OGC Op. No. 04-10-26

The Office of General Counsel issued the following opinion on October 28, 2004, representing the position of the New York State Insurance Department.

Re: N.Y. Ins. Law § 2101(g)(1)(a) Adjusting on Behalf of an Affiliate

Questions Presented:

1. Does the N.Y. Ins. Law § 2101(g)(1) exemption from the definition of an independent adjuster for officers, directors or regular salaried employees of an authorized insurer pertain when the claim being adjusted is that of another insurer?

2. May a regular salaried employee of an insurer adjust claims on behalf of affiliated insurers if the claims adjusting services are performed pursuant to a written agreement between the parties which has been reported to and reviewed by the Department in accordance with the requirements of Circular Letter 2001-17?

Conclusions:

1. Only as permitted by the amendments to N.Y. Ins. Law § 2101(g)(1), as provided for by Chapter 692 of the Laws of 2003 and Chapter 385 of the Laws of 2004.

2. No. Chapter 385 of the Laws of 2004 amended N.Y. Ins. Law § 2101(g)(1)(C) to remove the language, added by Chapter 692 of the Laws of 2003, which pertained to adjusting claims pursuant to a written agreement. Unless exempt from the licensing requirement under N.Y. Ins. Law § 2101(g)(1), the fact that service contracts must be submitted to the Department in accordance with Circular Letter 2001-17, does not override the licensing requirements for independent adjusters contained in N.Y. Ins. Law § 2108 (McKinney Supp. 2004).

Facts:

No facts were presented. The question is general in nature.

Analysis:

N.Y. Ins. Law § 2101(g)(1), as amended by Chapter 385 of the Laws of 2004, provides:

(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster" as defined below:

(1) The term "independent adjuster" means 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, except that such term shall not include:

(A) any officer, director or regular salaried employee of an authorized insurer or entity licensed pursuant to article forty-four of the public health law providing comprehensive health service plans (as used in this paragraph, a "health maintenance organization"), or any manager thereof, individual or corporate, or the manager, agent or general agent of any department thereof, individual or corporate, or attorney in fact of any reciprocal insurer or Lloyds underwriter, or marine underwriting office, unless acting as an auto body repair estimator as defined in subsection (j) of this section;

(B) any officer, director or regular salaried employee of an insurer authorized to write accident and health insurance, a corporation licensed under article forty-three of this chapter (collectively, as used in this paragraph, a "health insurer") or a health maintenance organization, or any manager thereof, individual or corporate, when the claim to be adjusted is issued or administered by another health insurer or health maintenance organization within the same holding company system as the health insurer or health maintenance organization adjusting the claim;

(C) any officer, director or regular salaried employee of an article fifteen holding company or a controlled person within such holding company system providing administrative services within that holding company, or any manager thereof, individual or corporate, when the claim to be adjusted is submitted for payment under a health benefit plan that is issued or administered by a health insurer or health maintenance organization within that same holding company system;

(D) any adjustment bureau or association owned and maintained by insurers to adjust or investigate losses, or any regular salaried employee or manager thereof who devotes substantially all of his time to the business of such bureau or association, unless acting as an auto body repair estimator as defined in subsection (j) of this section;

(E) any licensed agent of an authorized insurer who adjusts losses for such insurer solely under policies issued through his or its agency, provided the agent receives no compensation for such services in excess of fifty dollars per loss adjusted;

(F) any licensed attorney at law of this state;

(G) any average adjuster or adjuster of maritime losses;

(H) any agent or other representative of an insurer authorized to issue life and annuity contracts, provided he receives no compensation for such services.

It has been asserted that the language in the exception set forth in N.Y. Ins. Law § 2101(g)(1)(A) is broad enough to exempt an officer, director or salaried employee of any insurer from having to be licensed as an independent adjuster to adjust the claims of any other insurer. Specifically, the language in the exception and the absence of the word "such" is cited to support the view that the exception should extend to the claims of any insurer rather than being limited to the claims of the insurer for which the individual is an officer, director or salaried employee. Accordingly, it is argued that the Department’s opinions to the contrary have been incorrect.

Chapter 692 of the Laws of 2003 amended Section 2101(g)(1) to permit officers, directors and regular salaried employees of authorized health insurers and HMOs to adjust claims submitted for payment under a health benefit plan issued or administered by another health insurer or HMO within the same holding company. This amendment, together with the amendment to subparagraph (C), which, in part extended the exemption to a third party adjusting claims pursuant to a written contract with a health insurer or an HMO expanded the exceptions to the independent adjuster’s licensing requirements for health claims submitted for payment under a health benefit plan.

However, because the Legislature recognized that health claims, in particular, are subject to many statutory and contractual requirements that require specialized knowledge of applicable law and contract firms, Chapter 385 of the Laws of 2004 removed the provision that would have allowed unlicensed and unregulated third parties to adjudicate claims for a health insurer or HMO pursuant to a written contract. Chapter 385 of the Laws of 2004 also amended subparagraph (C) of Section 2102(g)(1) to extend the licensing exemption to officers, directors and regular salaried employees of authorized life insurers or property/casualty insurers, but only with respect to health claims for insurers within the same holding company.

Moreover, unless exempt from the licensing requirement under N.Y. Ins. Law § 2101(g)(1), the fact that service contracts must be submitted to the Department in accordance with Circular Letter 2001-17 does not override the licensing requirements for independent adjusters contained in N.Y. Ins. Law § 2108 (McKinney Supp. 2004).

The 2003 and 2004 amendments to N.Y. Ins. Law § 2101(g)(1) may be reviewed to better understand the current extent of the exemption from the licensing requirements for independent adjusters.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.