OGC Op. No. 11-09-01

The Office of General Counsel issued the following opinion on September 22, 2011, representing the position of the New York State Insurance Department.

Re: Selling Salary Protection Insurance in the Excess Line Market

Question Presented:

May an insurance broker licensed under N.Y. Ins. Law § 2104(b)(1)(A) (McKinney 2006) (life insurance broker) act as a retail broker with respect to a salary protection insurance transaction in the excess line market?

Conclusion:

Yes. An insurance broker licensed under either Insurance Law § 2104(b)(1)(A) (life insurance) or (B) (property/casualty insurance) may act as a retail broker with respect to a salary protection insurance transaction in the excess line market, because the New York State Insurance Department (“Department”) considers salary protection insurance to be a type of accident and health insurance, which both a life insurance broker and a property/casualty insurance broker are authorized to place.

Facts:

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

Analysis:

Chapter 626 of the Laws of 2006 added salary protection insurance as a kind of insurance that an insurer may write in New York, and Insurance Law § 2105(a) authorizes a person, firm, association, or corporation licensed as an excess line broker to procure salary protection insurance in the excess line market. Insurance Law § 1113(a)(31) defines “salary protection insurance” as:

insurance against financial loss caused by the cessation of earned income due to disability from sickness, ailment or bodily injury, in an amount up to: (A) that portion of an individual’s annual earned income which is in excess of the amount of in force disability insurance as defined in paragraph three of this subsection in an amount not to exceed seventy-five percent of the individual’s annual earned income in total based upon the sum of the in force disability insurance and salary protection insurance when the benefits are payable to the individual or the individual’s beneficiary; or (B) where such underlying disability insurance cannot be obtained by an individual from an authorized insurer, in an amount not to exceed seventy-five percent of the individual’s annual earned income when the benefits are payable to the individual or the individual’s beneficiary. Any insurer licensed to write disability insurance as defined in paragraph three of this subsection may also write salary protection insurance as defined in this paragraph.

The Department considers salary protection insurance to be a type of accident and health insurance, fully encompassed within the definition of accident and health insurance under Insurance Law § 1113(a)(3). See Circular Letter No. 9 (2011); Letter from Howard Mills, Superintendent of Insurance, New York State Insurance Department, to Richard Platkin, Counsel to the Governor, Executive Chamber (“10-day letter”) (July 10, 2006). The Legislature added salary protection insurance to the Insurance Law principally to make it available in the excess line market. See 10-day letter.

Insurance Law § 2104 applies to insurance broker licensing and states in relevant part that:

(b)(1) Such license shall confer upon the licensee authority to act in this state as insurance broker, and upon every natural person named as sub-licensee in such license authority to act in this state as insurance broker in the name of and on behalf of such licensee, with respect to the following lines of authority:

(A) life insurance, variable life and variable annuity products, accident and health insurance and sickness or any other line of authority deemed to be similar by the superintendent, including for this purpose, health maintenance organization contracts and legal services insurance; or

(B) any and every line of authority, except life insurance and variable life and variable annuity products.

Therefore, a life insurance broker’s license issued under § 2104(b)(1)(A) confers upon a licensee the ability to procure life insurance, variable life and annuity products, accident and health insurance and sickness, or any other line of authority deemed to be similar, while a property/casualty insurance broker’s license issued under § 2104(b)(1)(B) confers upon a licensee the ability to procure any and every line of authority, including accident and health insurance, other than life insurance and variable life and variable annuity products. Since salary protection insurance is a type of accident and health insurance, either kind of insurance broker is authorized to procure salary protection insurance. Accordingly, an insurance broker licensed under Insurance Law § 2104(b)(1)(A) or (B) may act as a retail broker with respect to a salary protection insurance transaction in the excess line market.

For further information, you may contact Senior Attorney Joana Lucashuk at the New York City Office.