|Eric R. Dinallo
The Office of General Counsel issued the following opinion on April 9, 2007, representing the position of the New York State Insurance Department.
Re: Adjusting Claims on Behalf of Affiliated Insurers
Is ABC Co. exempt from the requirement of being licensed as an independent adjuster under Insurance § 2101(g) where it is owned by two insurers that are members of the ABC Group, and where it adjusts property/casualty and accident and health insurance claims on behalf of various ABC Group member insurance companies, including those that do not own ABC Co.?
ABC Co. would not qualify for the exemption set forth in Insurance Law § 2101(g)(1)(D), because its adjusting activities are not limited to the claims of its owner insurers. However, ABC Co. may qualify for the exemption set forth in Insurance Law § 2101(g)(1)(C) with regard to adjusting accident and health insurance claims, because it is a controlled person in a holding company system that adjusts accident and health insurance claims for insurers in the same holding company system. Nevertheless, to adjust property/casualty claims, ABC Co. still must obtain an independent adjuster's license in accordance with Insurance Law § 2108.
The inquirer reports that ABC Co. is a member company of ABC Group that is 50% owned by Insurer A, a New York domestic property/casualty insurer, and 50% owned by Insurer B, a foreign property/casualty insurer that is authorized to do business in New York. Insurer A and Insurer B are, like ABC Co., also member companies of ABC Group. ABC Co.'s primary business involves the adjusting of property/casualty and accident and health insurance claims under policies issued by Insurer A, Insurer B and various other ABC Group member insurance companies authorized to do business in New York.
Insurance Law § 2102(a)(1) is relevant to your inquiry. It generally prohibits any person or entity from acting as an insurance adjuster without a duly issued license. The statute reads, in pertinent part, as follows:
(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.
In turn, Insurance Law § 2101(g)(1) defines the term “independent adjuster”, in relevant 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: . . .
(C) any officer, director or regular salaried employee of an article fifteen holding company or a controlled person within such holding company system providing administrative services within that holding company, or any manager thereof, individual or corporate, when the claim to be adjusted is submitted for payment under a health benefit plan that is issued or administered by a health insurer or health maintenance organization within that same holding company system;
(D) any adjustment bureau or association owned and maintained by insurers to adjust or investigate losses, or any regular salaried employee or manager thereof who devotes substantially all of his time to the business of such bureau or association, unless acting as an auto body repair estimator as defined in subsection (j) of this section. . .
Thus, Insurance Law § 2101(g)(1)(D) exempts an adjustment bureau, association or regular salaried employee or manager thereof from the requirement of having an independent adjuster's license when the entity is owned by insurers to adjust or investigate losses. Moreover, the Department has opined that if two or more insurers have a substantial ownership interest in an adjustment bureau, and the bureau provides adjusting services only to insurers that own it, then no independent adjuster's license is required. See OGC Opinion No. 05-01-12, dated January 18, 2005 (available at http://www.ins.state.ny.us).
Here, the inquirer indicates that Insurer A and Insurer B are member companies of ABC Group, and that each company owns 50% of ABC Co. However, because the inquirer notes that ABC Co. also would provide adjusting services to various other ABC Group member companies without an ownership stake in ABC Co., the Department's Office of General Counsel must conclude that ABC Co. would not qualify for the exemption set forth in Section 2101(g)(1)(D). Of course, if ABC Co. were to limit its activities to adjusting claims only for its two owner insurers, or if the other insurers for which ABC Co. currently adjusts claims also had substantial ownership interests in ABC Co., then ABC Co. could avail itself of the exemption.
Furthermore, to the extent that ABC Co. adjusts accident and health insurance claims, ABC Co. may qualify for the exemption set forth in Insurance Law § 2101(g)(1)(C), inasmuch as it is a "controlled person" in a holding company system that adjusts accident and health insurance claims for insurers in the same holding company system. However, since that exemption is limited to accident and health insurance claims, ABC Co., as well as the individual employees that are actually engaged in adjusting claims, still would need independent adjusters' licenses with regard to the other types of claims that ABC Co. would adjust. (In contrast, the exemption set forth in Insurance Law § 2101(g)(1)(D) is not limited by the types of claims that an adjustment bureau or association may adjust on behalf of its owner insurers.)
For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.