OGC Op. No. 04-03-15

The Office of General Counsel issued the following opinion on March 16, 2004, representing the position of the New York State Insurance Department.

Re: Insurance Agents/Commissions; Insurance Law Article 21

Question Presented:

May an insurer withhold commission from an agent due to a dispute over commissions previously paid by the insurer to the agent for a non-related account?


The agent's responsibility to return previously paid commissions must be derived from the specific provisions of the Agency-Company agreement. The insurer's right to recoup such "unearned" commission and the method(s) that may be utilized must be specified in the agreement.


The dispute relates to an ongoing agency relationship between the inquirer’s agency ("the agency") and a New York insurer group ("the Insurer"). The Agency-Company agreement was executed in 1982 and has remained in force over the past 22 years. The dispute concerns premiums that were payable in 2000 but were never actually paid. The insurer has paid the agency commissions on the policy. The subject insured has been out of business for the past three years.

The insurer has asserted a claim against the agency for the commissions paid to the agency on the unpaid premiums. It seeks to "set-off" the amount of commissions paid to the agency on the 2000 policies against commissions due to be paid on current unrelated accounts.


"In the absence of specific agreement to the contrary, an agent who has performed all services contemplated is entitled to recover and retain his commission…" 13 Holmes" Appleman on Insurance Law and Practice § 97.12 (2nd ed. 2000). The same treatise states that "[t]he general insurance rule is that the right of an insurance agent to commission, salary or other compensation is governed by the terms of the contract of employment or agency between agent and insurer." 13 Holmes" Appleman on Insurance Law and Practice § 97.2 (2nd ed. 2000).

The circumstances presented in the instant matter concern a policy issued in 2000. Presumably, all commissions due to the agency on the policy were paid several years ago. The insurer, for reasons not stated, failed to ever collect the premiums from the insured. It now seeks to recover the commissions paid to the agency on that policy. To accomplish that it proposes to take a set-off against commissions payable to the agency for policies written on current accounts of insureds with no relationship to the insured under the policy written in 2000.

The insurer's claim for recovery of previously paid commissions must be based upon specific language in the Agency-Company agreement or some other legal principle that would support holding the agency liable for return of the commissions.

The Department will not interfere with a private contract between an insurer and an insurance agency, provided that the agreement does not otherwise violate the Insurance Law. Rather, it would be for a court of competent jurisdiction to make such a determination under applicable law. We suggest that the inquirer contact private counsel.

For further information you may contact Associate Attorney Sam Wachtel at the New York City Office.