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 August 29, 2006 representing the position of the New York State Insurance Department.

Re: Premium accounts when the insured is a non-resident of New York

Questions Presented:

1. Is an insurance agent duly licensed in the State of New York required to maintain premium monies in a premium account in a bank duly authorized to do business in New York when the policy is not issued or delivered in New York; the insured is not a resident of New York; and the property or risks are not located or resident in New York?

2. Must the name on a New York premium account be the "doing business as" ("DBA") name of the agent?

Conclusions:

1. No, an insurance agent, who does not make immediate remittance of premium funds to the insurer, is not required to maintain premium monies in a premium account in a bank duly authorized to do business in New York if the policy is not issued or delivered in New York; the insured is not a resident of New York; and the property or risks are not located or resident in New York.

2. The name on the premium account must be the name of the licensee (the name under which the license has been obtained from the Department), and one which identifies the account as a "premium" account.

Facts:

The inquirer’s company is a non-resident insurance agent duly licensed in New York that sells excess liability and professional liability insurance. Policies are issued in Pennsylvania and delivered to insurance brokers in other states. Some of these brokers are licensed in New York State, and the company pays the brokers a commission. The insured in this particular transaction is a resident of California and the policy was issued outside the state on property or risks not located in New York.

Analysis:

An insurance agent or broker is responsible in a fiduciary capacity for all funds received or collected in such capacity. Premium accounts of insurance agents and brokers are regulated pursuant to N.Y. Ins. Law § 2120 (McKinney 2006), and N.Y. Comp. Codes R. & Regs. tit. 11, § 20.3(b) (2005) (Reg. 29).

N.Y. Ins. Law § 2120(a) (McKinney 2006) provides:

Every insurance agent and every insurance broker acting as such in this state shall be responsible in a fiduciary capacity for all funds received or collected as insurance agent or insurance broker, and shall not, without the express consent of his or its principal, mingle any such funds with his or its own funds or with funds held by him or it in any other capacity.

Further, Section 20.3 of N.Y. Comp. Codes R. & Regs. tit. 11, part 20 (2005) (Reg. 29) states:

(b) Every insurance agent and every insurance broker is responsible as a fiduciary for funds received by such agent or broker in such capacity; all such funds shall be held in accordance with the following paragraphs:

(1) An agent or broker who does not make immediate remittance to insurers and assureds of such funds shall deposit them in one or more appropriately identified accounts in a bank or banks duly authorized to do business in this State, from which no withdrawals shall be made except as hereinafter specified (any such account is hereinafter referred to as "a premium account").

In this instance, if the policy is not issued or delivered in New York; the insured is not a resident of New York; and the property or risks are not located or resident in New York, a non-resident agent is not required to maintain premium monies that are not immediately remitted to the insurer in a premium account in a bank duly authorized to do business in New York.

As to what name must appear on the premium account, this Department has opined1 that an "appropriately identified account" as required by Regulation 29, is one in the name of the licensee (the name under which the license has been obtained from the Department), and one that identifies the account as a "premium" account.

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


1 See Opinion of General Counsel No. 04-11-17 (November 22, 2004).