OGC Opinion No. 06-03-18
The Office of General Counsel issued the following opinion on March 28, 2006, representing the position of the New York State Insurance Department.
Re: Entities and Their Employees That Adjust Claims on Behalf of Self-Insurers and Self-Insurance Groups.
Questions Presented:
1. Are entities and their employees that adjust workers" compensation claims on behalf of "self-insurance" groups required to be licensed as independent adjusters under the New York Insurance Law?
2. Are entities and their employees that adjust workers" compensation claims on behalf of self-insurers required to be licensed as independent adjusters under the New York Insurance Law?
Conclusions:
1. Yes. Entities and their employees that adjust workers" compensation claims on behalf of "self-insurance" groups are required to be licensed independent adjusters under the New York Insurance Law.
2. No. Entities and their employees that adjust workers" compensation claims on behalf of self-insurers are not required to be licensed as independent adjusters under the New York Insurance Law.
Facts:
No specific fact pattern was submitted. This inquiry is general in nature.
Analysis:
N.Y. Ins. Law § 2102(a)(1)(McKinney Supp. 2006) provides, in pertinent part, that:
(a)(1) No person, firm, association or corporation shall act as an . . . 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(g)(1)(McKinney Supp. 2006) defines the term "independent adjuster", in pertinent part, as follows:
(g)(1) [A]ny 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 . . . (emphasis supplied)1
Thus, in accordance with the above, entities that adjust claims on behalf of "insurers" must be licensed as independent adjusters. The Department considers the term "insurer" to encompass any entity that is doing an insurance business in New York, irrespective of whether such entity is required to be licensed as an insurer under the Insurance Law.
N.Y. Ins. Law § 1102(a)(McKinney Supp. 2006) prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state, unless licensed as an insurer or exempted from licensing pursuant to the Insurance Law. N.Y. Ins. Law § 1101(b)(1)(McKinney Supp. 2006) defines the term "doing an insurance business", in pertinent part, as:
(b)(1)(A) making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts. . .
(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance. . .
(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter. . . .
N.Y. Ins. Law § 1101(a)(1) (McKinney Supp. 2006) defines "insurance contract" as follows:
(a)(1) [A]ny agreement or other transaction whereby one party, the "insurer", is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
(2) "Fortuitous event" means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party. . . .
In accordance with the above, if employers form a group wherein each employer promises to pay for workers" compensation claims submitted by the employees of other employers that arise due to fortuitous events (i.e. injury), such arrangement would constitute doing an insurance business as defined under Section 1101, because the employers are essentially insuring one another in a manner similar to reciprocal insurers.
However, since these self-insurance groups are permitted under N.Y. Workers" Comp. Law § 50 (3-a) (McKinney Supp. 2006), the Department considers them to be exempt from the licensing requirements of the Insurance Law. There is no comparable exemption, however, for an independent adjuster that adjusts claims on behalf of such insurer. Therefore, entities and their employees that adjust workers" compensation claims on behalf of such self-insurance groups must be licensed as independent adjusters under the New York Insurance Law.
In contrast, a single employer that assumes responsibility for its own liability relative to the workers" compensation claims submitted by its employees is not considered to be an insurer within the meaning of Section 1101. Consequently, entities and their employees that adjust workers" compensation claims on behalf of such self-insured employers are not required to be licensed as independent adjusters under the New York Insurance Law.
For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.
1 Although the statute lists exemptions from this licensing requirement, none of them are applicable to this inquiry.