New York State Seal

STATE OF NEW YORK

INSURANCE DEPARTMENT

25 BEAVER STREET

NEW YORK, NEW YORK 10004

Andrew M. Cuomo
Governor

James J. Wrynn

Superintendent

OGC Op. No. 11-09-02

The Office of General Counsel issued the following opinion on September 26, 2011, representing the position of the New York State Insurance Department.

Re: Adjusting on Behalf of a Self-Insured Parent and Self-Insured Affiliates

Question Presented:

Must ABC Claim Management Corporation (“ABC”) and its employees be licensed as independent adjusters to investigate and adjust liability claims solely on behalf of ABC’s self-insured parent company, DEF Corporation (“DEF”), and DEF’s self-insured affiliate companies?

Conclusion:

No. ABC and its employees need not be licensed as independent adjusters to investigate and adjust liability claims solely on behalf of ABC’s self-insured parent company, DEF, and DEF’s self-insured affiliate companies, because N.Y. Ins. Law § 2102(g)(1) (McKinney Supp. 2011) only requires a person or entity to be licensed as an independent adjuster if, for money or commission, the person or entity investigates or adjusts claims arising under insurance contracts issued by, and on behalf of, an insurer. Similarly, ABC and its employees need not be licensed as public adjusters, which adjust certain claims on behalf of an insured, since there is no insured involved.

Facts:

The inquirer states that ABC is a wholly-owned subsidiary of DEF, an automobile rental company that self-insures its own liability up to the minimum financial responsibility requirements, and that DEF pays ABC’s employees to investigate and adjust claims on behalf of DEF and its self-insured affiliate companies. The inquirer also states that DEF collects the premiums for supplemental liability insurance and personal accident and personal effects insurance, and forwards the premium to JKL Insurance Company (“JKL”) and XYZ Insurance Company (“XYZ”), after deducting certain administration and claim administration fees. DEF has a limited license under Insurance Law § 2131 to sell such insurance.

ABC signed a stipulation on January 21, 2011 admitting that, between 2005 and 2010, ABC acted as an independent adjuster without a license after its independent adjuster license had expired. ABC is currently licensed in New York as an independent adjuster. However, the inquirer now asks whether ABC and its employees must be licensed as independent adjusters to investigate and adjust liability claims solely on behalf of DEF and its self-insured affiliate companies.

Analysis:

Insurance Law § 2102(a)(1) prohibits any person, firm, association, or corporation from acting as an insurance adjuster in New York without being licensed by the Department. Insurance Law § 2101(g) provides that “adjuster” means either an independent adjuster or a public adjuster. Insurance Law § 2108(a)(3) prohibits an adjuster from acting on behalf of an insurer unless licensed as an independent adjuster. Insurance Law § 2101(g)(1) defines “independent adjuster” in relevant part 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… 1 .

Thus, a person or entity generally must be licensed as an independent adjuster if, for money or commission, the person or entity investigates or adjusts claims arising under insurance contracts issued by, and on behalf of, an insurer, involving an insurer that may be exempted from having to be licensed as an insurer. Here, ABC and its employees are not investigating and adjusting claims on behalf of an insurer. Rather, ABC and its employees investigate and adjust claims on behalf of DEF and its affiliates, which self-insure their own liability up to the minimum financial responsibility requirements, and are therefore not insurers. See OGC Opinion No. 03-07-19 (July 18, 2003); OGC Opinion No. 02-08-14 (Aug. 15, 2002).

Therefore, ABC and its employees need not be licensed as independent adjusters to investigate and adjust liability claims solely on behalf of ABC’s self-insured parent company, DEF, and DEF’s self-insured affiliate companies, because Insurance Law § 2102(g)(1) only requires a person or entity to be licensed as an independent adjuster if, for money or commission, the person or entity investigates or adjusts claims arising under insurance contracts issued by, and on behalf of, an insurer. Similarly, ABC and its employees need not be licensed as public adjusters, which adjust certain claims on behalf of an insured, since there is no insured involved. See OGC Opinion No. 03-07-19; OGC Opinion No. 02-08-14.

However, ABC and its employees may not investigate or adjust claims on behalf of companies that are not affiliates or subsidiaries of DEF that self-insure their own liability, including on behalf of JKL and XYZ with regard to supplemental liability insurance and personal accident and personal effects insurance, without being licensed as independent adjusters.

The Department offers no opinion as to ABC and its employees’ activities with respect to any law other than the Insurance Law, including whether the employees are engaged in the unlawful practice of law.

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

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1 Section 2101(g)(1) sets forth certain exceptions, none of which are relevant to this inquiry.