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 November 20, 2006, representing the position of the New York State Insurance Department.

Re: Disclosure of Insurance Broker's Commission Sharing Arrangement

Question Presented:

Does the New York Insurance Law require an insurance broker, who also acted as a managing agent for a condominium development, to disclose whether it received a share of the commission of an insurance broker from whom it obtained insurance for the condominium development?

Conclusion:

No. The New York Insurance Law does not contain a specific disclosure requirement. However, the undisclosed receipt of a commission under certain circumstances may create a perception that the broker is conflicted in its loyalties and may be considered to be untrustworthy conduct pursuant to N.Y. Ins. Law § 2110 (McKinney 2006).

Facts:

The inquirer is the president of a condominium development located in New York. Over the past few years, the condominium has obtained insurance through Insurance Broker A. It has also retained managing agents, ABC and DEF, to manage the day-to-day affairs of the condominium. The inquirer stated that last year, when the condominium insurance was up for renewal, the then managing agents "aggressively" pushed for renewal through Insurance Broker A. The inquirer later discovered that the managing agents are also licensed as insurance brokers and he is concerned that Insurance Broker A may have shared its commission with the managing agents and that the condominium may not have received the most comprehensive coverage at the best price if such a commission sharing arrangement existed.

Analysis:

The New York Insurance Law does not contain a specific requirement that an insurance broker disclose whether it receives a share of the commission of an insurance broker from whom it obtained insurance for the condominium development. However, the undisclosed receipt of a commission under certain circumstances may create a perception that the broker is conflicted in its loyalties and may be considered to be untrustworthy conduct under N.Y. Ins. Law § 2110 (McKinney 2006).

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