OGC Op. No. 10-12-16
The Office of General Counsel issued the following opinion on December 31, 2010, representing the position of the New York State Insurance Department.
Re: Prohibited Referral Payments to Insurance Agents or Employees by a Motor Vehicle Glass Repairer
Does N.Y. Ins. Law § 322 (McKinney’s 2006) prohibit all gifts given to a licensed insurance producer from a motor vehicle glass and collision repair shop, whether received before or after a referral?
Yes. Insurance Law § 322 prohibits all gifts given to a licensed insurance producer from a motor vehicle glass and collision repair shop, regardless of whether the gift was received before or after a referral.
The inquiry is of a general nature, without reference to specific facts. However, the inquirer expressed his understanding that Insurance Law § 322 prohibits an insurance producer from accepting any cash or cash equivalent payment from any motor vehicle repairer after the producer has referred an insured to the repairer. For the purposes of this opinion, “referral” consists of an agent directing an insured who has submitted a collision or comprehensive damage claim to a motor vehicle repairer. The inquirer sought clarification on whether a producer who receives such a gift before making a referral to the repairer would also be in violation of Insurance Law § 322.
Insurance Law § 322 is relevant to this inquiry. It prohibits an insurance producer from receiving cash or cash equivalent payments from a motor vehicle repairer in exchange for a referral. Insurance Law § 322 reads as follows:
No licensed insurance agent, licensed insurance broker, licensed adjuster, authorized insurer or representative of such insurer shall directly or indirectly request, procure or accept any payment from a motor vehicle repairer for referring any motor vehicle repair business to such repairer.
As stated in Office of General Counsel Opinion No. 04-06-10 (June 14, 2004), Insurance Law § 322 “does not limit its applicability to situations in which the Department licensee or its representatives directly requests, procures or accepts the payment for the referral.” The law broadly prohibits all exchanges in which a gift of cash value is given to a producer or otherwise specified person by a motor vehicle repairer in exchange for a referral. The specific chronology of the exchange is irrelevant. Therefore, a producer who receives a cash or cash equivalent payment from a motor vehicle repairer for a referral would violate Insurance Law § 322, even if the payment is given prior to the referral.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.