New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor

Eric Dinallo
Superintendent

The Office of General Counsel issued the following opinion on July 25, 2007 representing the position of the New York State Insurance Department.

Re: Third Party Administrators

Question Presented:

Does a Third Party Administrator (TPA) require any license from the New York Insurance Department?

Conclusion:

The Department does not license TPAs, but if the entity adjusts claims, it must be licensed as an independent adjuster.

Facts:

According to the records of the Insurance Department, both the inquirer and her firm are licensed as insurance agents pursuant to N.Y. Ins. Law § 2103(a) (McKinney 2006). The inquirer reports that other officers and supervisory staff of the firm are similarly licensed.

The inquirer further reports that the firm operates as a TPA for self-funded vision and dental plans and inquire whether any additional license, especially as an adjuster, is required. It is noted that as part of its functions, the firm “adjudicates” claims.

Analysis:

While New York does not require licensing of TPAs, if the entity performs a function that would require a separate license, the TPA must be so licensed. See Office of General Counsel (“OGC”) opinion of August 1, 2005. The most common function that might require an additional license is that of adjusting claims.

An entity that adjusts claims for an insurer or self-funded benefit plan is considered an independent adjuster. Insurance Law § 2101(g)(1) defines the term “independent adjuster” as follows:

The term "independent adjuster" means any 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 . . . .

Pursuant to Insurance Law § 2108(a)(3), no entity may function as an independent adjuster without a license from the Department.

If a third party exercises any discretion on behalf of an insurer or self-funded benefit plan in the payment of a claim, that entity must be licensed as an independent adjuster. See OGC opinion of April 1, 2001. Because the firm in question adjusts the claims, it, and every employee adjusting claims, must be licensed as an independent adjuster.

For further information you may contact, Principal Attorney Alan Rachlin at the New York City Office.