The Office of General Counsel issued the following opinion on March 23, 2007, representing the position of the New York State Insurance Department.
Re: Licensing of a County as an Insurance Agent or Broker
Under the circumstances presented herein, may the county become licensed as an insurance agent or broker?
No. Under the circumstances presented herein, the county may not become licensed as an insurance agent or broker pursuant to New York Insurance Law §§ 2103 and 2104 (McKinney 2006).
A proposal was made for a county to establish a health insurance services division. The division would be managed by a salaried employee of the county, who would be licensed as an insurance agent in New York. The agent would assist the countys employees in selecting insurers, reviewing renewal premiums, and conducting employee benefit educational meetings. In short, the agent would replace the countys current insurance producer (a person who is not a county employee). In addition, it was envisioned that the countys insurance services division, through its agent-licensed employee, would market healthcare insurance to towns, villages, and non-civil service employers located within the county, and that commissions would be paid to such insurance services division.
Under the proposal, the countys insurance services division would become licensed as an insurance agent or broker. Licensing is required in order to act as an insurance agent or broker pursuant to New York Insurance Law § 2102 (McKinney 2006). The Superintendent is authorized to issue an insurance agents license to a person, firm or corporation pursuant to Insurance Law § 2103(a), and to issue an insurance brokers license to an individual, firm, association, or corporation pursuant to Insurance Law § 2104(a).
A county is a municipal corporation pursuant to New York County Law § 3 (McKinney 2004) and New York General Construction Law § 66(2) (McKinney 2003). General Construction Law § 65(b) classifies a municipal corporation as a public corporation. Public corporations are one of three categories of corporations set forth in General Construction Law § 65(b). Hence, a county is a corporation.
But while the county at issue qualifies as a corporation under the New York Insurance Law, it is not eligible to become licensed as an insurance agent or broker based on the information provided about its proposed operations. Every corporate licensee must have at least one sub-licensee through which it will operate. An insurance agent or broker license issued to a corporation shall authorize only the officers and directors thereof, named in such license as sub-licensees, to act individually as agents or brokers thereunder. Indeed, Insurance Law § 2103(c) provides:
Any such license issued to a firm or association shall authorize only the members thereof, named in such license as sub-licensees, to act individually as agents thereunder, and any such license issued to a corporation shall authorize only the officers and directors thereof, named in such license as sub-licensees, to act individually as agents thereunder. Every sub-licensee, acting as insurance agent pursuant to such a license shall be authorized so to act only in the name of the licensee.
Likewise, Insurance Law § 2104(b)(2) provides:
A license issued to a corporation may name as sub-licensees only the officers and directors of such corporation, and a license issued to a firm or association may name as sub-licensees only the individual members of such firm or association. Each sub-licensee named in such license must be qualified to obtain a license as an insurance broker, and for each such sub-licensee a fee must be paid at the times and at the rates hereinafter specified.
In the situation proposed, the only licensed individual would be a hired employee. A county officer or director, however denominated1, would have to be named a sub-licensee in order to comply with Insurance Law §§ 2103 or 2104.
Please note that this opinion is limited to an interpretation of the New York Insurance Law. The Departments Office of General Counsel offers no opinion as to whether the county is authorized by the State Constitution or other laws of New York to engage in the sale of insurance. Even if the county were to identify an appropriate sub-licensee, the county nevertheless also would have to demonstrate to the Department that there are no other legal impediments to the Department in granting the countys application for a license.
1 General Construction Law § 66(15) states: The term director, when used in relation to corporations, means any member of the governing board of such corporation, whether designated as director, trustee, manager, governor, or by any other title, designated to manage the affairs of a corporation.