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 25, 2006, representing the position of the New York State Insurance Department.

Re: Need for an Adjuster’s Bond

Question:

May a single bond, executed for the purpose of obtaining an independent adjuster’s license, be obtained for all the employees of a company that are licensed as independent adjusters?

Conclusion:

Every independent adjuster must obtain a separate bond. However, a bond issued to a corporate licensee will apply to all sub-licensees of that corporation acting in such capacity.

Facts:

ABC company administers short and long term disability insurance programs. Certain responsibilities entailed in performing these services involve adjusting. ABC would like to know whether a single bond would be sufficient for all of the licensed adjusters it employs.

Analysis:

N.Y. Ins. Law § 2108(l) (McKinney’s 2006) prescribes the bonding requirements for a licensed adjuster and states in pertinent part:

(l)(1) No adjuster's license or renewal license shall be issued to any applicant unless there shall be on file with the superintendent a bond, executed by such the applicant and by approved sureties, in the penal sum of one thousand dollars conditioned on the faithful performance by such licensee and by all sub-licensees named in such license, of their duties as such adjusters.

(2) Such bond shall be approved as to form by the attorney general and as to sufficiency of security by the superintendent.

(3) Such bond shall be made to the state of New York and shall specifically authorize recovery by the state of the penal sum provided therein in case the adjuster or any sub-licensee shall have been guilty of fraudulent or dishonest practices in connection with the transaction of his or its business as such adjuster or shall have been convicted under any of the sections contained in article one hundred fifty of the penal law.

Thus, § 2108(l) requires any adjuster who applies for a license to have executed a bond that can be recovered by the state should there be a penalty against the licensee or the sub-licensee. The bond covers all sub-licensees of the licensee, but does not cover employees who are individually licensed.

A corporate license does not permit all employees to become sub-licensees. Only qualifying members of a licensed corporation, such as officers and directors, and individual members of a licensed firm may become sub-licensees. See N.Y. Ins. Law § 2108(c)(2). A sub-licensee must be able to, in his or her own capacity, qualify for a license as a trustworthy and competent person and pass a written examination, just as any licensee. See N.Y. Ins. Law § 2108(e)(1). Although a sub-licensee does not need an individual bond, the bond for the licensee is conditioned on the faithful performance by the licensee and all sub-licensees of their duties. See § 2108(l)(1). Each independent adjuster who is not a sub-licensee but is an employee needs to execute a separate bond pursuant to § 2108(l).

For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.