OGC Op. No. 10-01-02

The Office of General Counsel issued the following opinion on January 5, 2010 representing the position of the New York State Insurance Department.

Re: Insurer Use of Fictitious Name When Adjusting Claims on behalf of Other Insurers

Questions Presented:

1. Is ABC Insurance Company (“ABC”) required to use a fictitious name when adjusting claims on behalf of another insurer?

2. May ABC use another insurer’s name when adjusting claims for the insurer if ABC has obtained the consent of the insurer?

Conclusions:

1. Yes. ABC must use a fictitious name when adjusting claims on behalf of another insurer, unless ABC makes it clear in all communications with claimants and on its letterhead that it is adjusting claims for the insurer.

2. No. ABC may not use the names of third-party insurers, even with their consent, when adjusting claims for such insurers.

Facts:

ABC is a life insurer authorized to do business in New York, which adjusts its own long-term health care claims, as well as the claims of two other New York authorized insurers. ABC acts as a reinsurer for one of the insurers. ABC applied for licensing as an independent adjuster to adjust claims on behalf of other insurers. The Department’s Licensing Bureau rejected the application on the ground that the company may not be licensed under its actual name, but must use a fictitious name when adjusting the claims of another insurer. The inquirer reports that ABC actually uses the names of the other insurers when adjusting claims on their behalf, with their permission. The inquirer asks whether ABC is required to use a fictitious name when adjusting claims on behalf of such other insurers, and whether ABC can use another insurer’s name with that insurer’s consent.

Analysis:

I. Insurer Use of a Fictitious Name

The first question raised by the inquiry is whether ABC is required to use a fictitious name when adjusting insurance claims on behalf of another insurer.

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:

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(E) any officer, director or regular salaried employee of an authorized life insurance company, or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, when the claim to be adjusted is submitted under an insurance contract issued by another insurer and the claim: (i) is within the scope of a contract of reinsurance between the two insurers for all of the underlying risks and none of the underlying risks are later reinsured back to the ceding insurer; and (ii) relates to a kind of insurance that the authorized life insurance company adjusting the claim is licensed to write;

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Although Insurance Law § 2101(g) provides certain exemptions from this licensing requirement, including an exemption for claims submitted under insurance contracts that the adjuster reinsures, the Department at this time lacks sufficient facts to determine whether any of the exceptions apply here.

Insurance Law § 2108 sets forth licensing requirements for adjusters, and is also relevant to the inquiry. That statute provides that no adjuster may act on behalf of an insurer unless licensed as an independent adjuster. See Ins. Law § 2108(a)(3).

Insurance Law § 2102 governs the licensing of insurance producers and adjusters. Specifically, Insurance Law § Section 2102(a)(1) provides that “no person, firm, association or corporation shall act as an . . . insurance adjuster in this state without having the authority to do so by virtue of a license in force pursuant to the provisions of this chapter.” Thus, any individual or entity that acts an insurance adjuster, including an insurer, must be licensed as an adjuster.

Most significantly (at least for purposes of the instant query), Insurance Law § 2102(f) provides, in relevant part, that “[e]xcept for an individual licensee's own legal name, no licensee shall use any name, in conducting a business regulated by this article that has not been previously approved by the superintendent.” See also N.Y. Bus. Corp. Law § 301(a)(5)(B) (stating that the name of a corporation may not include certain listed words without the approval of the Superintendent of Insurance attached to the certificate of incorporation.)

In determining whether to grant a license to an individual or entity under a particular name, the Department typically considers factors such as whether the applicant's proposed name is similar to an already licensed name and whether the proposed name is likely to deceive or mislead the public in any manner. See OGC Opinion No. 08-01-09 (Jan. 28, 2008); OGC Opinion No. 05-06-22 (June 21, 2005); OGC Opinion (May 18, 1999) (copy enclosed); see also Ins. Law § 1102(g).

