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

Re: Licensing as an Independent Adjuster

Question Presented:

Is ABC Co. exempt from the requirement of being licensed as an independent adjuster under N.Y. Ins. Law § 2101(g)(1)(A)(McKinney Supp. 2006) where it was hired and paid by insurers to adjust claims for comprehensive programs as an alternative to the insurers creating additional divisions within their respective claims departments?

Conclusion:

No. ABC Co. is not exempt from being licensed as an independent adjuster under Section 2101(g)(1)(A). The fact that ABC Co. was hired and paid by insurers to adjust claims for comprehensive programs as an alternative to the insurers creating additional divisions within their respective claims departments is inconsequential to the requirement of obtaining an independent adjuster's license.

Facts:

ABC Co. and its President and Chief Operating Officer are licensed as insurance brokers in New York. ABC Co. currently employs an individual licensed as an independent adjuster. However, ABC Co. itself is not licensed as an independent adjuster. ABC Co. was hired and paid by insurers to adjust claims for comprehensive programs as an alternative to the insurers creating additional divisions within their claims departments. ABC Co. does not adjust claims on a claim-by-claim basis. The inquirer further stated that the fact that ABC Co. was hired to perform adjusting for extensive programs of insurers are outlined in its written agreements with the insurers.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney 2006) provides, in pertinent part, that:

(a)(1) 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.

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

(g)(1) [A]ny 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 Lloyd's underwriter, or marine underwriting office, unless acting as an auto body repair estimator as defined in subsection (j) of this section; (Emphasis supplied)

According to the statute, an agent, manager1 or general agent of any department of an insurer is not included in the definition of independent adjuster and is, therefore, exempt from the requirement of being licensed as an independent adjuster.

The inquirer argued that ABC Co. was hired and paid by insurers to adjust claims for comprehensive programs, rather than on a claim-by-claim basis, as an alternative to the insurers creating additional divisions within their respective claims departments. It is, therefore, an "agent" of a department of the insurer and is exempt from being licensed as an independent adjuster under Section 2101(g)(1)(A).

However, such an interpretation is too broad and would obviate the need for a license for most entities that adjust claims on behalf of insurers. It is our view that the terms agent, manager or general agent in the statute refer to a person or entity that is licensed as an insurance agent in New York and that is appointed by an insurer. Since ABC Co. is not licensed as an insurance agent and appointed by an insurer, it can not be perceived as being an agent of a department of the insurer. Moreover, the fact that ABC Co. contracted with the insurers to adjust claims for comprehensive programs for insurers rather than on a claim-by-claim basis is inconsequential to the requirement of obtaining an independent adjuster's license, as the statute makes no such distinction.

The inquirer further stated that he reviewed the legislative history of Section 2101(g)(1)(A) and found nothing to contradict ABC Co.'s interpretation of the statute. Ch. 692 of the Laws of 2003 amended Section 2101(g)(1) to add language that exempted any company that contracts with a health insurer or HMO to administer health insurance claims. This exemption was specifically limited to adjusting health insurance claims. However, Ch. 385 of the Laws of 2004 amended Section 2101(g)(1) to, among other things, remove this exemption from the statute. In doing so, the Legislature addressed the Department's concerns that unlicensed and unregulated third parties should not be allowed to adjust claims. The legislative history makes clear that an entity that is not licensed as an independent adjuster is not exempt from licensing because it entered into a contract with an insurer to provide adjusting services.

Accordingly, ABC Co. is not exempt from being licensed as an independent adjuster under Section 2101(g)(1)(A) and must become licensed as an independent adjuster. In addition, each of its employees that adjust claims for the insurer must also become licensed as independent adjusters.

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


1   Section 33.4(c) of Regulation 120 states that: "[n]o person shall be a manager in this State within the meaning of Insurance Law section 2101(g)(1) unless that person is an MGA [managing general agent] and licensed as an insurance agent."