OGC Op. No. 04-09-16
The Office of General Counsel issued the following opinion on September 24, 2004, representing the position of the New York State Insurance Department.
Re: Insurance Law Section 2101 Unlicensed Employees of Insurer
1. May an unlicensed employee of an insurer, working from the office of the insurer, solicit or accept applications and orders for insurance sold by both the employer/insurer and by other insurers who are affiliates of the employer/insurer?
2. May an unlicensed employee of an insurer, working from inside the office of the insurer, solicit or accept applications and orders for insurance via telephone from individuals outside of the office?
3. If the answer to question 2 is yes, would it matter if the office were located outside of New York State?
1. The licensing exception is for an employee of a specific insurer, and is limited to the sale of insurance sold by that insurer in the manner specified in the statute. Accordingly, the unlicensed employee may solicit or accept orders or applications for that insurer but not for the insurer's affiliates.
2. Yes. N.Y. Ins. Law § 2101(a)(1) allows an unlicensed employee of insurer to solicit insurance business by telephone from inside the office of the insurer, provided that the employee acts in the manner specified in the statute.
3. No. N.Y. Ins. Law § 2101(a)(1) only requires that the activities take place in the office of the authorized insurer. There is no requirement that the office be located in New York.
The Department was asked to clarify the permissible scope of activity of an unlicensed employee of an insurer, as stated in the questions submitted.
N. Y. Ins. Law § 2102(a)(1) (McKinney 2000 as amended by Chapter 687 of the Laws of 2003) prohibits any person or firm from acting as an insurance producer without a license.
Specifically, N. Y. Ins. Law § 2102(a)(1) states:
[Eff. Jan 1, 2004] No person, firm, association or corporation shall act as an insurance producer or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
N. Y. Ins. Law § 2101(k) (McKinney 2000 as amended by Chapter 687 of the Laws of 2003) states as follows:
In this article, "insurance producer" means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.
N. Y. Ins. Law § 2101(a) (McKinney 2000 as amended by Chapter 687 of the Laws of 2003) defines an insurance agent as:
any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker....
Therefore, anyone who engages in any of the above activities is considered to be acting as an insurance agent and must be licensed pursuant to N. Y. Ins. Law § 2102(a)(1). The Insurance Law, however, contains various exceptions to the otherwise applicable licensing requirement.
Specifically, N. Y. Ins. Law § 2101(a)(1) (McKinney 2000 as amended by Chapter 687 of the Laws of 2003) exempts the following persons from licensing as an insurance agent:
any regular salaried officer or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance agent, who does not solicit or accept from the public, outside of an office of such insurer, health maintenance organization or agent, applications or orders for any such contract, if such officer or employee does not receive a commission or other compensation for his services which commission or other compensation is directly dependent upon the amount of business done....
Thus, an authorized insurer may delegate certain duties and responsibilities to its unlicensed employees if they fit within the above exemption. It is, however, incumbent on the licensed insurer to exercise reasonable judgment when delegating such duties and to continuously and actively supervise such employees. In addition, note that the exemptions do not permit such unlicensed employees to be compensated on a commission basis or to be compensated in a manner that is directly dependent upon the amount of business done by the unlicensed employees. The insurer remains fully responsible for the actions of its employees.
The inquirers first question is whether the exemption extends to placing business with insurers affiliated with the employer/insurer. The Department has consistently interpreted the language of the statute that provides for the licensing exemption to apply only to the employer/insurer of the employee and not its affiliates. Accordingly, an employee may not solicit or place applications or coverage in an affiliated insurer.
The inquirers second question is whether placing coverage over the telephone would be considered to be "outside" the office of the insurer. The Department has previously opined that the statutory exemption would allow the employee to "act" by telephone from inside the office of the insurer. That remains the Department's position.
The inquirers final question is whether the insurer's "office" must be in New York State. N. Y. Ins. Law § 2101(a)(1) applies to authorized insurers, which would include domestic, foreign and branches of alien insurers. The statute does not require that the employee act from an office in New York State. An employee of any authorized insurer may act from an office of the insurer outside of New York and still be exempt from licensing requirements if acting in accordance with N. Y. Ins. Law § 2101(a)(1).
Note, however, that an insurer may obtain a special risk license pursuant to N. Y. Ins. Law § 6302 (McKinney 2000) "...only if the business is underwritten and transacted from an office within this state.", N. Y. Ins. Law § 6303 (McKinney 2000). This would be a limitation on the scope of activity of the unlicensed employee that could be conducted from an office outside of New York.
For further information you may contact Associate Attorney Samuel Wachtel at the New York City Office.