OGC Opinion No. 06-01-21

The Office of General Counsel issued the following informal January 19, 2006, representing the position of the New York State Insurance Department.

Re: § 3425(j) and Agency Termination

Question Presented:

Under the facts described below, are N.Y. Ins. Law §§ 3425(j)(1)(D) (McKinney Supp. 2006) and 3426(k)(2) (McKinney Supp. 2006), which provide commission rights under certain circumstances, applicable to J.D.C. Agency upon the termination of its agency agreement with DEF Insurance Company and DEF Insurance Company of New York (hereinafter collectively "DEF Insurer")?


N.Y. Ins. Law §§ 3425(j)(1)(D) (McKinney Supp. 2006) and 3426(k)(2) (McKinney Supp. 2006) will be applicable upon the termination of the agency agreement. The provision in the agreement purporting to waive the rights contained in N.Y. Ins. Law §§ 3425(j) (McKinney Supp. 2006) and 3426(k) (McKinney Supp. 2006) is invalid.


The inquirer wrote to the Department on behalf of the J.D.C. Agency, a member of the inquirer's association.

On April 4, 2005, J.D.C. Agency, a licensed property/casualty insurance agent, contracted with the ZEV Agency (hereinafter "ZEV") to purchase, among other things, ZEV’s Expirations, including policies issued through DEF Insurer. Pursuant to an agreement dated April 4, 2005 (hereinafter "the Agreement"), DEF Insurer temporarily designated J.D.C. Agency as its agent for the sole purpose of servicing the ZEV Expirations for a period of up to one year, subject to the termination provisions of the Agreement.

The Agreement provides that J.D.C. Agency ". . . has no authority to solicit or secure applications for the lines of insurance DEF Insurer writes, and . . . shall not bind DEF Insurer to new business." The Agreement defines new business as ". . . any transaction involving a new policy and it does not include revised policies or endorsement to existing policies."

The Agreement also provides the following provisions, in relevant part:

(17)Agent is not and shall not be a Regular Agent or Regular DEF Insurer Agent as such term(s) is/are used in DEF Insurer's Agency Agreement or in DEF Insurer's summary of Commissions, Bonuses & Prizes; provided however, that during the term of the Agreement and this Addendum, DEF Insurer will pay Agent those monthly commissions on account of the ZEV Expirations received by Regular DEF Insurer Agents as set forth in the then current edition of DEF Insurer's Summary of Commissions, Bonuses & Prizes, as such document may be amended from time to time . . .

(18)With respect to subsections 3425(j) and 3425(k) of the New York Insurance Law, Agent hereby waives any right it may have thereunder to continue to service or receive commissions from any DEF Insurer policies including within the ZEV Expirations after April 4, 2006 . . .


N.Y. Ins. Law §§ 3425(j)(1)(D) (McKinney Supp. 2006) and 3426(k)(2) (McKinney Supp. 2006), provide commission rights under certain circumstances to agents and brokers whose contracts or accounts have been terminated by an insurer unless an event specified in N.Y. Ins. Law §§ 3425(j)(2) or (3) has occurred.

Although the Agreement provides that the agency is temporary and that J.D.C. Agency is not a Regular Agent or Regular DEF Insurer agent, N.Y. Ins. Law §§ 3425(j) and 3426(k) do not make such such distinctions. As a result, N.Y. Ins. Law §§ 3425(j)(1)(D) and 3426(k)(2) will apply upon the termination of J.D.C. Agency agreement with DEF Insurer. The provision purporting to waive J.D.C. Agency's rights under N.Y. Ins. Law §§ 3425(j) and 3426(k) is invalid. See Opinion of General Counsel No. 04-02-15 (February 18, 2004).

Please note that a producer's rights under N.Y. Ins. Law §§ 3425(j)(1)(D) or 3426(k)(2) for a particular policy are subject to the continuation of the policy. The insurer may cancel or non-renew the policy as permitted under N.Y. Ins. Law §§ 3425 and or 3426 or the insured may cancel the policy.

For further information please contact Assistant Counsel Brenda M. Gibbs at the Albany Office.