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 July 24, 2006 representing the position of the New York State Insurance Department.

Re: Independent adjuster license for firm negotiating payment for health care services from out of network doctors

Questions Presented:

1. Is a firm required to obtain an independent insurance adjuster’s license in New York State when a firm is negotiating with health care providers in order to get the providers to accept a discounted fee?

2. Must each of the employees of the firm be individually licensed as an independent adjuster?

Conclusions:

1. Yes, the firm is required to obtain an independent insurance adjuster’s license in New York State in order to negotiate with health care providers in order to get the providers to accept a discounted fee.

2. If an employee is adjusting claims then that person must be individually licensed as an independent adjuster.

Facts:

An out-of-state firm would like to provide health care cost containment services for New York State health insurers. When claims are filed by New York State insureds who received services from providers outside the health plan, the firm would negotiate with the provider to try to get the provider to accept a discounted fee for the services provided.

Analysis:

N.Y. Ins. Law § 2101(g)(1) (McKinney 2006) defines the term independent adjuster, in pertinent part, as follows:

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 ….

Although New York State Insurance Law does provide a number of limited exceptions to the definition of independent adjuster, none of them appear to apply to this situation.

Under N.Y. Ins. Law 2102(a)(1) (McKinney 2006):

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.

The firm is required to obtain an independent insurance adjuster’s license in New York State because, under Section 2101, it is engaging in the "investigating and adjusting of claims." The firm is negotiating with providers on behalf of the insurance company. The duties performed by the firm in the handling of a claim require the exercise of discretionary authority conferred by the insurer, as opposed to the performance of strictly ministerial tasks.

Further, N.Y. Ins. Law § 2108(c) (McKinney 2006), regarding the licensing of adjusters, states as follows:

(1) The superintendent may issue an independent adjuster's license or a public adjuster's license to any person, firm, association or corporation, hereinafter designated as licensee, who, or which, is trustworthy and competent to act as an adjuster in such manner as to safeguard the interests of the people of this state and who, or which, has complied with the prerequisites herein prescribed.

(2) A license issued to a corporation may name as sub-licensees only the officers and directors of such corporation, and a license issued to a firm or association may name as sub-licensees only the individual members of such firm or association. Each sub-licensee named as such in the license issued to a firm, association or corporation must be qualified to obtain a license as an independent adjuster or as a public adjuster, as the case may be, and for each such sub-licensee a fee must be paid at the times and at the rate hereinafter specified. Each such sub-licensee shall be authorized, pursuant to such license, to act as an independent adjuster or as a public adjuster, as the case may be, only on behalf of the licensee.

Only officers and directors of the firm can be named as sub-licensees, and every corporation must have at least one sub-licensee. The firm may utilize employees who are not officers or directors to adjust claims so long as the employee is individually licensed and is supervised by the sub-licensee.

Thus, the firm and each of its employees adjusting claims must become licensed as independent adjusters in New York State pursuant to N.Y. Ins. Law Article 21.

For further information you may contact Senior Attorney Elizabeth Barrett at the New York City Office.