The Office of General Counsel issued the following opinion on December 10, 2004, representing the position of the New York State Insurance Department.
Re: Sale of Deceased Agent's Business
Where an insurance agent died and his widow is selling his business to another New York licensed agent:
1. May the widow, as estate administrator, receive the commissions that her deceased husband earned from an insurer but had not yet received?
2. May the widow, as estate administrator, receive a share of the commissions that the agent who purchases the business will earn from an insurer for subsequent renewals of policies that were originally transacted by her deceased husband?
1. Yes. Nothing in the Insurance Law precludes the administrator of a deceased insurance agent's estate from receiving commissions that the deceased agent had earned but were not yet received.
2. Yes. Nothing in the Insurance Law precludes the administrator of a deceased agent's estate from receiving a percentage of the commissions that the agent who purchases the business will earn from an insurer for subsequent renewals of policies that were originally transacted by the deceased agent.
An insurance agent, who was licensed to sell life and property/casualty insurance, died. His widow, as administrator of his estate, intends to sell his business. The widow is not a licensed insurance agent.
1. Commissions Earned But Not Yet Received.
N.Y. Ins. Law § 2101(a) (McKinney 2000), as amended by Chapter 687 of the Laws of New York 2003, provides in pertinent part:
"insurance agent" means 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
The unlicensed wife, as administrator of her deceased insurance agent husbands estate, will not violate the Insurance Law by merely receiving commissions on behalf of her husband's estate that her husband already earned but has not yet been received, as she will not be acting in the capacity of an insurance agent. See N.Y. Ins. Law §§ 2101(a) and 2102 (McKinney 2000), as amended by Chapter 687 of the Laws of New York 2003, 2114, 2115 (McKinney Supp. 2004). New York courts have generally held that absent an agreement to the contrary, a licensed agent or broker earns its commission when it brings about the relationship of insurer and insured. See Hamond v. Risk Specialists, 210 A.D.2d 202, 619 N.Y.S.2d 744 (1994); Western Nat. Ins. Co. v. Haph Brokerage, 277 A.D. 6, 97 N.Y.S.2d 447 (1st Dept. 1950), affd. 302 N.Y. 678 (1951).
2. Commissions From Subsequent Renewals.
An Attorney Generals Opinion, dated October 31, 1947, (1947 AG. 219) is still controlling on this issue, and for your convenience, a copy is enclosed. The Attorney General, when asked to opine about whether the widow of a deceased insurance broker could receive 30% of the commissions earned on continuing portions of her deceased husband's business as consideration for its transfer noted:
Certainly the business is an asset of the decedent's estate, of value as a going concern. His representative is authorized, if not required, to attempt to dispose thereof at a fair value and in doing so in the manner described is not, in my opinion, "soliciting, negotiating or procuring the making of any insurance contract" or otherwise acting as an insurance broker.
Nothing in the Insurance Law precludes the widow of a deceased insurance agent, acting as administrator of his estate, from selling her deceased husband's insurance business and receiving a percentage of the commissions the agent who purchases the business may earn from subsequent renewals of policies originally transacted by her deceased husband.
Here, the deceased insurance agent's wife will merely be receiving a portion of commissions from subsequent renewals of policies originally transacted by her deceased husband and will not be "soliciting, negotiating or selling" contracts of insurance or acting as an insurance agent or producer. See N.Y. Ins. Law §§ 2102 (McKinney 2000), as amended by Chapter 687 of the Laws of New York 2003, 2114, 2115 (McKinney Supp. 2004).
Please note that the administrator will not be entitled to receive any portion of the commissions the agent who purchases the business will earn from new business written for former clients of the decedent. An endorsement to a policy that merely changes the face amount of insurance is not regarded as new business, but an endorsement adding an additional kind of coverage is regarded as new business.
Additionally, since the administrator wife does not intend to service the decedent's existing insurance business, she will not need to obtain a temporary license pursuant to N.Y. Ins. Law § 2109 (McKinney 2000).
This opinion is general in nature and limited to an interpretation of the Insurance Law using the facts as presented. We express no opinion on any other laws.
For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.