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

David A. Paterson
Governor

James J. Wrynn
Superintendent

OGC Op. No. 09-12-06

This opinion has been modified by Opinion No. 10-03-01

The Office of General Counsel issued the following opinion on December 29, 2009, representing the position of the New York State Insurance Department.

Re: Refusal to accept cash premium payments

Question Presented:

Does the New York Insurance Law and regulations promulgated thereunder prohibit an insurance producer from refusing to accept cash premium payments from its clients, either for all transactions, or particular types of transactions, such as renewals or installment payments?

Conclusion:

The New York Insurance Law and regulations promulgated thereunder do not address whether an insurance producer may refuse to accept cash premium payments from its clients either for all transactions or particular types of transactions, such as renewals or installment payments. In the absence of an express prohibition, an insurance producer may refuse to accept cash premium payments from its clients. However, an insurance producer should fully explain to an insured or potential insured any refusal to accept cash payments, preferably in writing, and an insurance producer should not refuse a cash payment if the insured may be adversely impacted by imminent cancellation, non-renewal, or non-issuance of the insurance policy.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

Does the New York Insurance Law and regulations promulgated thereunder prohibit an insurance producer from refusing to accept cash premium payments from its clients either for all transactions or particular types of transactions, such as renewals or installment payments. The Insurance Law and regulations promulgated thereunder do not address whether an insurance producer may institute a policy of not accepting cash when an insured tenders a premium payment to the producer.1 In the absence of an express prohibition, an insurance producer may refuse to accept cash premium payments from its clients either for all transactions or particular types of transactions, such as renewals or installment payments.

However, an insurance producer should fully explain to an insured or potential insured any refusal to accept cash payments, preferably in writing. Of course, an insurer may impose its own contractual requirements on insurance producers that do business with the insurer and insist that the insurance producer accept cash.

An insurance producer, however, should not implement such policies in an inflexible manner where the policy may be cancelled as a result. In this regard, Insurance Law § 2121(a) is relevant. That statute reads as follows:

(a) Any insurer which delivers in this state to any insurance broker or any insured represented by such broker a contract of insurance pursuant to the application or request of such broker, acting for an insured other than himself, shall be deemed to have authorized such broker to receive on its behalf payment of any premium which is due on such contract at the time of its issuance or delivery or payment of any installment of such premium or any additional premium which becomes due or payable thereafter on such contract, provided such payment is received by such broker within ninety days after the due date of such premium or installment thereof or after the date of delivery of a statement by the insurer of such additional premium.

Therefore, any premium payment made to an insurance broker is deemed to be payment made to the insurer. Further, by definition, an insurance agent acts on behalf of the insurer it represents. As such, the agent is vested with apparent authority to collect premium payments from an insured. See OGC Opinion 02-01-05 (Jan. 4, 2002). Hence, payment to an insurance agent is deemed to be payment to the insurer. See id.

There may be circumstances where an insurance producer’s refusal to accept a cash premium payment may result in cancellation, non-renewal or non-issuance of the insurance policy. Accordingly, an insurance producer should not refuse a cash payment if the insured may be adversely impacted by imminent cancellation, non-renewal or non-issuance of the policy.

This opinion letter is limited to interpretation of the Insurance Law.

For further information, you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.

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1 Further, there is no federal statute mandating that a private business, a person or an organization must accept cash as payment for goods or services. See Legal Tender Status, FAQs: Currency, Education, United States Department of the Treasury, at http://www.ustreas.gov/education/faq/currency/legal-tender.shtml.