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

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 09-06-07

The Office of General Counsel issued the following opinion on June 22, 2009, representing the position of the New York State Insurance Department.

Re: Independent Adjuster Licensing

Question Presented:

Must an entity obtain an independent adjuster’s license in New York if it only issues checks to providers on behalf of an insurer from a checking account, where the insurer funds the account and makes all decisions on the underlying claims?

Conclusion:

No. An entity need not obtain an independent adjuster’s license in New York if it only issues checks to providers on behalf of an insurer when the insurer funds the checking account and makes all decisions on the underlying claims.

Facts:

The inquirer seeks clarification about the independent adjuster licensing requirements for an entity that only issues checks to providers on behalf of an insurer where the insurer funds the checking account and has the sole responsibility for making all decisions regarding the underlying claims. The inquirer further states that when the insurer makes a decision to pay the claim, the insurer instructs the entity to issue the check.

The inquirer asks whether the entity needs to obtain an independent adjuster’s license in New York.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney 2009) prohibits any person, firm, association or corporation from acting as an insurance adjuster in New York without a license. Insurance Law § 2101(g)(1) defines “independent adjuster” as

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….

Thus, an entity that investigates or adjusts claims on behalf of an insurer must be licensed as an independent adjuster in New York. In determining what constitutes “investigating and adjusting of claims,” the Insurance Department evaluates whether the duties performed in the handling of claims require the exercise of discretionary authority conferred by the insurer, as opposed to the performance of strictly ministerial tasks. See OGC Opinion 06-02-09 (Feb. 6, 2006). The Department has further opined that an administrator issuing claim payments “on the insurer’s check stock” that does not “have any discretionary authority regarding claim payments” is not required to become licensed as an independent adjuster. See id.

In the situation presented here, the activity of merely writing checks to providers on an insurer’s behalf from an account funded by the insurer, where the insurer has the sole responsibility for making all decisions regarding the underlying claims, such as decisions about compensability and the payment amount, does not require the exercise of discretionary authority, but rather is a ministerial task that does not constitute “investigating and adjusting” within the purview of Insurance Law § 2101(g)(1). Thus, an entity would not need to obtain an independent adjuster’s license in New York to perform such activities.

For further information, you may contact Supervising Attorney Samuel A.Wachtel at the New York City Office.