New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT

25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor
Eric R. Dinallo
Acting Superintendent

The Office of General Counsel issued the following opinion on February 9, 2007, representing the position of the New York State Insurance Department.

RE: Renewal Commissions – Deceased Agent

Question Presented:

May a corporation that is licensed as an insurance agent receive commissions, including renewal commissions, for business placed by its sole sublicensee prior to the agent’s death if the shares in the corporation are inherited by the agent’s unlicensed daughter?

Conclusion:

Yes. Nothing in the New York Insurance Law prohibits a corporation that is licensed as an insurance agent from receiving commissions, including renewal commissions, for business placed by its sole sublicensee prior to the agent’s death if the stock is inherited by the agent’s unlicensed daughter.

Facts:

The inquirer is the sole sublicensee of a corporation that is licensed as a life, accident and health insurance agent. The inquirer asked whether he could leave stock in the corporation to his daughter in his will and whether the corporation may continue, after his death, to receive commissions on business he placed on behalf of the corporation.

Analysis:

A licensed agent or broker generally earns commissions when the agent or broker brings about the relationship of insurer and insured. See Hamond v. Risk Specialists, 210 A.D.2d 202, 619 N.Y.S.2d 744 (2d Dep’t 1994); Weston Nat. Ins. Co. v. Haph Brokerage, 277 A.D. 6, 97 N.Y.S.2d 447 (1st Dep’t 1950), aff’d, 302 N.Y. 678. Given this circumstance, the Department has concluded that the unlicensed spouse of a deceased agent or broker may receive commissions earned by that producer prior to the producer’s death, but the unlicensed spouse may not solicit or sell any new policies or service existing policies. See, e.g., Opinion of General Counsel No. 04-12-12 (December 10, 2004).

The foregoing is no less applicable to a corporation that is licensed as an insurance agent, with only one sublicensee, upon the death of that sublicensee. Thus, if at the time of the inquirer’s death, the inquirer was the only sublicensee, the corporation could continue to collect commissions already earned. But, the corporation could not accept new business, unless the corporation acquired a new sublicensee. And, the corporation could not service existing business, unless the Superintendent issued a temporary insurance license pursuant to N.Y. Ins. Law § 2109(1)(D) (McKinney 2006).

As heir, the inquirer’s daughter could receive dividends from the corporation declared in the usual course of the business of the corporation based upon her ownership interest. And if applicable, she could receive a distribution of assets after dissolution of the corporation, as a shareholder of the corporation, provided that she did not engage in any activity that requires licensing.

Please note that this opinion is general and is limited to an interpretation of the Insurance Law. The Department expresses no opinion about any other laws that may be applicable to the situation that presented by the inquirer.

For further information you may contact Assistant Counsel Brenda Gibbs at the Albany Office.