquirer's client is a New York authorized insurer that issues excess workers' compensation policies for entities that are self-insured for workers' compensation. Employers self-insure the workers' compensation claims of their employees up to a certain limit and purchase insurance from insurers for losses that are in excess of this limit. The inquirer stated that the administration of claims under his client's excess polices and those that are self-insured are currently handled by a third party administrator ("TPA"). Since the inquirer failed to describe the specific activities that the TPA is engaged in with respect to "administering" these claims, we will assume for purposes of this inquiry that these activities involve the adjusting of claims.1 The inquirer's client would like to adjust claims under the excess policies that it issues and claims that are self-insured by an employer and perform all other tasks that are currently being performed by the TPA.

Analysis:

The Insurance Law does not contain a licensing or registration requirement for TPAs as such. However, if the TPA engages in activities that require licensing under the New York Insurance Law then it must obtain the appropriate license. The Department examines the specific activities of the TPA to determine whether licensing under the Insurance Law is required.

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, except that such term shall not include:

(A) any officer, director or regular salaried employee of an authorized insurer or entity licensed pursuant to article forty-four of the public health law providing comprehensive health service plans (as used in this paragraph, a "health maintenance organization"), or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, or attorney in fact of any reciprocal insurer or Lloyds underwriter, or marine underwriting office, unless acting as an auto body repair estimator as defined in subsection (j) of this section. . . (emphasis supplied)

Thus, pursuant to the exemption contained in Section 2101(g)(1)(A), since the inquirer's client will be using its own employees to adjust claims under excess policies that it issued, the insurer and its employees will not have to become licensed as independent adjusters under the New York Insurance Law to adjust such claims.

With respect to the second question, the licensing requirement for independent adjusters applies to entities that adjust claims on behalf of insurers and exempt insurers. A single employer that assumes responsibility for its own liability relative to the workers' compensation claims submitted by its employees is not an insurer. Consequently, the insurer and its employees that adjust workers' compensation claims on behalf of such self-insured employers are not required to be licensed as independent adjusters under the New York Insurance Law.

Please note, however, that a group of employers that form a self-insurance group to provide workers' compensation insurance are doing an insurance business as defined under N.Y. Ins. Law § 1101 (McKinney Supp. 2006), since the employers are essentially insuring one another in a manner similar to reciprocal insurers.2 However, since these self-insurance groups are permitted under N.Y. Workers' Comp. Law § 50(3-a) (McKinney Supp. 2006), the Department considers them to be exempt from being licensed as insurers under the Insurance Law. Although an employer self-insurance group is exempt from licensing as an insurer, there is no exemption for independent adjusters that adjust claims on its behalf. Therefore, entities and their employees that adjust workers' compensation claims on behalf of such a self-insurance group must be licensed as independent adjusters under the New York Insurance Law.

The inquirer stated that the insurer is seeking to perform all tasks that are currently performed by the TPA. Since some of these tasks may fall outside the scope of the Insurance Law, licensing may be required under some other New York State Law. The inquirer was directed to contact the New York Workers' Compensation Board for further guidance.

This opinion is strictly 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.


1   Please note that if the TPA is currently adjusting claims under excess policies, it must also be licensed as an independent adjuster under the New York Insurance Law for the reasons stated herein.

2   See OGC Opinion dated March 28, 2006, entitled "Entities and Their Employees That Adjust Claims on Behalf of Self-Insurers and Self-Insurance Groups."