Because an insurer's use of its actual name when adjusting the claims of another insurer has the potential to deceive or mislead insureds and the public as to the true identity and functions of the insurers involved, an insurer generally should avoid engaging in such conduct. See Ins. Law § 2402(c) (McKinney 2006 and Supp. 2009); see also Ins. Law § 2110. Consequently, the Department's Licensing Bureau typically requires an insurer that adjusts claims for other insurers to add a fictitious name on its license as a "doing business as" name. See OGC Opinion (May 11, 2007) (copy enclosed). In the alternative, with respect to its adjusting activities for other insurers, ABC may, in all communications with insureds and on its letterhead make clear that it is adjusting claims for the other insurer.

II. Insurer Use of the Names of Other Insurers When Adjusting Claims

The second question asks whether ABC may, with consent, use the name of another insurer when adjusting claims for the insurer.

As noted above, Insurance Law § 2102(f) generally prohibits a licensee from using any name, in conducting a business regulated by Article 21 of the Insurance Law, that has not been previously approved by the Superintendent. Thus, after the Department issues a license to a corporation to conduct business under a specific name, the entity must use that name in conducting business unless it obtains permission from the Department’s Licensing Bureau to use another name. See OGC Opinion No. 08-01-09 (Jan. 28, 2008); OGC Opinion No. 07-08-01 (Aug. 6, 2007) and OGC Opinion No. 01-03-19 (March 29, 2001).

Moreover, N.Y. Gen. Bus. Law (“GBL”) § 130 (McKinney 2004) is also relevant to this inquiry. That statute governs the use of assumed names in New York State, and reads in relevant part as follows:

(1) No person shall hereafter (i) carry on or conduct or transact business in this state under any name or designation other than his or its real name . . . unless:

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(b) Such person, if a corporation, limited partnership or limited liability company, shall file, together with the fees as set forth in subdivision five of this section, in the office of the secretary of state a certificate setting forth the name or designation under which business is carried on or conducted or transacted, its corporate, limited partnership or limited liability company name, the location including number and street, if any, of its principal place of business in the state, the name of each county in which it does business or intends to do business, and the location including number and street, if any, of each place where it carries on or conducts or transacts business in this state. Each certificate shall be executed by an officer of the corporation, a general partner of the limited partnership, a member or manager of a limited liability company, or an attorney-in-fact or authorized person for such corporation, limited partnership, or limited liability company, as the case may be. A corporation which carries on or conducts or transacts business in this state as a member of a partnership or limited liability company shall not be required solely by reason thereof to file the certificate required by this paragraph if the partners shall have filed the certificate required by paragraph (a) of this subdivision.

Thus, under GBL § 130, a person may not do business under any name or designation other than the person’s real name, unless the person makes the requisite filing with the Secretary of State.

N.Y. Business Corp. Law § 301(a)(2) (McKinney Supp. 2009) also sets forth requirements for corporate names in New York. That statute provides that the corporate name of a domestic or foreign corporation must “be such as to distinguish it from the names of corporations of any type or kind, or a fictitious name of an authorized foreign corporation. . .” The purpose of this provision is to protect the public and to prevent deception and confusion. See Helsam Realty Co., Inc. v. H.J.A. Holding Corp., 4 Misc. 3d 64 (Sup. Ct. App. Term 2004); Jervis Corp. v. Secretary of State, 43 Misc. 2d 185 (Sup. Ct. N.Y. Co. 1964).

Here, the Department would not approve the use of the name of another insurer that is currently in use, because to do so would potentially deceive or confuse insureds and the public as to which insurer is performing the adjusting. Although ABC reports that it has entered into agreements with other insurers to use their names, such agreements are not apparent to insureds or the public who are not aware of their existence. Hence, ABC's use of another insurer's name as its own is potentially misleading and confusing.

Accordingly, ABC may not use the name of another insurer as its own, even with its consent, when adjusting claims for the insurer. Nor may ABC use its actual name when adjusting claims for another insurer, unless ABC makes it clear in all communications with claimants and on its letterhead that it is adjusting claims for the insurer.

For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.